September 2009, USAID
The extractive sector comprises a significant percentage of foreign and domestic direct investment in Sub-Saharan Africa, and this is likely to increase over time due to a rising demand for, and supply of, large amounts of untapped mineral resources.
Because of its nature (scale, duration, extraction methods, and location), the extractive industry can have significant economic, social, physical and environmental impacts in host countries. How mining operations are regulated and managed can determine whether their impacts are positive or negative.1 In this regard, host country governments, mining companies, local communities, and donors are all stakeholders with interdependent interests. Central to all four – but for different reasons – is a preoccupation with the welfare and development of host communities. This has led mining corporations – strongly encouraged by governments, monitored by communities, and sometimes in cooperation with donors – to engage communities through on-the-ground, development-oriented programs.
Within this context, this paper examines programs that offer economic opportunities to indigenous small and medium sized enterprises (SMEs) within the mine’s supply chain. We begin with a brief overview of the mining sector in Sub-Saharan Africa, the constraints faced by mining corporations, and some of the corporate responses (i.e. social mining programs). We then outline the rationale and general principles of local supplier development programs and present specific examples. We conclude with an analysis of our findings and some guidelines for future program design and implementation.
