Oil gas and mineral exploitation creates economic growth but few jobs

Extractive foreign direct investment is heralded as the new development opportunity in poor African countries. But although multinational investments in the oil, gas or mineral sectors may create economic grow, it is typically 'jobless.' Therefore, few local firms and workers benefit from the country’s natural resource riches. Local content is limited.

The key arguments in this article are that without incentives for creating jobs, multinationals operating in the natural resources sectors are unlikely to link their activities to the local economy. Whether such incentives actually exist depends significantly – but not exclusively - on the local political economy. It is particuartly important that local content policies and practices are compatible with ruling elites’ efforts to build and maintain stable political coalitions. Alternative explanations, focusing on market failures and weak institutions, are partial at best and must be complemented with the political explanations specified above.

These arguments are based on analyses of the local content experiences of three African countries - Mozambique, Tanzania and Uganda – with huge expectations for extractive based economic development. Specifically, the paper explores why local content in extractive industries are so difficult to achieve.