Leveraging a Large Capital Investment to Develop Local Value Chains ‘Local Content’ in the Construction of Tanzania’s LNG Facility Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility © 2016 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. 2 Summary Report Table of Contents: I. Acknowledgements 6 II. Executive Summary 9 III. Summary of Industry Profiles 1. Supporting Services: Community-based Jobs and Opportunities in the Agro-processing Value Chain • Catering 32 • Business Support Services 34 2. General Construction: Upskilling the Industry for Future Engagements • Concrete Works 36 • Building and Camp Construction 38 • Site Preparation 40 • Roads and Landing Strips 42 • Equipment Rental and Scaffolding 44 • Basic Electrical Works 46 3. Project - Specific: “Learning on the job” Opportunities for Future Oil and Gas Projects • LNG Tanks and Trains 48 • Metal and Steel Fabrication 50 • Docks and Jetties 52 IV. References 54 3 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility 4 Summary Report Abbreviations and Acronyms APZ Agricultural Processing Zone MNRT Ministry of Natural Resources and Tourism BoT Bank of Tanzania NACTE National Council for Technical Education CIIP Competitive Industries and Innovation NBS National Bureau of Statistics Program NDT Non-Destructive Testing CGS Credit Guarantee Scheme NEEC National Economic Empowerment Council CRB Contractors Registration Board NGO Non-Governmental Organization CSO Civil Society Organization NORAD Norwegian Agency for Development DfID UK Department for International Development Cooperation DPs Development Partners NPLs Non-Performing Loans EDC Enterprise Development Center NQI National Quality Infrastructure EPC Engineering, procurement and construction PFI Participating Financial Institution contractor PMO Prime Minister’s Office EPZA Export Processing Zones Authority PMU Project Management Unit EU European Union POPC President’s Office Planning Commission FEED Front End Engineering Design PPD Public-Private Dialogue FIs Financial Institutions PPP Public-Private Partnership FID Final Investment Decision PTFC Practical Training Facilitation Center FDI Foreign Direct Investment SEZ Special Economic Zone FYDP Five Year Development Plan SIDO Small Industries Development Organization GIZ Gesellschaft für Internationale SMEs Small and Medium Enterprises Zusammenarbeit SWD Supplier and Workforce Development GoT Government of Tanzania TBS Tanzania Bureau of Standards HGA Host Government Agreement TCCIA Tanzania Chamber of Commerce, Industry and HSSE Health, Safety, Security and Environment Agriculture JV Joint Venture TFDA Tanzania Food and Drugs Authority IMF International Monetary Fund TIC Tanzania Investment Centre IOCs International Oil and Gas Companies TNBC Tanzania National Business Council IQM Internal Quality Management TPA Tanzania Ports Authority ISIC International Standard Industrial Classification TPDC Tanzania Petroleum Development Corporation ISO International Organization for Standardization TPSF Tanzania Private Sector Foundation LC-OSS Local Content One-Stop Shop UNIDO United Nations Industrial Development LCP Local Content Policy Organization LNG Liquefied Natural Gas VETA Vocational Education and Training Authority MEM Ministry of Energy and Minerals VSO Voluntary Services Overseas MEL Monitoring, Evaluation and Learning WBG World Bank Group MIT Ministry of Industry and Trade MMBtu Million British thermal units 5 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility I. Acknowledgements This report is part of a broader engagement by the World Bank in a debate concerning local content in Tanzania aimed at identifying the potential linkages between the development of off-shore gas fields and the strengthening of domestic value chains. The effort began with the organization of a series of public-private dialogues (PPD) that took place over 2014-2015 with high level participants from the Government, the private sector, and the donor community. The key messages and lessons learned from that initiative can be found in the publication “Maximizing Domestic Value Added in the Oil and Gas Industry – Sharing lessons learned through public private dialogues in Tanzania” (WBG 2016). During this period the World Bank undertook a parallel assignment designed to contribute to the stakeholder dialogue: to first assess the business and employment opportunities associated with the planned Tanzania LNG project and then to estimate the potential degree of local participation. A summary of the findings from that broad diagnostic exercise are provided in this short report, which also includes a snapshot of the case studies of “priority” industries.1 The preliminary findings of the report have been discussed with stakeholders from the private and the public sector, including Government agencies, international oil and gas companies operating in Tanzania, local private sector representatives, and development partners. A series of workshops was organized in July 2014 to present the results of the first phase of the analysis, followed by a second round in May 2015, and a final round in the summer and fall of 2016 to discuss the final results. This report was prepared by a World Bank team composed of Andrea Dall’Olio (Lead Economist, Finance and Markets Global Practice) and Barbara Calvi (Consultant, Finance and Markets Global Practice) with contributions by Gilles Cols (Consultant, Trade and Competitiveness Global Practice); Silvana Tordo (Lead Energy Economist, Energy and Extractives Global Practice); and Stefano Negri (Lead Private Sector Development Specialist, Trade and Competitiveness Global Practice). The report is based on background analytical work by DAI (Development Alternatives Inc.), produced by a team led by Mark Beare and composed of Zachary Kaplan, Emily Foster, Ulrich Ernst, John Chitsa, and Denisse Hamard. The DAI team worked in close collaboration with the World Bank team to elaborate the methodology of the analysis and prepare the initial forecasting model, based on desk research and stakeholders’ interviews conducted during field work in Tanzania. The team would also like to acknowledge the overall guidance and collaboration provided since the inception of the work by Richard Boulter (former Team Leader for Sustainable Growth, UK Department for International Development Tanzania); the significant contributions on the forecasting model assumptions, as well as on the structure and content of the case studies provided by David Simmonds (Consultant, VSO International); the comments and suggestions on the summary presentation and preparatory interventions provided by Kate Sullam (Local Content Manager, BG Tanzania & Tanzania LNG Plant Project); the technical inputs on standards and certification programs provided by Martin Kellermann (Independent Consultant); and finally the support provided by the Tanzania Private Sector Foundation (TPSF) that was a key partner in the organization of roundtable dinners and seminars with the local private sector. Comments were provided at various stages by a number of colleagues to whom the team would like to express its gratitude: Wafa Aranki (Senior Private Sector Specialist, Trade and Competitiveness Global Practice); Steven 6 Summary Report Dimitriev (Lead Private Sector Development Specialist, Trade and Competitiveness Global Practice); Valeriya Goffe (Senior Financial Sector Development Specialist, Finance and Markets Global Practice); Cornelia Jesse (Senior Education specialist, Education Global Practice); Barbara Kotschwar (Senior Private Sector Specialist, Trade and Competitiveness Global Practice); Nataliya Kulichenko (Senior Energy Specialist, Energy and Extractives Global Practice); Carlos Lopez (Senior Oil and Gas Specialist, Energy and Extractives Global Practice); Neema Mwingu (Agribusiness Specialist, Trade and Competitiveness Global Practice); and Yutaka Yoshino (Lead Economist and Program Leader, Equitable Growth, Finance and Institutions, Tanzania Country Unit). The team also benefited from the overall guidance provided by Irina Astrakhan (Practice Manager, Finance and Markets Global Practice); Bella Bird (Country Director for Tanzania, Burundi, Malawi and Somalia); Philippe Dongier (former Country Director for Tanzania, Uganda and Burundi); Catherine Masinde (Practice Manager, Trade and Competitiveness Global Practice); Christine Qiang (Practice Manager, Trade and Competitiveness Global Practice); Ganesh Rasagam (Practice Manager, Trade and Competitiveness Global Practice); Ivan Rossignol (Chief Technical Specialist, Trade and Competitiveness Global Practice); and Dan Kasirye (IFC Resident Representative, Tanzania). The team would also like to thank Albert Zeufack (Chief Economist, Africa Region) for the encouragement provided at the inception of the study. Finally, the report benefited from the peer reviewers’ comments and inputs from Michael Wong (Lead Private Sector Development Specialist, Trade and Competitiveness Global Practice) and Gosia Nowakowska-Miller (Operations Officer, IFC Infrastructure and Natural Resources Advisory). The authors are also grateful to Neema Lugangira (former Ag. Director of Local Content in Investments, National Economic Empowerment Council); Olivier Coupleaux (Head of Economics, Governance and Regional Integration Section, European Union Delegation Tanzania); Gianluca Azzone (Head of Natural Resources Section, European Union Delegation Tanzania); Regine Qualmann (Country Director, German International Cooperation – GIZ Tanzania); and Abid Mallick (Country Director, Aga Khan Foundation Tanzania) for the collaboration and support to the analysis; and to Glen Schroeder (Senior Editor); Deborah Davis (Senior Editor); and Abdulaziz Muhile (Graphic Designer, Laurent & Augustine Co. Ltd) for the editing and graphic design work on the report and the industry case studies. Finally, the team would like to extend special thanks to the Ministry of Energy and Minerals team, led by his Hon. Minister Prof. S. Muhongo, and to the National Economic Empowerment Council (NEEC) team, led by Mrs. Bengi Issa (Executive Secretary), for their inputs to the report and the organization of the multi- stakeholder workshop “Leveraging the LNG Investment in Tanzania to Develop Local Content” held on September 29, 2016 in Dar es Salaam, which hosted the launch of this report; and to John Ulanga (Country Manager for Tanzania, TradeMark East Africa) for his effective facilitation of the event. The analytical work benefited from funding provided by the World Bank Trade and Competitiveness Global Practice, as well as by the Competitive Industries and Innovation Program (CIIP) and by the UK Department for International Development. November 2016 The World Bank Group Africa Region 7 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility 8 Summary Report II. Executive Summary The discovery of large, deep-sea, natural gas reserves in Southern Tanzania and plans for their development have sparked a national discussion about how “local content” can be maximized in a way that benefits the economy as a whole. Energy production is not foreign to the country. Gas has been flowing from the on-shore and shallow water reserves of Songo Songo and Mnazi Bay since the mid-2000s, but the scale of those fields is limited.2 In contrast, the off-shore reserves discovered in 2012 by a consortium of international oil companies (IOCs)3 are major finds that raised projections of total reserves to over 57 tcf4 and carry with them the potential to transform the country into an emerging, global, energy hot-spot. So it is in keeping with that good news that government and business leaders now want to know how those assets can be fully leveraged to strengthen and diversify Tanzania’s domestic economy and generate local employment. Large-scale exploitation of Tanzania’s off-shore gas fields is justified only if much of the production can be exported. The proven 1.4 tcf of gas from on-shore reserves is considered more than sufficient to satisfy the country’s energy needs for the next two decades, even after future increases in consumption are taken into account. So developing the new fields only makes commercial sense if the product can be converted to liquid in a Liquefied Natural Gas (LNG) production facility and shipped to international markets. High value LNG exports will also offset the higher extraction, processing, and transport costs associated with the development of deep-water reserves. It is estimated that an investment in the range of USD 30-40 billion will eventually be needed to develop Tanzania’s LNG production and export capability. Although the IOCs intend to develop their off-shore gas blocks independently a joint venture has been formed between them (the “LNG JV”) to build an on-shore production facility somewhere in the vicinity of Lindi. The investment required to develop that plant alone is estimated between USD 15-20 billion applied over a 5-7 year project timeframe. Adding that to the USD 15-20 billion expected to be dedicated to upstream developments and the total investment in Tanzania’s LNG export capability begins to approach USD 30-40 billion. However, funding will not be secured until a final investment decision (FID) is made, and negotiation delays and the general downturn in gas markets worldwide have pushed that decision out to 2018/2019.5 This means gas production is not expected to commence before 2025. The FID is influenced by many factors affecting the commercial viability of the project, including projected gas prices and local market conditions. Local content requirements are very much part of the overall equation since they can have a significant impact on the project’s timing and cost. 9 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility This interval puts Tanzania in a unique position from a development standpoint because it gives the country more time to prepare local firms and workers for greater integration in the gas value chain, which works to reduce the risk that the country faces of falling into the common “resource curse” trap.6 Gas investments can benefit the Tanzanian economy and population in three ways: through gas-related fiscal revenue (that translates into public expenditure); from direct use of the gas; and from foreign direct investment (FDI) that increases value added7 and boosts employment. Since the first two benefits do not materialize until gas begins to flow, the immediate focus of policy makers should be on the attraction of FDI, and here firms and workers can take active steps to position themselves for a greater role in supply chains directly connected to the development of the LNG facility. This study is a summary of analytical work performed by the World Bank Group (WBG) directed at helping the Tanzanians increase their participation in the construction of the LNG facility. The analysis had a threefold structure, which was to: 1) identify the main activities that make up the construction of the facility; 2) assess the types and potential levels of local participation attainable under base case and success case scenarios; and 3) propose interventions that could lead to increased local involvement. One overarching intent of the exercise is to give stakeholders improved information upon which future discussions about “expected” levels of local content can be grounded and interventions can be designed. Overall, the analysis revealed that a significant, domestic shortage of oil- and gas-related industrial competencies is likely to limit local participation in the gas supply chain, but the construction of the LNG facility should spearhead opportunities for certain industries. Right now, Tanzania’s private sector is unprepared to offer many of the services and skills that are demanded in a highly complex and unique project environment like off-shore gas development. The number of domestic companies and workers that could be expected to participate in “core” oil and gas activities will therefore be limited. However, the project should create a sizeable number of service jobs and generate opportunities that will upgrade the quality and size of deliveries in the construction sector. It may also advance the development of certain gas-related industries whose goods and services will be needed over the 25- to 30-year lifespan of the fields. The lack of an industrial base in the Lindi and Mtwara regions constrains the involvement of local communities and creates project risk. Lindi’s economy is largely based on agriculture, and neighboring Mtwara, although benefiting from the presence of a port, also has a small industrial footprint. There is a limited base of worker skills and both regions suffer from high levels of poverty and unemployment. Indeed, many people migrate from these regions to Dar es Salaam in search of work.8 So ensuring the participation of these communities in the LNG project will be important not only from the standpoint of promoting economic growth but also as a way to help maintain social stability. 10 Summary Report The study examined the impact of the estimated USD 15-20 billion investment into the LNG facility as a source of demand for jobs, goods, and services within a set of “priority industries.” This focus on the “midstream” segment of the gas industry came about largely due to considerations relating to the timing and overall impact of the investments. Demand for goods and services directly connected to the project will be high and concentrated over a relatively short timeframe (5-6 years),9 but the industrial capacity and skills developed over that period will add value well after the project finishes. A fairly diverse set of industries will be mobilized during the construction process, some of which are already operating in Tanzania. For purposes of the analysis, they were grouped into three clusters: labor intensive supporting services (including catering and cleaning services, temporary employment agencies, security, landscaping, and passenger transport); general construction activities relating to site preparation and civil infrastructure installation (such as civil works, general electrical and non-specialized instrumentation connections); and certain project-specific industries (mostly related to LNG tank and train production and installation, metal/steel fabrication, and the construction of sea jetties). The analysis measured “local capture” as a proxy of local value created along the gas value chain and assessed the magnitude of that capture in the priority industries. The level of local capture, expressed as a percentage of total demand, was derived by looking at its three main components: (i) the level of local employment, translated into labor payroll; (ii) the local sourcing of goods; and (iii) the share of profits that comes from local sub-contracting.10 To determine the size of demand, a top-down assessment of all industries involved in the construction of the LNG facility was performed and a subset of industries displaying the highest potential for local participation were selected for the study. Each industry was then broken down into a set of sub-activities and an effort was made to identify the local content opportunities within each activity. Information was then collected to gauge the level of preparedness of local enterprises to seize those opportunities. Using that information the team was able to identify constraints that might limit local content uptake and propose specific interventions designed to address those gaps. In the analysis, “base case” estimates of local capture assume minimal intervention before the FID and “success case” projections presuppose early implementation of an integrated set of supplier and workforce development initiatives. In the base case, existing skills development programs11 are augmented by initiatives sponsored by the LNG JV or the engineering, procurement and construction contractor (EPC), steps that are usually launched only after the FID has been reached and that only focus on suppliers and workers that are considered “pre-qualified”. In contrast, the success case scenario assumes an “early start” and a coordinated approach to preparatory interventions, such as the up-skilling of the local labor force to meet international certification standards, the upgrading of product qualities, or the implementation of financing mechanisms to encourage long term investments. These “Supplier and Workforce Development (SWD)” interventions are a central recommendation of the report. 11 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility The base case scenario suggests potential for “local capture” in the priority industries of around 11% of the total estimated demand. Figure 1 shows that out of a total LNG investment projected to be around USD 17 billion,12 roughly USD 12.4 billion will be spent in the priority industries over the seven-year project timeframe, and within that number the “local capture” is expected to be in the range of USD 1.4 billion, split between supporting services (10%), construction (70%), and project-specific industries (20%). Figure 1: Estimated Local Capture in the Priority Industries (Base Case) Note: Figures are based on the model: the actual investment will depend on the final design and construction approach. Source: Team analysis Demand for labor-intensive “supporting services” is expected to absorb a large share of the locally sourced workforce, and many responsibilities there can be delegated to qualified local providers (see Figure 2). Catering (see page 32) and business support services (see page 34) include occupations such as kitchen helpers, waiters, cleaners, security guards, warehouse assistants, gardeners, drivers, and office assistants. Almost 60% of these workers will be employed at the basic-skilled level – accounting for about half of the total basic-skilled positions generated across all of the priority industries. Local participation could be high in this activity, however, even among semi-skilled workers (see Figure 3). The EPC is likely to rely heavily on a local workforce for these services, or sub-contract out many full-service activities to Tanzanian companies, provided that workers and firms are able to demonstrate compliance with international standards and show the capacity to deliver services to scale. Demand for “supporting services” is also expected to remain relatively stable over the project period, giving local firms willing to invest in upgrades enough time necessary to recover their costs. So despite 12 Summary Report being comparatively small in value, generating less than USD 300 million of total demand (or less than 2% of total LNG spending), the ‘supporting services’ industry cluster could achieve local capture levels of at least 50% in the base case scenario, and up to 80% in the success case. Figure 2: Supporting services: average full-time employment over the project period Source: Team analysis Figure 3: Supporting services: average full-time employment by skill level13 Source: Team analysis The “supporting services” industry offers significant potential for employment and commercial opportunity in the Lindi and Mtwara regions. While skilled and semi-skilled workers will likely be recruited throughout Tanzania, basic-skilled workers will likely be sourced from the surrounding Mtwara and Lindi communities, potentially through a network of local, temporary-employment agencies. To maximize opportunities in these areas attention will have to be paid to training the local workforce in communication skills and health, safety, security and environment (HSSE) skills. Catering services could generate long-term benefits at the local level by developing agro-processing value chains in the Southern region. If agribusiness value chains can be strengthened in the region, and food safety standards raised, a range of catering inputs to the project could be locally sourced. Such a development could have a long term impact on the local economy as an improved agricultural sector would be positioned to satisfy demand from within the country and surrounding regions once the LNG facility construction period is over. However, private sector investments (such 13 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility as the establishment of a large scale poultry farm in the surroundings of Lindi) would be needed well in advance of the FID date to prepare the food industry for production at the scales that are going to be required. Demand for general construction should mobilize a significant number of local workers and result in the procurement of large quantities of basic goods and increased sub-contracting opportunities for top-tier Tanzanian companies. Since construction activities will be concentrated in the early phases of the project (see Figure 4), local suppliers of labor and goods will have to be well prepared as early as the FID date if they want to participate. Construction (see pages 36-47) is labor intensive and the balance of jobs tends to be skewed towards skilled and semi-skilled workers (see Figure 5). Roughly 40% could be expected to be skilled positions (e.g., project managers, technical supervisors, quality and safety supervisors, engineering team leaders); another 40% semi-skilled (e.g., scaffolding workers and carpenters, industrial electricians and painters); with basic-skilled (e.g., trades assistants) making up the balance. Sourcing of local goods could also be significant for certain categories of bulk materials – such as sand and aggregate for concrete production, or fill material for site preparation. Finally, while local firms are not expected to directly secure the largest contracts,14 a number of sub- contracting opportunities should emerge in areas such as perimeter fencing, building foundation laying, superstructure assembly, and road construction. Figure 4: General construction: average full-time employment over the project period Source: Team analysis Figure 5: General construction: average full-time employment by skill level Source: Team analysis 14 Summary Report The project offers a one-time opportunity to upscale local firm quality and capacity and improve local skill sets in the construction sector. The construction sector has been growing at a fast pace over the past three years and currently stands at about 11% of Tanzanian GDP. Aside from the size of the contracts that will be awarded there, the greatest opportunities for local firms and workers may lie in the exposure they will get to more efficient and technologically advanced practices. The transferable skills they will acquire in the project should help them be competitive with foreign contractors in the drive to urbanize and strengthen the country’s infrastructure, and the impetus for firms to leverage Tanzania’s abundant natural resources and improve the quality of primary construction inputs such as sand, aggregates, and cement, will prove to be useful in future projects as well. Opportunities in project-specific industries may lead to greater future participation in the oil and gas value chain, but the immediate engagement of local firms and workers will be constrained (see Figure 6). Project-specific industries include the construction and installation of LNG tanks and trains (see page 48), of the docks and jetties for LNG loading (see page 52), as well as the fabrication of specialized metal and steel (see page 50). While there is no real industrial base for these activities right now in Tanzania and the local availability of skills is very limited (see Figure 7) it could be worth developing some capabilities in these areas because they will represent almost USD 6 billion or 35% of the total LNG investment. These high, value-added industries will also be active over a longer period. For example, there will be continuous demand for spare parts and maintenance of LNG trains and tanks during the construction project, in upstream activities, and in plant operations. Figure 6: Project-specific industries: average full-time employment over the project period Source: Team analysis 15 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Figure 7: Project-specific industries: average full-time employment by skill level Source: Team analysis All in all, close to 4,000 Tanzanian workers – or one out of every two positions – could be employed full-time in the priority industries during the six year construction period, reaching a peak of 5,500 in year 4 (see Figure 8). An average of around ~7,600 full-time jobs could be generated during the life of the project, extending upwards to 12,000 in year 4, about half of which could be filled by locals working on behalf of the EPC, other prime contractors, or Tanzanian sub-contractors. Figure 8: Estimated trend of Local jobs (by cluster) vs. Foreign jobs, in the Priority Industries Source: Team analysis However, local employment will only represent 13% of the total payroll. While local employment is expected to translate into ~USD 450 million in local labor payroll, it may be less than 15% of the total due to the balance of skills that will be needed between the local and the international workforce. The share of that going to local communities may also be limited given the prevalence of low-wage, basic-skilled jobs sourced from those areas. 16 Summary Report Local companies could capture close to USD 1 billion in goods and sub- contracting opportunities in the priority industries. Local companies are expected to supply goods and services for ~USD 700 million directly to the EPCs or prime contractors (see Figure 9). Goods most likely to be sourced will be sand, aggregates (such as granite for road construction), gravel, engineered- fill, bitumen, and cement; along with consumables (such as wiring, cabling, petrochemical products) and vegetable foodstuffs. Local companies are also expected to earn profits quantified in the range of ~USD 250 million from outsourcing opportunities mostly in the areas of Concrete Works and Building/ Camp Construction (see Figure 10). Figure 9: Estimated Demand for Local vs. Imported Goods in the Priority Industries and Demand for Local Goods by cluster Source: Team analysis Figure 10: Estimated Share of Local Sub-contracting in the Priority Industries Source: Team analysis Potential for higher local capture is constrained by shortages of workforce skills, the limited capacity of firms to deliver quality goods in the volumes required, and a business environment that hinders private sector competitiveness (see Table 1). The analysis not only confirmed a limited awareness among Tanzanian firms of the gas value chain and the demands of an LNG facility, but it also highlighted three main categories of constraints 17 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility that hold back local participation. First, the labor force at all skill levels will have to comply with the highest quality and safety standards expected by the oil and gas industry – a condition that will require workers to be certified for a number of semiskilled and skilled positions. Second, quality requirements will also be binding at the level of the firm. Suppliers will have to prove that they are capable of reaching industry standards under conditions of large-scale production. This translates into large working capital requirements and the need for appropriate investments in state-of-the-art equipment. Third, the business environment must be conducive to the establishment and growth of enterprises. Here it should be noted that local content has proven to be most successful when international companies are able to establish joint ventures ( JVs) with local partners on the basis of tangible commercial benefits, rather than on imposed local content requirements. One aspect of the business environment deemed critical for the gas industry is the presence of a National Quality Infrastructure (NQI)15 system that facilitates the absorption of foreign technology and provides a low-cost testing environment. Table 1: Key Constraints to Local Capture Key Constraints to Local Capture “Unfriendly” Shortage of Limited Firm Capacity to Scale-up and Business Workforce Skills Comply with Quality Standards Environment • “Missing middle” • Limited availability of certified goods, weak • High costs of dilemma: shortage of local enforcement of HSSE standards, and increased doing business craftspeople certified to service costs when they are adopted and complying international industry • Limited availability of internationally with relevant standards (e.g. IVQ level 3) recognized and affordable testing and legislation hinder due to low domestic certification services firm demand competitiveness • Absence of bulk fabrication capacity in • Poor soft skills, including engineering services which provides team work, economies of scale communication, English, • Limited access to finance to (i) meet large punctuality, and basic working capital requirements to scale up problem solving capacity and/or (ii) finance investments in state-of-the-art equipment Source: Team analysis IOCs usually take actions designed to enhance local participation, including Corporate Social Responsibility (CSR) programs, only around the FID date. In this case, however, the LNG JV should be part of joint capacity-building initiatives to be launched by public and private stakeholders well in advance of the FID. In most oil and gas projects, full-scale interventions to upgrade local suppliers sponsored by the IOCs (or the EPC) begin only immediately before the FID, or shortly thereafter, which is usually about 6-12 months before the full-fledged commencement of the project. Furthermore, these interventions tend to focus only on workers and suppliers that have already shown a substantial level of readiness for the industry, the idea being that with minimal training they will be able to make the final upgrades towards full compliance with industry standards within the limited timeframe available. 18 Summary Report 19 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility However, in this scenario, these preferences will mean that many, if not most, Tanzanian firms (especially SMEs) and workers will end up missing out on opportunities considering the gaps that exist in their level of preparedness. This calls for an early start of coordinated interventions by the Government and the local private sector well ahead of the FID, and strong support of the LNG JV will needed during that effort to help ensure that the programs put in place effectively serve to meet the standards of the project and the industry. Early launch of integrated Supplier and Workforce Development (SWD) interventions, preferably as dedicated operations within existing institutions, would broaden the pool of potential beneficiaries and improve “local capture” from the project. To maximize opportunities for local stakeholders, a set of coordinated SWD interventions would be designed to comprehensively address identified constraints and give firms and workers enough time to improve their competitiveness vis-à-vis industry requirements. To minimize implementation costs and reduce the potential for overlapping mandates (implied by the creation of new agencies) these efforts would be led as much as possible by existing institutions, that would then have to set up a “window” of operation dedicated to capacity building activities strictly related to oil and gas.16 The interventions could be sequenced in four main steps (see Table 2): · Visibility. The first step would be to provide up-front visibility of industry demands for skills, goods, and services, including an estimate of the timing in which the demand will materialize. · Assessment. The second step would be to assess the gaps between demand requirements and individual suppliers’ skills and capabilities. A matching process could then take place by evaluating at various stages the readiness of workers and firms to meet industry standards and then identifying candidates that are ready to be engaged in the industry as workers, suppliers, or (sub-)contractors. · Upgrade. Support could then be provided to firms and workers to help them: (i) upgrade their skills; (ii) achieve certain quality and certification standards; and (iii) scale-up their operations to meet capacity requirements. In the course of implementing such programs attention should be paid to the need for greater access to financing, which was identified by Tanzanian enterprises as the top constraint to doing business.17 Finally, improvements in the overall business environment to facilitate the attraction of FDI, angel, and impact investing18 should be pursued, along with the creation of a strong NQI to reduce the cost of product certifications. · Matching. Finally, initiatives would be made to facilitate the matching of international contractors with local suppliers, as well as labor demand with local supply. 20 Summary Report Table 2: Proposed sequencing of Supplier and Workforce Development (SWD) interventions Source: Team analysis Visibility on the project demand for local suppliers could be provided by centralizing all information relating to procurement and labor needs in a “Local Content One-Stop Shop” (LC-OSS).19 The LC-OSS would be designed to address generalized problems associated with the imperfect exchange of information between the oil and gas industry and local firms. Furthermore it would help with the coordination of demand and supply. The LC-OSS would have both a physical office and an online platform to serve as a repository of demand requirements for the industry. It could also be set up to perform monitoring, evaluation and learning (MEL) functions, tracking both the “local capture” outcomes and the intermediate indicators measuring the strengthening of the enabling environment. The MEL function should also seek to balance the costs of interventions against the achieved outcomes. The assessment of individual enterprises in terms of their overall suitability as potential suppliers, and the creation of a unique database of pre-qualified firms, could be carried out by an independent provider with the support of an Enterprise Development Center (EDC).20 As part of its outreach function the LC-OSS would direct local firms to enter a supplier assessment program, which would then create a comprehensive database. While the screening process and the supplier database should be managed on a commercial basis by an independent provider,21 an EDC would advise the most promising firms on how to enhance their production capacity, product quality and certification, workforce training, and enhance their partnership potential for JVs. The EDC – potentially set up as a Public-Private Partnership (PPP) – could play a coordinating role by directing local enterprises to specific support and advisory services based on their identified gaps. The EDC would most logically 21 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility be located in Dar es Salaam because of the concentration of enterprises in that area, but satellite offices could also be set up in other regions like Lindi or Mtwara to support players based there. As local firms upgrade and obtain new certifications their improvements will be reflected in the supplier database, which will be kept constantly up-to-date. Dedicated upgrade programs would help firms and workers address bottlenecks in four main areas (see Figure 11) that include: (i) compliance with international quality and certification standards, (ii) access to finance to scale-up operations, (iii) availability of skills and professional certifications, and (iv) business environment and testing and certification infrastructure. These are discussed in further detail: The EDC would provide direct support to firms that want to scale-up their capacity and improve their quality levels in order to qualify as potential suppliers or sub-contractors. These interventions, which would ideally be managed by the EDC, will be expected on one hand to provide consulting services on a matching basis to incentivize SMEs to operate in line with international standards and maintain quality compliance; on the other, they will manage matching grant programs for firms to acquire product or quality certifications. Advisory services will include: (i) consulting and training on procurement, business planning, financial management, and general health, safety, security, and environment (HSSE) standards; (ii) consulting and training on firm and product quality certification; and (iii) specialized industry- specific trainings. In parallel, certification programs will support the effort by selecting local firms to obtain quality certifications (such as ISO 9001) and/or product certifications (such as IEC electrical standards or ISO 10426 standards for cement) considered by the LNG JV and EPC as a minimum requirement for suppliers and sub-contractors. For these programs to be successful, however, it is paramount that the LNG JV/EPC communicates, transparently and in advance of the project launch, which standards will be applied to the required goods and services.22 · Enterprise financing interventions will support efforts by local enterprises to access working and investment capital to increase their scaling capacity or quality of operations. Qualified firms positioned to submit proposals to financial institutions (FIs) to secure working and/or investment capital (to finance improvements or acquire equipment directly connected to their ability to compete as suppliers to the LNG project) could receive practical advice under this area. Technical assistance could also be given to FIs to help them channel financing to selected industries, or to categories of enterprises normally perceived as “high-risk” (and therefore remain un-served or under-served) such as agribusiness entities or SMEs. The advisory to firms and banks could be complemented by access to finance programs. Working capital financing in the form of invoice discounting or factoring should be designed in close coordination with the LNG JV/EPC to conform to their procurement processes. A credit line to financial institutions to extend the maturity of available financing for suppliers would make longer-term investments possible, such as the purchase of industrial machinery or heavy equipment. Finally, a credit guarantee scheme (CGS) to reduce the credit risk for FIs could also be considered, including with some kind of backing from the IOCs. 22 Summary Report · Workforce Development interventions will address the shortages of qualified (and certified) local labor at the skilled and semi-skilled levels (the “missing middle”) and maximize the employment of community workers for basic-skilled tasks. The overall objective of these interventions is to enlarge the local pool of potential workers and match them with future demand. To this end, a Practical Training Facilitation Center (PTFC)23 will develop and support a comprehensive labor force (or “talent”) database, and deploy up-skilling programs targeting workers in different locations at various skill levels. Through the database, the PTFC will be able to match the demand and supply of local labor by providing worker information to the LNG JV/EPC, prime contractors and local firms. Training for basic-skilled workers will be focused on “soft skills”,24 like communication skills, English language skills, or knowledge of HSSE standards. These would be low-intensity, flexible programs designed to address the quality of relationships in a working environment and to improve the chances for locals to be hired for basic-skilled tasks in the future. Programs could be offered in Lindi and Mtwara that are tailored to the specific needs of workers already employed, particularly women, with classes scheduled on a part-time basis or in the evening so as to not disrupt their incomes or family obligations. Another effect of the part-time and supplemental nature of the programs would be to properly reduce expectations of assured employment. · Business Environment and Quality Improvement interventions will focus on policy level support to reduce the cost of doing business and to improve the country’s national quality infrastructure (NQI). In order to improve the competitiveness of local enterprises, a number of cross-cutting interventions to reduce the cost of doing business and administrative costs need to be put in place. In addition, quality- related improvements will affect the ability of local firms to expand their businesses and increase the desirability of their products: interventions under this category will be closely linked to the Enterprise Development objectives. Support will be provided in the form of financing and technical assistance to national quality institutions (such as the Tanzania Bureau of Standards and the Food and Drugs Authority) and to professional registration boards (in particular, the Construction Registration Board) to improve their testing infrastructure and increase their capacity to issue certifications required by the LNG project in-country and at affordable rates. As part of this process, support could also be provided for a nondestructive testing (NDT) laboratory to be established in Tanzania. This type of facility would reduce the time and cost for local firms to test and certify simple goods needed in large quantities for the project (such as cement, electrical wires, and steel products) as well as for other planned, construction projects (such as the Hoima-Tanga oil pipeline). 23 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Figure 11: Where will local enterprises and workers get support from? Source: Team analysis The LC-OSS could also match labor demand with supply and facilitate the process of attracting JV partners. The LC-OSS would manage the database of pre-screened suppliers25 and supervise access to it by the LNG JV, potential buyers, and financial institutions. The LC-OSS would also be a reference point for foreign companies willing to establish partnerships with local enterprises in relation to the project. It could play a role in facilitating the creation of JVs, help streamline administrative procedures for local players to obtain permits and licenses, and support match-making efforts through the organization of trade fairs and other business-to-business (B2B) events26 (e.g., through the Tanzania Investment Center). Financial institutions – the banking sector in particular – will benefit from a close collaboration with the EDC and the LNG JV to design and implement financing programs tailored to the working capital and investment financing needs of suppliers. The EDC could help in this regard by improving the ability of banks to select well-performing enterprises participating in the program that are qualified to access finance through technical assistance programs. Financial institutions could also benefit from using the supplier database as a source of credit information. Once the FID approaches, the LNG JV should also play a catalytic role in supporting access to finance by developing suppliers’ financing mechanisms, including backing banks’ efforts to extend financing with risk-sharing mechanisms and guarantees. The PTFC could leverage the existing network and infrastructure of the Vocational Education and Training Authority (VETA) by reviewing the curricula based on the needs of the project and by complementing it with additional practical training sessions. Given the extensive network of training centers already operated by VETA throughout the country, the PTFC could leverage that infrastructure and help shape the existing curricula to 24 Summary Report include activities targeted to the oil and gas sector. The detailed design of interventions under this area should be informed by, and coordinated with, the existing skills development initiatives sponsored by DPs, such as the “Employment and Skills for Eastern Africa” (SOGA) program by GIZ and DfID, and the “Education and Skills for Productive Jobs” (ESPJ) program for results (P4R) by the WBG. Finally, the PTFC would link up selected, skilled workers with the LNG JV and the EPC so that they might receive specialized, on-the- job training, mentoring, and experience in the field. Support for upgrading will require a partnership between the project sponsors, the local private sector, and the Government, to maximize the benefits to the economy and to leverage existing institutions and programs that already have a mandate to develop transferable skills and technical competencies that advance other sectors of the economy. Active involvement will be needed from the Government at the policy level, and from the private sector, to help entrepreneurs cope with risks associated with the uncertainty of the FID. The IOCs must be explicit and transparent when communicating project standards applied to the project and supporting capacity-building initiatives. In particular, the final choice of standards should be made public as soon as possible so that local firms can start preparing themselves to ensure compliance. To be effective, the interventions should, to the furthest extent possible, build upon existing institutions and infrastructure and complement active programs. For instance, partnerships with Government agencies such as the National Economic Empowerment Council (NEEC) and the Small Industries Development Organization (SIDO) could be explored to leverage their know-how and their network to help establish the LC-OSS and support enterprise development. This kind of approach would help guarantee both the sustainability of those interventions and the development of skills and technical competencies that could be transferable to other sectors of the economy. The proposed “public good” interventions led by the Government will need to be matched by a tailored approach to procurement by the LNG JV and the EPC that supports pre-selected suppliers and attracts local investors into the industry. The proposed SWD interventions pursue “public good” objectives in that they would bridge the gap between individual business interests to achieve a specific improvement in quality or production capacity and expand the number of firms and workers that could compete for contracts. However, the final outcome of these interventions will depend on the procurement choices by the LNG JV. Conventional procurement in the oil and gas sector gravitates towards large, single-sourced contracts after the FID, which can only be fulfilled through targeted procurements tailored to large global suppliers that can mobilize at very short notice. This disadvantages local suppliers in sectors that could lend themselves to more innovative approaches to procurement by the LNG JV. Examples of such approaches are split contracting (e.g. in catering, general services), asset financing of equipment (e.g. concrete batch supply), pre-selection and conditional contract awarding in non-technically specific areas (e.g. in site clearing, office blocks construction). These should be explored and selectively pursued as part of the local content development initiatives. 25 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Finding ways to facilitate JVs between international contractors and local partners will allow qualified Tanzanian enterprises to acquire experience and technical know-how relating to large scale projects. Such arrangements will be effective, however, only if local players are able to show that they can provide some commercial benefits. JVs can help local companies overcome the challenges in delivering on large scale commitments. They can be encouraged by the Government (by creating a business environment that is friendly to foreign investors) and furthered by the project sponsors and the EPC (by “unbundling” some of the large contracts to allow for local enterprises to capture some of the tasks in which they are qualified, such as concrete production or catering services). However, JVs will only be effective if local players can prove that they are up to performing under international standards and are able to bring tangible advantages to their international partners (such as knowledge of the local market, a reliable supplier network, in-country production facilities, improved access to inputs, or greater availability of local skills at a lower cost). International experience has shown that imposed JV arrangements not backed by a competitive local industry may generate sentiments of mistrust, particularly with respect to the appropriation of technology and patent issues.27 Policies also play a role in driving local content; however, their main objective should be the development of a competitive local private sector and labor force to achieve sustainability. The experiences of other countries (which were discussed in Tanzania as part of the local content PPD events in 2014/15)28 have shown that mandated “unrealistic requirements or targets” that protect the local private sector may not necessarily produce the desired results. Sustainable local content is only possible through the development of a truly competitive local private sector and labor force. Local content policies should therefore focus on achieving sustainability in the long run. Any special privileges granted to “infant industries” should be “time bound,” calibrated on actual project requirements, and complemented by programs to develop the technical skills, managerial competence, and financial acumen of the local private sector. SWD interventions could be instrumental in boosting local capture in the priority industries up to an estimated USD 2 billion. It is estimated that through these interventions local capture in the priority industries could increase up to USD 2 billion, which would be an increase of over 40% from the base case. Tanzanians could participate in more value-adding, semi-skilled and skilled jobs, resulting in an increase in local employment to over 5,000 jobs on average during the life of the project (and up to ~7,500 at peak), which would translate into almost USD 700 million in local labor payroll. Local supply of goods would benefit from the enhanced certification of inputs and equipment, as well as from strengthened business management competencies of local firms, increasing to ~USD 1 billion, part of which will be delivered through local sub-contracting (up to 13% of the total investment), resulting in turn in USD 300 million of profits for local firms. 26 Summary Report Upgrading local industries also has the potential to open new markets and enhance economic diversification, which could lead to additional indirect and induced benefits. The development of Tanzania’s agro-processing value chain would be a good example of this. During the LNG project the concentrated, mid-term demand for meals could provide a trigger to scale up the production and processing of many food inputs demanded by the catering industry on the spot, including poultry and red meat at higher quality standards. This could have a significant impact on indirect employment in the local communities of Southern Tanzania and generate induced economic effects from increased spending. There is also the real possibility that production in these areas could be sustained in the future thanks to the rising demand for agriculture goods coming from other East and Southern African countries. In particular, improvements in key value chains could have a significant impact on local employment, resulting in additional 15,000-20,000 indirect jobs and 40,000-55,000 induced jobs.29 The demand for direct jobs in the priority industries could spur an additional 15,000-20,000 indirect jobs – local jobs in the priority industries performed off-site, as well as jobs created along the value chains (e.g., agricultural and input manufacturing jobs) – and another 40,000-55,000 induced jobs (see Figure 12). However, these positive spillovers will not happen automatically. Broad skills development efforts will be needed before Tanzanians can capture all the opportunities emerging along the value chains related to the gas industry. Figure 12: Direct, Indirect, and Induced Local Jobs in relation to the Priority Industries * The ratio of direct to indirect varies in the range of 2.3 - 3.8. ** The ratio of direct to induced varies in the range of 6.6 - 8.4. Source: Team analysis using multipliers from the study “Uganda Industrial Baseline Survey” (Schlumberger Business Consulting 2013). 27 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Since building local capacity takes time, preparatory interventions must start early enough for local suppliers and workers to internalize the newly acquired capacity and skills. The proposed interventions need time to be properly implemented and absorbed into their operations by local players. Some will need to be sequenced so that, for example, incentivizing policy measures on business environment can be in place before enterprises start investing in significant up-scaling. Intervening early in the process is therefore critical to having an impact on the selected priority industries. While SWD interventions will have to be led by the Government in partnership with the private sector, DPs can help facilitate the dialogue, and provide conduits for networking, as well as technical and financial backing to help ensure that Tanzanians gain from the LNG investment. The enabling policy conditions and overall design of the proposed interventions will have to be provided by the Government after close consultations with local businesses and the IOCs. Funding for the interventions could include public-private partnerships (PPPs) to limit the risk to private investors, complemented with targeted support from DPs. The results of this work are aligned with the Second Five-Year Development Plan (FYDP II) and can be used to help the Government shape its local content development strategy. The priority industries and gaps identified by the study are broadly in line with those targeted by the FYDP II, which sets the promotion of local content and the development of productive capacity in sectors like building and construction, iron and steel, and agro-processing, among its key interventions. With access to better information on industry demand, supplier gaps, and investment opportunities provided in this report, the Government should be able to implement a regulatory framework that reflects greater levels of consensus across public and private sectors on where local content emphasis should be placed. 28 Summary Report ENDNOTES 1 There are 11 industry case studies, summarizing the findings for 15 priority industries: the analyses of five smaller industries (Security Services; Cleaning Services; Landscaping Services; Temporary Employment Agencies; and Passenger Transport Services) have been grouped together into one single industry profile titled “Business Support Services”. 2 Proven reserves are ~1 tcf. 3 Namely BG Group, Ophir and Pavilion on one side and Statoil and ExxonMobil on the other. 4 This figure includes total estimates of on-shore gas in place in Songo Songo and Mnazi Bay, worth an estimated 8-10 tcf. 5 According to information available at the timing of writing this report. 6 The “resource curse” refers to a paradoxical situation in which countries with an abundance of non- renewable resources (like fuels) experience stagnant growth or even economic contraction. In fact, when a country starts focusing on a single industry, such as oil and gas, and neglects other major sectors, the economy becomes overly dependent on the price of commodities, and overall gross domestic product becomes extremely volatile. 7 Value added, in economics, refers to the difference between the total sales revenue of an industry and the total cost of components, materials, and services purchased from other firms within a reporting period, and the cost of labour. Value added generally represents the industry’s contribution to the gross domestic product (GDP). 8 VSO Tanzania and UK DfID (2016). 9 The “upstream” segment (exploration and extraction) offers longer-term opportunities in the Mtwara region, but the technological and capital intensity of the industry implicitly limits the local participation in the short term. Similarly, opportunities in the downstream segment (use of gas) will only materialize once the gas starts flowing. 10 See the methodological note for a detailed explanation. 11 Currently, in Tanzania, a number of programs are active. The main ones include the joint GIZ-DfID’s “Employment and Skills for Eastern Africa” (SOGA), a regional program for East Africa and already active in Tanzania, and VSO’s “Regional Enterprise Development” (RED) program, focused on the Lindi Region. In addition, the WBG is preparing an “Education and Skills for Productive Jobs” (ESPJ) program for results (P4R). 12 The USD 17 billion figure represents the midpoint of the USD 15-20 range used for calculation purposes. 13 Skill levels are defined as follows: (i) Skilled jobs require the ability to perform specialized work independently, and normally demand specific educational or professional qualifications; (ii) Semi- skilled jobs require technical skills for the performance of routine operations, monitoring and quality checking, and the ability to work under limited supervision; (iii) Basic-skilled jobs involve simple tasks and do not usually require one to exercise judgment. 14 Most of the contracts for each sub-activity in these industries are above USD 50 million value, therefore local firms may not reach the scale required to deliver on these orders. 15 NQI refers to the set of services and related regulatory framework available at the national level in the fields of metrology, standardization and testing, quality management and conformity assessment, including certification and accreditation. 29 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility 16 This type of approach should be tested through a feasibility study, which would also assess the capacity of existing institutions. 17 Firms seeking credit to finance both working capital and investment needs face prohibitive collateral requirements and high interest rates, which in turn reflect heightened levels of risk and asymmetric information faced by the banks. (World Bank Group 2013). 18 Dalberg and GIIN Advisory (2015). “The Landscape for Impact Investing in West Africa – Understanding the current status, trends, opportunities, and challenges”. 19 The LC-OSS could be established within the existing Local Content Unit under the National Economic Empowerment Council (NEEC). Note: no commitment has been expressed on this point, which will need to be discussed with the relevant counterparts. 20 The EDC could be established under the Small Industries Development Organization (SIDO) or another public institution with an already established network of local enterprises, and collaborate closely with the Tanzania Private Sector Foundation (TPSF). Note: no commitment has been expressed on this point, which will need to be discussed with the relevant counterparts. 21 In 2015 the LNG JV has launched in 2015 a privately managed supplier database – “Achilles”. Consultations between the LNG JV and the Government are ongoing, to see what the best structure for such a platform would be going forward. 22 For example, there is substantial uncertainty as to whether the LNG project will require British or American standards to general electrical services. Tanzania has adopted U.K. standards so it would be unviable to retrain and recertify technicians to U.S. standards without certainty that local firms would be successful in being awarded some contracts. 23 The PTC could be managed through the Vocational Education and Training Authority (VETA), and be funded as a public-private partnership (PPP). Note: no commitment has been expressed on this point, which will need to be discussed with the relevant counterparts. 24 “Soft skills” refer to character traits and interpersonal skills that characterize a person’s relationships with other people in the workplace, such as team building, communication, conflict management, human relations, etc. 25 While the database would be maintained by an independent service provider, the LC-OSS could be responsible for managing its access policy. 26 Events to facilitate the establishment of commercial relationships between businesses. 27 Studies have found that technology employed in mandatory JVs was on average 3 to 10 years out of date, and that technical training provided by international companies to local affiliate staff was a fraction of that provided in wholly-owned subsidiaries. 28 World Bank Group (2016). “Maximizing Domestic Value Added in the Oil and Gas Industry – Sharing lessons learned through public private dialogues in Tanzania”. 29 In order to estimate the indirect and induced effects, the team relied on multipliers extracted from the study “Uganda Industrial Baseline Survey”, Schlumberger Business Consulting (November 2013): the study used coefficients observed through research in other countries or cities that have gone through similar oil and gas activities, like Macaé (Brazil), Trinidad & Tobago, Aberdeen (UK) and Stavanger (Norway). 30 Summary Report III. Summary of Industry Profiles 1. Supporting Services: Community-based Jobs and Opportunities in the Agro-processing Value Chain • Catering 32 • Business Support Services 34 2. General Construction: Upskilling the Industry for Future Engagements • Concrete Works 36 • Building and Camp Construction 38 • Site Preparation 40 • Roads and Landing Strips 42 • Equipment Rental and Scaffolding 44 • Basic Electrical Works 46 3. Project - Specific: “Learning on the job” Opportunities for Future Oil and Gas Projects • LNG Tanks and Trains 48 • Metal and Steel Fabrication 50 • Docks and Jetties 52 31 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Industry: 01 Catering Services Estimated Industry Demand Estimated Job Creation (yearly FTE) Estimated Procurement of Goods and Sub-contracting (US$ mn and %, by sub-activity) 32 Summary Report Summary 33 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Industry: 02 Business Support Services Estimated Industry Demand ~ Estimated Job Creation (yearly FTE) Estimated Procurement of Goods and Sub-contracting (US$ mn and %, by sub-activity) 34 Summary Report 35 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Industry: 03 Concrete Works Estimated Industry Demand ~ Estimated Job Creation (yearly FTE) Estimated Procurement of Goods and Sub-contracting (US$ mn and %, by sub-activity) 36 Summary Report Summary 37 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Industry: 04 Building and Camp Construction Estimated Industry Demand Estimated Job Creation (yearly FTE) ~ Estimated Procurement of Goods and Sub-contracting (US$ mn and %, by sub-activity) 38 Summary Report 39 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Industry: 05 Site Preparation Estimated Industry Demand Estimated Job Creation (yearly FTE) ~ Estimated Procurement of Goods and Sub-contracting (US$ mn and %, by sub-activity) 40 Summary Report 41 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Industry: 06 Roads and Landing Strips Estimated Industry Demand Estimated Job Creation (yearly FTE) ~ Estimated Procurement of Goods and Sub-contracting (US$ mn and %, by sub-activity) 42 Summary Report 43 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Industry: 07 Equipment Rental and Scaffolding Estimated Industry Demand ~ Estimated Job Creation (yearly FTE) Estimated Procurement of Goods and Sub-contracting (US$ mn and %, by sub-activity) 44 Summary Report 45 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Industry: 08 Basic Electrical Works Estimated Industry Demand Estimated Job Creation (yearly FTE) ~ Estimated Procurement of Goods and Sub-contracting (US$ mn and %, by sub-activity) 46 Summary Report 47 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Industry: 09 LNG Tanks and Trains Estimated Industry Demand ~ Estimated Job Creation (yearly FTE) Estimated Procurement of Goods and Sub-contracting (US$ mn and %, by sub-activity) 48 Summary Report 49 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Industry: 10 Metal and Steel Fabrication Estimated Industry Demand Estimated Job Creation (yearly FTE) ~ Estimated Procurement of Goods and Sub-contracting (US$ mn and %, by sub-activity) 50 Summary Report 51 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility Industry: 11 Docks and Jetties Estimated Industry Demand ~ Estimated Job Creation (yearly FTE) ~ Estimated Procurement of Goods and Sub-contracting (US$ mn and %, by sub-activity) 52 Summary Report 53 Leveraging a Large Capital Investment to Develop Local Value Chains: ‘Local Content’ in the Construction of Tanzania’s LNG Facility IV References Bouri, A., Balloch, S., Mudaliar, A., Schiff, H., and Gustafson, H. 2015. “The Landscape for Impact Investing in West Africa – Understanding the current status, trends, opportunities, and challenges”. GIIN (Global Impact Investing Network) Advisory and Dalberg Global Development Advisors. SBC (Schlumberger Business Consulting). 2013. “Uganda Industrial Baseline Survey”. VSO (Voluntary Service Overseas) Tanzania and UKDfID (UK Department for International Development). 2016. “Regional and Enterprise Development – A Research Study into the Opportunities and Challenges for Enterprise and Donor Investment in the Lindi Region”. WBG (World Bank Group). 2016. “Maximizing Domestic Value Added in the Oil and Gas Industry – Sharing lessons learned through public private dialogues in Tanzania”. WBG (World Bank Group). 2013. Enterprise Survey Tanzania. 54 55 Funding for this report was provided by