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Increasing Domestic Impact of Investments Through Linkages

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Broadening Domestic Impact

The impact on the domestic economy of large-scale investment varies significantly

In part depends on the intrinsic capital-intensity of the sector

Promoting linkages to domestic firms can enhance and broaden the impact of major investments

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Benefits of Linkages

For Large Firms: Reduced procurement, production, and distribution costs Improved integration in new overseas markets Enhanced reputation and local license to operate

For Small-Medium Enterprises (SMEs): Access to new clients and markets Enhanced skills, standards, and capacity Acceleration of knowledge transfer and technology upgrading

For Local Communities: Stimulation of economic activity, increased employment opportunities, and

local or regional competitiveness Added local purchasing power

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Approaches to Promoting Linkages

Building SME Skills and Capacity Procurement Opportunities Access to Information Access to Finance Corporate Social Responsibility Leveraging Global Standards

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Building SME Skills and Capacity

Facilitating training, mentoring, and consulting for SMEs over a period of time

Mozlink, an IFC program in partnership with CPI. Program has had a significant impact on SMEs and the local

economy Built the capacities of 45 local SMEs. Mozal spends $17 million with 250 Mozambican

companies monthly. The success of MozLink encouraged four corporations in

Mozambique—Mozal, Sasol, CDM, and Coca-Cola—to partner with IFC to design a three-year SME development and linkages program, MozLink

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Building SME Skills and Capacity (cont.)

Standardized training modules can be very cost-effective. IBM & IFC have developed an online SME Toolkit containing self-guided modules. Martins Group in Brazil has provided online training to

11,000 people through its Martins Retail University. A number of companies have developed best practice

guidelines specific to particular industries or business activities. Unilever’s Sustainable Tea Initiative provides guidelines for

tea farmers to produce crops with high yield and nutritional quality, and low environmental impact.

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Procurement Opportunities

Firms can establish internal programs that aim to increase engagement with SME suppliers ExxonMobil in Chad is an example

The National Content Strategy encourages: Contracts to be broken up into manageable sizes Shorter payment cycles Longer-term contracts

The Local Business Opportunity Program has helped develop local suppliers through: Supplier assessment program, which found significant

gaps in accounting, risk management, HR. In response, training initiated in IFC managed facility

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Access to Information

It can be difficult and costly to identify the right SMEs, and especially costly for large numbers of small transactions

One solution is dedicated staff or departments Anglo American has created Anglo Zimele to identify and

perform due diligence on potential SME suppliers. In Chad, ExxonMobil has developed supplier databases for

60 potential suppliers, as well as 1,000 additional SMEs surveyed by IFC/Chamber of Commerce.

SBP shares supplier databases with large firms in South Africa, Tanzania, and Malawi.

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Access to Finance

Financial services are critical to SMEs success in scaling up production and upgrading technology, but SMEs often regarded as high risk.

Financing coupled with technical assistance for entrepreneurs can help promote access to finance. Mozambique Small and Medium Enterprise Initiative)

Programs can also catalyze lending to SMEs through providing risk guarantees and training to financial institutions Madagascar Partial Risk Guarantee Program BP Supplier Finance Facility in Azerbaijan

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Corporate Social Responsibility Ensures management commitment to domestic linkages Local content targets become a part of Managers’

performance assessment Social Responsibility Agreements can help assure balanced

expectations on all sides, and provide performance measures Newmont in the Ahafo mine in Ghana has involved traditional, local

and regional officials in its Social Responsibility Agreement, which will underpin a broader community development plan

Diavik Diamond Mines (Canada) socio-economic monitoring and participation agreement signed with authorities and indigenous groups outlining company’s commitments to local SME development and linkages

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Leveraging Global Standards

• Increasingly global accreditation bodies are working with multi-nationals to ensure compliance with social and environmental standards

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International Standards

ISO Standards on Environment Extractive Industry Transparency Initiative UN Compact

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Challenges and Lessons

Securing internal commitment within large firms Plan early, plan for the long-term, consult widely, and

be prepared to adjust Managing expectations and reducing dependence Strengthening public policy environment Customize to fit industry, investor, and local context

»OBRIGADO!