4 Strategies for local content success

Helping business to
serve shareholders AND society
SIMULTANEOUSLY
Four Strategies for
Local Content Success
-by Wayne Dunn
www.csrtraininginstitute.com/knowledge-centre

Local content has emerged as one of the most pressing issues facing
business in emerging markets.
Rightfully so.
It has the best local value to investment ratio (ROI) and even when
done poorly it can have significant positive impacts.
Effective local content strategies have two focus areas that are
common across industries and geographies. These are employment
and procurement.
Get them right and your project has the foundation for a strong and
resilient social license. Local employment and procurement can also
be a key component of your project’s overall economic viability.
Get them wrong and your project will struggle with social and
community issues and, quite often, overall project viability.
Developing local employment and local procurement is one of the
best leveraged CSR investments that a company can make. Think
about it.
The jobs have to be filled. The goods and services have to be
procured. If they aren’t procured locally then very little of the money
from them will circulate in the local economy.
If they are procured locally then virtually all of the money circulates in
the local economy and has a significant multiplier effect.
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Planned and executed properly, local content is the most sustainable and the most cost-effective
mechanism for delivering value into local communities and economies.

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Even if local content creates additional costs the socio-economic
impact derived from those extra costs represent a significant return on
that investment because they are leveraged by the overall employment
and procurement spending.
And, often there aren’t extra costs or the additional costs are front-
loaded and the benefits last over the life of the project.
If a project isn’t maximizing local employment and procurement then
it will be bringing in more outsiders. This costs extra and can increase
community tension beyond the lost employment and contracts. (Think
of an influx of single young men coming to work at a project site and
the impact on local families and communities).
Successful local content strategies can not only result in strong local
relationships, they can also help with a project and company’s
relationship with local and national governments and regulators as
well as with developmental and advocacy NGOs.
But, success is not easy
Common constraints that must be overcome to have success with local
content include:
Projects are often based in remote locations with little or no
experience with industrial employment or even salaried
employment of any kind.
Levels of literacy are low and household economies are often
subsistence based.
There is little or no effective infrastructure to provide training
and support to assist potential workers with the transition to
industrial employment.

Local businesses and prospective entrepreneurs lack the
skills and experience to be effective providers of goods and
services. This includes both technical skills and business
management skills.
There are no economic vehicles in the local economy that can
enable effective participation in the larger contracts and
opportunities.
Locally owned businesses lack the financial, operational and
management capacity to compete for larger contracts, even
with extensive support and assistance from the project/
company.
The bulk of the overall value of contracts for goods and
services cannot be broken down to a size that can be digested
by local businesses and entrepreneurs.
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Local residents desperately want
opportunities to participate in
the project’s economic activity
through jobs or contracts.

Developing and implementing successful local content programs
isn’t cheap. Getting to success often means overcoming significant
gaps in skills and capacity, and sometimes requires development of
organizational and institutional infrastructure. This can be costly and
time-consuming, yet can provide valuable long-term results.
Investments in local content development pay back over the life of
the project. Yet most budgets treat them as operating expenses, not
capital expenses. Why?
In my experience it is mostly because nobody has challenged
finance and accounting on how they are treated. But, it does make
a difference. And it should be treated as a capital expense. The
payback is over time, generally over life of project.
1. Think Cap Ex
when budgeting
This means that by default the local economy is effectively
prohibited from participating in the lion’s share of opportunities
other than as sub-contractors.
Programs to facilitate local content development are under-
resourced and focus on short-term impacts rather than the
structural issues that inhibit optimization of local content.
Local content success strategies
Below are four strategies that can help achieve local content success.
They probably won’t all work all of the time. And some may have no
applicability to your particular project or venture.
But, you may find some useful, or they may stimulate you to think of
other strategies and approaches for optimizing local content.
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When local content development is treated as an operating expense
it is generally under-resourced and focused too much on short-term
rather than life of project impacts.
There is a strong case to be made for including local content
development budgets early on in a project’s overall capital budget.
This can provide the resources and the time-frame to make it work
effectively and will pay off handsomely over the life of the project.
The scale of most procurement opportunities is simply beyond the
financial, operational and organizational capacity of local businesses
and economic institutions.
Local businesses are simply unable to scale so as to take advantage
of the opportunities the project presents. And, if they were given them
they would not have the capacity to manage them effectively.
This was a challenge faced by many Indigenous communities in
Canada.
Development of major industries and projects on their traditional lands
meant that there were large contracting and business development
opportunities available to them. But, their local businesses and
economic structures did not have the scale to take advantage of them.
The opportunities and benefits went to outside providers.
2. Development
Corporations
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Local content investment
contributes value over the
life of the project. Yet, it is
seldom budgeted as a capital
expense. This results in
chronic underfunding

A development corporation model evolved over time and proved to
be very successful at enabling local capacity to bid on major contracts
and activities.
In the development corporation model geographic or tribal based
populations come together and form for profit development
corporations that are collectively owned. They are able to operate at
a scale whereby they can engage professional management and be
better able to meet the needs of modern industry.
In many cases development corporations would recognize that the
scale of the contracting opportunity was so large that they needed
to bring in additional operational and financial expertise. This was
often accomplished via joint-venturing with firms that could bring the
missing pieces to the opportunity and supplement the strategic local
content advantage that development corporations had.
Kitsaki Development Corporation – Local Content Success Story
An early example of using a development corporation approach is the Kitsaki Development
Corporation, a business development vehicle created by the Lac La Ronge Indian Band in
northern Saskatchewan, Canada.
Kitsaki Development Corporation
is an successful example of a
development corporation being
used to overcome gaps and issues
that inhibit local content success
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The regulatory structure that was put in place to enable the development of the Uranium industry
in northern Saskatchewan sought to facilitate local content development. One of the ways it
did this was to put in place a requirement that local content providers be given a specific bid
preference.
Kitsaki used this preference, along with a well-executed joint-venture strategy to secure an initial
contract. It has used that strategy across a range of focused opportunities and created a venture
with annual turnover in the ½ billion dollar range (see details on their website here.
In the mid-1980s the bulk transportation contract was coming up for Key Lake Mine. Kitsaki
recognized the opportunity and also recognized that while it had a local content advantage, it
did not have operational experience in the bulk transport business.
Kitsaki, which had astute professional management, sought out a partner that could bring the
missing pieces to the venture. It partnered with Trimac Transportation, the largest bulk transport
firm in North America.
The Jt Venture that was created, Northern Resource Trucking, which was 51% owned by Kitsaki,
went on to become the largest bulk transport business in Northern Saskatchewan and today
provides services to industry and communities across the region.
Kitsaki used a similar approach to take advantage of other strategic opportunities in the local
and regional economy. See more here.
This development corporation and joint venture model has proven very successful for many
Indigenous communities and tribal organizations across Canada and the United States.
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The Lac La Ronge Indian Band used a Development
Corporation (Kitsaki) and a strategic partnership
approach to create NRT Trucking and capture a major
transportation contract from a local mine. Using the
same tactics they have grown Kitsaki into a substantial
economic force, generating many hundreds of jobs and
contract opportunities for band members and significant
revenues and profit.

A key to the sustainable success of development corporations is a
strategic approach that leverage’s local content advantages and meets
the needs of industry and other markets, often through partnerships
and joint ventures.
An equally important key is effective governance and political
management that give the development corporation operational
space and keeps it free from political interference and manipulation.
Advertise for entry level workers at a remote project and you are
overwhelmed with applications. And, the process of sifting through
them is inefficient, often bringing in poorly suited applicants and
leaving better suited ones off the list.
Some applicants find that the structure of industrial employment and
its impact on family and life simply doesn’t fit for them. In other cases,
immersion in a structured institutional setting can bring out traits that
were not evident during the screening and hiring process
Too often the end result is high turnover of employees and frustration
on the part of employees, managers and the company.
A well-structured pre-employment training program can address these
issues. It can dramatically reduce turnover and provide the broader
community with enhanced life-skills and livelihood potential.
It works by establishing a short-term program (typically 6-12 weeks)
where a pool of prospective employees are brought into a program
that prepares them for industrial employment and helps them to
determine if industrial employment is for them.
The program typically consists of a range of components that are
directly and indirectly related to the anticipated employment.
They include elements related to the lifestyle transition that often
accompanies a move from a subsistence lifestyle to salaried industrial
employment. Some of the programming, such as household financial
literacy and household economic transition involve spouses and
sometimes children.
3. Pre-employment
training
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At the end of the pre-employment training the trainees have a much
better sense of what all is involved in industrial employment and
whether that is a fit for them and their families.
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Pre-employment training helps companies to know prospective employees better and to make
smarter hiring decisions. It also helps prospective employees to understand whether industrial
employment is a fit for them. Even those that don’t move into industrial employment leave the
program with valuable life and livelihood skills.

Pre-employment training gives employers the opportunity to know
prospective employees over a much longer time frame and across
broader range of situations.
At the conclusion of the program those deemed the most suitable for
industrial employment go into a pre-screened pool that the company
can select from when it next needs to hire new workers. This pool can
also be made available to contractors and others, helping to improve
secondary and tertiary level local content success.
The end result is that those who are hired and brought on board
are much more likely to stay and succeed. A big cost saving for
the company, big value for the local economy and a big frustration
avoider for all!
Even those that are not brought into the pre-screened pool benefit.
They have learned new skills and are better positioned to secure other
employment or develop alternative livelihoods.
In many cases pre-employment training can be undertaken by more
than one project.
The skills, attitude and expertise gap between where local workers
are at and where they need to be can be huge.
Especially when the local content strategy is focused beyond simply
bringing in entry level workers and instead has a target of seeing local
employees at all levels and across all functions in the organization.
There is a need for effective education and training programs to
systematically bridge gaps and help both employees and employers.
While it may seem simpler to either do the training in-house or bring
in outside experts to do the training, this can be a short-sighted
approach with longer term costs.
Most times there are local polytechnics and other local training
institutions. And often they don’t have the capacity to develop and
deliver the type of training needed and at the quality level required.
4. Invest in education
and training
institutions
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Local training institutions are local content too.
Rather than simply pass by the local institutions in favour of bringing
in a qualified institution or instructor, or even doing it in-house,
companies should carefully consider investing in developing local
training capacity.
This would include facilitating partnerships between local training
institutions and international partners who can help them to
both develop and deliver effective programming to meet current
requirements, and develop the institutional capacity to do so in the
future.
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Investing in creating the local capacity to develop and deliver effective skills training can pay
dividends over the life of a project. Partnerships between local skills training institutions and their
more developed international counterparts can help ensure a steady supply of local workers with the
required skills AND develop the capacity for the local institution to provide a range of other pragmatic
skills and livelihood related programming.

While this may be slightly slower and more expensive in the short
term, the improved local capacity will pay many dividends, including
lower costs later on and an improved local capacity to train people
for a range of livelihoods and skills (thus reducing dependency on the
dominant industrial employer in a region).
These four strategies are no guarantee of success. Local content is not an easy puzzle to solve. But,
following those strategies that can apply effectively to your project can help improve your chances
of success, and can make a huge difference for local families and communities and, ultimately, your
shareholders.
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Facilitating partnerships between local training and educational institutions and highly
experienced international counterparts can help create short term solutions AND put in place
longer-term local skills training capacity

Below are some recent articles and publications on Corporate Social
Responsibility and stakeholder engagement that you may find interesting.
Mining Schools Hi Tech in CSR
CSR SWOT
discover risk, value and more
Eleven strategies
for maximizing value from CSR
CSR in Budget Crunch Times
12 strategies for success
Multi-sector CSR Partnerships
Natural Partnerships – Unnatu-
ral Partners
From Pariah to Exemplar
Applying the 6 best practices
Engaging Internal Stakeholders
Seven proven strategies
CSR Communications
Eleven mistakes to avoid
Stakeholder Engagement
Six best practices
Creating a CSR Program
in eight self-serving steps
Let’s be honest:
Internal CSR Communication
Sucks!
CSR Metrics:
You can’t measure temperature
with a speedometer
Stakeholder Engagement
Five common mistakes
CSR Value Continuum
A unique perspective on Shared
Value
Smarter CSR Budgets
8 steps to connect budget to
value
28 Expert tips
On stakeholder engagement
Don’t be an Altruistic Angel
Be transparent about what’s in it
for you
13 Mistakes that prevent & destroy
Multi-sector CSR partnerships
NHL Sustainability Report
Good but incomplete.
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Professor Dunn brings a practical and realistic approach to CSR, blending theory and
practice to develop realistic models and approaches to address real-world challenges
Dr. Ellis Armstrong
Former CFO, BP Exploration
…coherent, thoughtful, stimulating and insightful… state of the art! The network of
participants from the public, private and civil society sectors was incredible, some of
the leading experts in the field.
Kojo Busia, Ph. D.
Snr. Mineral Sector Governance Advisor
United Nations Economic Commission for Africa/UNECA
…pragmatic blend of theory and practice, very applicable to helping organizations
meet real-world challenges.
Frank McShane
Manager, Corporate Responsibility Policy and Ethics, Talisman Energy
… readily available to provide support to organizations like Amref that are seeking
partnerships, and looking to bring about positive change in a collaborative and concrete
way. Wayne and the CSR Training Institute helped us to identify and connect with
potential partners and are always available. The training, the expertise, the network
and the overall support are world-class.
Onome Ako
Director of Strategic Partnerships, Amref Health Africa
“The program enhanced the CSR knowledge and strategic skills of our Kosmos Energy
Ghana team, and offered the participants a platform for networking with professionals
from other organizations across Africa and Ghana.”
Reg Manhas
Sr VP Kosmos Energy
Very much helpful Wayne; some of the tips and questions you gave will be an extremely
helpful guide in the process of developing a CSR Strategy for my company.
Emmanuel Aubynn
Regional Social Responsibility Manager, Newmont Africa
The CSR Program was excellent. A key aspect of my work is to encourage and support
private sector development that contributes to Ghana’s overall socio-economic
growth. The learning that I and my staff take away from attending this program will
help us immensely with this responsibility. I highly recommend this program.
Hon. Rashid Pelpuo (MP)
Minister of State for Private Sector Development and Public Private Partnerships
(Ghana)
New and exciting insights into the theory and practice of CSR… great faculty and
participants, very diversified. An excellent learning experience, very practical and
useful. I’m very happy I was able to participate in it.
Hon InusahFuseini (MP)
Minister of Lands and Natural Resources (Ghana)
WHAT OTHERS SAY ABOUT OUR WORK

Should Business Serve
Helping business to serve society and
shareholders, SIMULTANEOUSLY.
Should Business Serve
WAYNE DUNN, PRESIDENT AND FOUNDER
SHAREHOLDERS?
SOCIETY?
IT SHOULD SERVE BOTH.
Wayne Dunn is President & Founder of the CSR Training Institute and
Professor of Practice in CSR at McGill. He’s a Stanford Sloan Fellow
with a M.Sc. in Management from Stanford Business School.
He is a veteran of 20+ years of award winning global CSR and
sustainability work spanning the globe and covering many industries
and sectors including extensive work with Indigenous Peoples in
Canada and globally. His work has won major international awards
and has been used extensively as ‘best-practice’ by industry and
academia.
He’s also worked oil rigs, prospecting, diamond drilling, logging,
commercial fishing, heavy equipment operator, truck driver and
underwater logging, done a couple of start-ups and too many other
things to mention.
Wayne’s career includes big successes, and spectacular failures. He
hopes he’s learned equally from both.
www.csrtraininginstitute.com

4 Strategies for local content success

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4 Strategies for local content success