The Effect of local content policies on sustainable local development by upstream oil and gas companies in Kenya
Mulati, Julius Wachiya
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Despite the massive surge of multinational companies into the African extractive sector, regions where extractive activities are occurring have remained steeped in poverty and underdevelopment. In response, developing countries have come up with local content requirements, legislations, or regulations to promote equitable distribution of natural resource wealth, there has been a movement towards introducing policies to leverage the resource, promote industrialization, and sustain economic growth. On the contrary, the effectiveness of local content in driving sustainable local development remains unclear. The general objective was to investigate the effect of local content policies on sustainable local development in the upstream oil and gas industry in Kenya. The study sought to determine the effects of employment and training of local workforce, domestic sourcing of goods and services and the effect of technology transfers to local economy on sustainable local development by the upstream oil and gas companies in Kenya. The study was grounded on the stakeholder theory and adopted a descriptive research design. The sample consisted of permanent employees from upstream oil and gas companies in Kenya. Purposive sampling was used to generate a sample size of 77 employees to whom a standardized closed-ended 5-likest scale questionnaire was administered. The data was analyzed using SPSS for both descriptive analysis and inferential computations. Descriptive statistics included frequencies, percentages, means and standard deviations, while the inferential statistical measures were Pearson correlations and linear regressions. The results were presented in tables, charts, and graphs. The results indicate that there is a positive and significant association between the independent and dependent variable. The study found out that local employment, training of local workforce, and domestic sourcing of goods have a positive effect on sustainable local development, but the effect was not statistically significant. Technology transfers had a positive and significant effect on sustainable local development. The study concludes that companies have moderately initiated, adopted, and implemented provisions of local content policies, and that these policies have the potential of improving sustainable local development. The study recommends the development of a clear policy framework on local employment as part of local content policies. Upstream oil and gas companies should expand the provision of internship opportunities as well as staff learning through cross-posting. There is need for upstream segment to increase opportunities for domestic firms. Finally, upstream companies to develop and adopt technology transfer agreements, form joint ventures, and set aside funding support for local research and development.