Toward a Strategic Management Perspective on Local Content in African Extractives

Local content requirements - i.e. government backed requirements that extractive MNCs must procure inputs locally - are fast becoming a major issue in MNC-host country bargaining in Africa. Across Africa, governments are seeking to mobilize MNCs for sustainable development through increasingly stringent local content requirements. As a result, extractive MNCs are facing a rapidly evolving strategic field, the management of which may have immense implications for their investment decisions, profitability and efficiency. While a vibrant and dynamic literature on local content in Africa is emerging, this literature is predominantly informed by economic and political perspectives, and strategic management perspectives are virtually absent. This is problematic as one of the main reasons why local content interventions in Africa fail to produce the expected results is that they often are based on an inadequate understanding of MNC strategy and interests. Hence, the aim of this paper is to characterize and conceptually develop the strategic management perspective on local content. The paper outlines generic strategies that MNCs may adopt to balance the often conflicting pressures for local content and global efficiency. It is concluded that by better aligning local content intervention with MNC strategy and interests, the likelihood of positive development outcomes will be greatly enhanced.