CIPE Country Representative in Mauritania Mr. Haroune Sidatt was recently interviewed by Senegalese online newspaper Keur Massar Actu on the state of play of the Mauritanian extractive sector. Read the original post in French here. An English translation is below.
Mr Sidatt, a private sector development specialist, argues that the local private sector and workforce are not ready to take advantage of the extractive sector in the Sahel. He was invited by the OSIDEA¹ for a roundtable on the governance of extractive industries on the theme “What strategies to build bridges for the energy transition around the exploitation of gas and oil?”. He was a panelist on local content issues and led discussions on ecosystem governance with a particular focus on the central responsibility of the private sector. The sharing of the GTA between Mauritania and Senegal noted his participation and his strong outputs on the requirements for socio-economic impact of oil and gas future. He was our guest to talk about Mauritania from Dakar.
Local Content is a hot topic in political discussions. Tell us what the situation of local content in Mauritania is.
First, we need to demystify this term, which seems to mean several things at once. Basically, we are talking about the socio-economic impact of the exploitation of natural resources on the population. In the contracts with the operators, our countries receive revenues directly in the form of taxes or royalties. These will boost the state budget to build roads, schools, hospitals, and other public services needed to improve the lives of citizens.
On the other hand, the exploiting companies will make a profit because that is what they are there for, and this is legitimate.
Local content will allow countries to tap into corporate budgets and profits through job creation as well as the use of domestic companies to provide services and products for operations in the country.
The complexity comes from two main factors: on the one hand, the requirements of the operators’ standards in terms of quality, assurance, and deadlines, and on the other hand, the local weaknesses in terms of education and training, as well as an experienced and professionalized economic fabric.
Our States need resources and therefore want to go fast on the exploitation of natural resources and must make compromises to accommodate companies. But our populations suffer and cannot wait to be at the professional level requested to benefit from the fallout. This is a dilemma and the solution that has been adopted is to move forward with investments while pushing forward public policies focused on local content requirements, accompanied by capacity building efforts, enterprise upgrading programs and business environment improvements.
To come back to the situation in Mauritania at this time, it is marked by several activities driven by future gas exploitation and mining expansion. A local content policy is being developed to guide and promote the actions of the State and operators, and a set of analyses has been carried out within a participatory framework to ensure the realism of public action but also to allow for the responsible commitment of the parties. Finally, the State has allocated significant resources to the education and training sectors and more recently to the promotion of employment and the development of the private sector. The basic work has been done, now it is a question of its application and of seeing the endurance of the actors because the result requires time and quality.
Do you think we will see the impact of this local content that we talk about so much in the near future?
I think, beyond being naturally optimistic, that Mauritania and Senegal are doing good things to promote local content in the extractive sector and that the results will come. In addition to public investment and development partners, the very fact that there are mechanisms for dialogue and engagement on this issue is a step in the right direction.
Now, as I said at the conference, we must manage expectations. We have taken the problem upside down because we are not in a proactive mode but in a corrective reaction with requirements, especially in education-training, that take years to be implemented.
We know that the fight against youth unemployment is a geostrategic priority for our countries. Is the local workforce well prepared to take advantage of the extractive sector markets?
Unemployment is the result of a set of challenges that it is important to understand in order to find solutions, and above all to be part of the ambitious but realistic approach we have been talking about.
We must keep in mind our realities in terms of the volume of school dropouts, the low success rate in the main professional exams and even more so the level of our education system and technical and vocational training. There are many specialties that require several years of study, practical experience, and certifications, and we are only now starting this process. It is never too late, but it is important to manage expectations and be realistic without being fatalistic.
The issue of youth unemployment, therefore, hides another important reality, which is that of the stock of young people who have left the system with little education, no training, and no work experience, many of whom are new urbanites and therefore without a structured work culture. For this important demographic group, nearly 50% of the youth, the authorities must therefore follow a logic of job training to try to take advantage of the subservient opportunities offered by the extractive sector, with a short-term and rather practical training offer. This is a strategy that will provide short-term relief, but without the integration of national cadres, this will quickly turn into a social frustration that is difficult to manage.
The good news is that, as presented today by British Petroleum (BP) with the fifty or so young Mauritanians and Senegalese in training, the operators are in action and understand their responsibility to anticipate this social frustration. This attitude is to be commended and shows that we are dealing with responsible companies. However, the focus of employment is rather on levels 2, 3, and 4 of the exploitation value chain, i.e., contractors and subcontractors. There is still a lot of work to be done here because on the one hand, these companies are under pressure to deliver services on budget, on time and must demand quality specifications, and on the other hand, they must hire nationals not always with the required skills. It is not easy, but this is where the state must act with the carrot, and if necessary, the stick!
You seem less optimistic about the market access of national companies, why?
I remind you that I am naturally optimistic. I think that the work to be done by the national private sector is more complicated and that the public support service is still in gestation. The time it takes to integrate the domestic private sector into the exploiting firms’ supply chains is what worries me.
Once again, if we look carefully at the private sector and the economy of our countries, we will see deep structural challenges, low diversification, the dependence of large companies on public markets, low productivity with recurrent quality deficiencies, lack of internalization, competitiveness issues and so on. The picture is not pretty but we have come a long way and we are moving forward. The change is in our hands, and it is rather how fast it will happen that worries me because the national private sector will capture this market sooner or later.
The extractive sector has been mentioned but the focus has been on the Greater Tortue Ahmeyim (GTA) gas field and BP² . Should we expect a rapid transformation of Mauritania with the production of the GTA?
The change in the living conditions of the population will depend on the use of the royalties that will be given to the state in the first place. What is certain is that when we start pumping gas at the end of this year or the beginning of next year, there will be an additional budgetary contribution for the Mauritanian state and therefore more resources for the state to do things to serve the people.
If there is good management of resources, there will necessarily be social projects, things that will be done for the people, that will immediately impact their lives, especially for the most vulnerable populations, including people in extreme poverty, rural areas, or areas with serious social challenges.
Now, will we be able to manage these resources well? This is a question that needs to be asked, especially to the political decision-makers of the day. In fact, the central discussion of this conference on local content is not how much the State will earn, but how it will anticipate the use of these resources and what accountability lever should be used on the use of resources. Because if the people do not know how much the state will earn and how it will be used, no one will be accountable.
The idea that Mauritania is only waiting for the gas from the GTA to become the United Arabic Emirates (UAE) or Saudi Arabia is utopian in my opinion. What have we done with fish, iron, gold, and copper?
We must, however, be optimistic and hope that our leaders will make good choices for the people. For the moment this file is on a good trajectory, and nothing makes us think about anything else.
Read the full interview in French here.
- Observatoire de Suivi des Indicateurs de Développement Économique en Afrique (Observatory for the Tracking of Development Indicators in Africa).
- The Greater Tortue Ahmeyim is an offshore gas field located off the coasts of Senegal and Mauritania and exploited by British Petroleum (BP), with the objective to position both countries as leaders in the world markets for the production of liquified natural gas (LNG). Production is set to begin in 2023.