Who needs a local content policy?

With the telecoms sector worth $32 billion and among the top ten fastest emerging markets in Middle East and Africa (MEA), CHUKWUDI OBI asks who needs a local content policy when there is much at stake.

Local content policies are designed to encourage local companies, give them undue advantage over foreign companies and drive more local investment in that particular sector. To a large extent the local content policy as implemented in the oil and gas sector many experts say, has been successful to the extent of stimulating the industry, encouraging active local participation and encourage competition.

But Federal Government’s Transformation Agenda has been hinged on increasing foreign direct investment and since inception of this administration, President Goodluck Jonathan and his lieutenants have not hidden their ambition to increase investments in the country. This, they have been pursuing vigorously, with some measure of success. It has paid off with Agriculture attracting the highest volume of investments and the telecommunication sector following suit.

Dr Eugene Juwah, DG NCC

With investments in the telecommunication sector totalling $32 billion in cash, assets and liabilities and the sector contributing 9.25 per cent to the nation’s Gross Domestic Product (GDP) as at June, 2014, according to Executive Vice Chairman, Nigeria Communication Commission’s (NCC), Dr Eugene Juwah, there are fears that a local content policy will impede the growth of this sector.

At a recent Regulator’s Forum in Lagos organised by All Telecommunication Companies of Nigeria, (ATCON), ATCON President, Engr Lanre Ajayi did not mince words when he gave the first shot.

“This is an opportunity for NCC to address local content issues. How do we increase local content. This forum will give an opportunity for NCC to give us a policy directive”, he said.

But EVC, NCC in his keynote address while underscoring the need for local companies to be more active in telecoms sector, raised thought provoking questions for industry players in a bid to find a solution to the challenge.

“ It is critical  for local companies to have a significant role in the provision of services and supply of materials to the telecommunication industry in Nigeria on a sustainable basis over the long term and provide more employment opportunities for Nigerians,” he said.

Some of the questions Juwah raised bothered on ethical practice, integrity, financial capacity of local companies and ability to have organizational and co-ordination competencies to deliver efficiently in the sector.  Other gray areas the NCC boss listed include identifying specific areas where local companies have core competence in, and what form a local content policy for the telecommunication industry will take. In his words:

“I will ask the same questions, I asked in one of the events organised by ATCON in the past in an attempt to find a solution that is appropriate for the industry with the objective of creating opportunities for local companies. These are:

1.      In which areas in the provision of services to the telecoms industry do local companies have the required competence to compete in?

2.      Are there no local companies that have required organisational and co-ordination competence required for some services in the telecommunication industry?

3.      Are there local companies with economic capacity to deliver such projects?

4.      Is the financial industry fully supporting local companies with the economic means to provide contracted services?

5.       Are local companies consistently providing quality and timely service to agreed specifications each time and every time?

6.      Are local companies being unfairly excluded from participating in the delivery of services within their capacity to the telecom industry?

7.      Is a local content policy in the telecom industry required? If so, what form should this take?”

But a section of the industry argued that they regulator can do more to support local companies insisting that capacity building, corporate social responsibility and subsidizing Annual Operating License for local companies are some of the areas the regulator can support local companies.

“We should do more than transferring contracts, but to build capacities. In the licensing procedure of infracos, there should be templates that will encourage local participation. Some of these templates can come in way of knowing and verifying what capacity foreign companies are trying to build in Nigeria, what partnership they have with Nigerian companies NCC should support local companies. Annual Operating Licenses for local companies should be different from that of foreign companies”, a concerned stakeholder said.

 

Peter Jack, DG NITDA

In his reaction Juwah questioned the competence of local companies fail to deliver on contracts awarded to them even after they are mobilized.

“Some Nigerian companies do work very well, but some well known Nigerian companies disappoint. They believe they can collect money and don’t work. In fact, it became so bad that security services were involved. In NCC we are a government department but we won’t pay you if you don’t work. If we pay you and you escape, we will report you to EFCC. It is real. It happens”, he said.

Though the agency saddled with regulation on local content is NITDA, Juwah said, NCC was putting effective mechanisms in place to encourage more local players and participation in the industry.

“We must create employment. NCC is doing it within our regulatory intervention. Our advertisement for infracs shows that you need a local company to bid or take part in th technical bid”, he said.

On reduction of AOL, the NCC boss noted that Act that established the agency stipulates NCC to be an impartial umpire.

“It will be difficult for us to have different AOL because our Act that says we should provide a level playing field for all players. It is left for local companies to take them up. If they don’t take them up, we will give them to foreign companies”, he said.

 

Minister Of Communication and Technology,
Dr Mrs Omobola Johnson

But ATCON president, Engr LAnre Ajayi, drove home his call for local content policy stressed that the call was made to add value to the industry rather than company ownership.

It is about local value addition. The agitation is not about company ownership but some equipment can be manufactured in Nigeria”, he said.

But another concerned stakeholder who affirmed that the telecom  industry was performing above average in terms of local content input, called for caution.

“We are not doing badly at all in terms of local content. The attention for us is Foreign Direct Investment, (FDI) and provision of level playing ground. We must not allow the appetite for local content to over shadow these interests.

NCC should sit together with NITDA to bring the players together and fashion out modalities. These should be something systematic in our industry, where we can make gains. What level of framework do we need to put in place to add value to the economy, the industry and the nation?”, she said.

Chief Executive Officer, CWG, Mr Austin Okere shared the same sentiments but added that a more robust platform can be created to expand revenue generation in the industry rather tha doing what will have a retrogressive effect in the industry.

But an industry expert differs in his opinion, maintaining that a local content policy will improve access to infrastructure apart from deepening broadband penetration.

“We think the policy will help deepen the existing fibre optics. We see it as a complimentary document that will help improve access to infrastructure in locations. We support it as it is. It will help deepen broadband penetration”, he said.

With $32 billion US dollars at stake, industry stakeholders are of the view that both NCC and NITDA need to thread softly so as not to hinder the unprecedented growth in the telecoms industry.

Experts in the industry insist that before a local content policy is drafted, all players in the industry must be involved while a painstaking effort not to undermine the financial interests of foreign owned companies must be taken.

Lanre Ajayi , ATCON President

Continuous publicity campaigns, local company partnerships, human capacity building and corporate social responsibility are some of the areas they have listed as key areas a local content policy for the telcom industry should focus on, if the industry really needs one.

But before a working group is commissioned, there are pertinent questions et to be addressed in the overall interest of the industry. Some of them are:  Who needs a local content policy? Why? What purpose will it serve? Whose purpose will it serve? Who wins at the end of the day? Will the industry be better for it? Will investors still have the confidence to invest? Will the policy encourage capital flight or discourage it?

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