Kenya Extractive Industries Development Programme (KEIDP)

Local Content Gap Analysis

Dissemination Workshop September

2015

1

Table of Contents

Project Overview

Methodology

Market Update

Supply Chain Insights

Proposed Actions

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6

9

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Project Overview

Abundance of largely untapped natural resource wealth in Kenya

Attracted considerable investor attention:

Recent oil discoveries announced by Tullow Oil and Africa Oil

Significant investments in mining by Base Titanium

Potential robust mining sector following additional discoveries of mineral sands, rare earth deposits, coal, and other mineral deposits

DFID commissioned this early local content gap analysis for extractives sector in Kenya

Initial view of sectors where opportunities will probably lie, and provides a foundation for further analysis

Study aimed at understanding:

Potential demand for local goods, services and labor

Potential for supply from the Kenyan private sector

Gaps (constraints and challenges) that need to be addressed to optimize Local Content in country

METHODOLOGY

Methodology

Market Assessment

• Key Players

• Goods and Services

• Operational Update

Data Collection

• Information gathering from players

• Informational meetings with key players

• Questionnaire/Survey on supply chain

Analysis

• Analysis of Survey

• Supply Chain Impact Model

• Refining Inputs

• Findings + Recommendations

Reporting

• Finalizing Findings

• Recommendations + Action Plan

• Validation Workshop 4th June 2015

• Final Report Writing + Submission

MARKET UPDATE

Market Update – Mining Sector

Market Update – Oil and Gas Sector

SUPPLY CHAIN INSIGHTS

Mining Sector

Supply Chain – Goods and Services

Oil and Gas Sector

Indirect and Direct Services have the most appeal for local supplier development

Supply Chain – Survey Views

Goods and supplies most suitable for supplier development

Supply Chain – Survey Views

Supply Chain – Survey Views

Core technical services better for longer term supplier development

Perception of challenges to local sourcing of goods and services in country

Supply Chain – Survey Views

Supply Chain – Commercial Opportunities

Assumptions based on scenarios

Most operations are in early exploration

No scoping studies

No project plans or conceptual designs

No technical feasibility studies

Scenarios based on data from view of extractives sector development

Company projections

Analysts’ views

Interviews and survey data

Local content capture based on preliminary view of market performance as well as experience in other countries

Interviews and survey data

Oil and Gas Mining

Low High Low High

Exploration Estimated Budget USD 300M USD 700M USD 30M USD 100M

Estimated Local Content Capture ~ 20% ~ 20% ~ 25% ~ 25%

Construction Estimated Budget USD 400M USD 1B USD 200M USD 600M

Estimated Local Content Capture ~ 30% ~ 30% ~ 30% ~ 30%

Supply Chain – Commercial Opportunities

$ 5,700,000

$ 23,340,000 $ 30,960,000

Core Technical Direct Services Indirect Services 600,000

600,000

600,000

600,000

840,000

900,000

900,000

1,200,000

1,200,000

1,200,000

1,200,000

1,800,000

3,000,000

3,000,000

5,400,000

6,120,000

7,200,000

9,000,000

12,000,000

Drilling Equipment & Supplies

Civil Engineering and design services

Lifting services

Lubricants/Chemicals

Environmental services

Specialised Engineering Services

Hazarduous Waste Management

Seismic & interpretation

Goods (wholesale distribution, manufacture)

Construction raw material (cement, gravels, etc)

Site support consumables (food, water, office supplies stationery etc)

IT/communication services

Drilling & Well Services

Security Services

General and Site support services (catering,…

Vehicle fleet management and people transportation

Energy (fuel, electricity)

Supply Chain services (freight forwarding, transport etc)

Construction services (building, earthworks, civil works etc)

OIL AND GAS EXPLORATION PHASE

LOW CASE SCENARIO: USD 300M

Supply Chain – Commercial Opportunities

- 200 400 600 800 1,000 1,200 1,400

Skilled

Semi-Skilled

Unskilled

Oil and Gas Workforce Estimated No. of Jobs Created

OIL AND GAS EXPLORATION PHASE

LOW CASE SCENARIO: USD 300M

- 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

Direct

Indirect

Induced

Supply Chain – Commercial Opportunities

$ 30,600,000

$ 28,800,000

$ 120,600,000

Core Technical Direct Services Indirect Services 900,000 900,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000

3,600,000 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000

5,400,000 5,400,000 5,400,000 5,400,000

7,200,000 7,200,000 7,200,000

9,000,000 9,000,000

10,800,000 14,400,000

41,400,000

Health Services

Personnel services: Manpower

Laboratory Activities

Recovery Activities

Drilling (contracted services, spares, consumables,maintenance, tyre tracks)

Blasting (explosive, transports & services, site preparation)

Crushing & Grinding (consumables, repair & maintenance)

Demolition & Site Preparation

Goods (wholesale distribution, manufacture)

Professional services: Legal

Banking & Financial Services

Personnel services: training

Telecom and data systems

Site improvements, Gardening and landscaping

Earthworks, tunnelling, Piles & Caissons

Environmental Services

Light Vehicle Maintenance

Insurance services

Computer maintenance & System Servicing

Waste Management

Supply Chain Services (customs, warehousing, transports)

Security

Building & Facilities maintenance

Civil works construction and maintenance

Fleet Management (Car Truck Rental and other Vehicles)

Administrative Support

Load & Haul (contracted services, spares, consumables,maintenance)

Hospitality Services (including Camp Catering, food supplies, laundry ect..)

Electrical Equip (Installation, Repair, and Maintenance)

Equipment maintenance (generators, pumps, crushers etc…)

Heavy Vehicle Maintenance

Transport/Logistics in country

Management & Technical Maintenance Services (Engineering, planning, survey)

Energy services (Fuel, electricity)

MINING CONSTRUCTION PHASE

HIGH CASE SCENARIO: USD 600M

Supply Chain – Commercial Opportunities

- 1,000 2,000 3,000 4,000 5,000

Skilled

Semi-Skilled

Unskilled

- 10,000 20,000 30,000 40,000 50,000 60,000

Direct

Indirect

Induced

Mining Workforce Estimated No. of Jobs Created

MINING CONSTRUCTION PHASE

HIGH CASE SCENARIO: USD 600M

Supply Chain – Sector Priorities

Local content can be improved if we

focus on the procurement process

The supply chain model was developed

to capture demand side alongside

supply side behavior with reference to

procurement of services

Demand Side – Feasibility

Supply Side - Suitability

Prioritization matrix ranks the best areas

for local content development

Constrained Simple

Complex Constrained

Low

Low

High

High

FE

AS

IBIL

ITY

SUITABILITY

Supplier Development Matrix

Supply Chain – Sector Priorities

Simple -

Strengthen and Expand

Markets

Supply Chain – Sector Priorities

Constrained -

Form Partnerships

among Suppliers

Supply Chain – Sector Priorities

Constrained -

Maximize Commercial Advantage

Supply Chain – Sector Priorities

Complex -

Ensure Supply

Continuity

PROPOSED ACTIONS

Proposed Actions

Local Supplier

Development

Insight Studies

Insight Sector Studies

Focus

Detailed supplier mapping and data

Understanding sector dynamics

Shape dialogue on sector development

for EI

Rationalize

Services and Components

Required Inputs (information, funding, etc.)

Key Players and Roles

Outputs

Supplier Development

Strategy + Detailed Action Plan

Workforce Gap Analysis

Resource Evaluation (budget,

personnel, time frame, etc.)

Mozambique SME Linkage Development Program (Mozlink)

SME Development Centre Sharing Best

Practice Benchmarking

HOW

SMEELP

• BHP Mozal Construction Phase)

• 15 SMEs

• $ 5,000,000 contracts

PROGRAMS

2001 2003 2004 2006 2007

Program Goals:

Develop SME Competitiveness

Transfer knowledge and business

to Mozambique involving other

large companies

Mozlink Phase 1

• BHP Mozal Operations Phase

• 25 SMEs

• $15,000,000

Mozlink phase 2

• Inclusion of other Corporates

• 75 SMEs, $27,000,000 plus

• 2,041 Jobs Created

Knowledge Sharing Project Mozambique

Business Network Mozlink website

Supply Analysis New products and

services to be supplied locally

Mozambique SME Linkage Development Program (Mozlink)

Steering Committee: Corporates, CPI, IFC, other

donors

Program Management Unit

CPI (Investment Promotion Center)

Technical Mentors

(Corporate Partners and/or External consultants)

Business and Financial Course

Developers/Trainers

(External Consultants)

Business Mentors

(Corporate Partners and/or External Consultants)

Technical Advisors

(IFC, UNCTAD)

Supplier Development Program

Program Management

• Provided by entity through some selection process (tender, proposal development, etc.)

• Endorsed by government and industry chambers, associations, etc.

Products and Services

• Business development services

• Training and capacity building

• Access to finance and financial services

• Business matchmaking – for JVs, Consortium Bidding

• Access to tenders and bids

• Information sessions and reports

Funding

• Membership fees

• Contributions from extractives companies

• Funding from development partners

• Funding from government programs

Supplier Development Program

Delivery of services

Reporting to the Program Manager

Program execution/implementation

Reporting to Steering Committee

Monitor project execution

Provide approvals for noted activities as per governance guidelines

Steering Committee

Program Management Office

Consultants Other Third Parties

Technical

Advisory

Team

Supplier Development Program

Extractives Companies & Lead Contractors

• Local content strategy

• Lead supplier development management

• Co-financing/funding

• Local content training elements

Finance Institutions / Donors

• Co-financing/funding

• Finance instruments

• Local content training elements (through Technical Advisory Team)

• Technical qualification

Local Suppliers / Companies

• Co-financing/funding

• Performance contracts

• Uptake of supplier development services

Host Country/Government Institutions

• Co-financing/funding

• SME development

• Income generation & economic opportunities

Enterprise Development Center

Participation

Supplier Development Program

Supply side services

• Online supplier database

• Business matchmaking

• Supplier opportunity sharing

• Business development services

• Workforce development and recruitment

• Training and capacity building

Demand side services:

• Online supplier database

• Publishing of opportunities

• Contracting support

• Contracting strategies support

• Business matchmaking

• Training and capacity building

Discussions

THANK YOU