Local content strategies and procurement participation by local firms in the oil and gas industry of Uganda

Abstract

The study set out to establish the effect of the local content strategies of promotion of business competitiveness, use of locally produced goods/services, technology transfer and local firm’s participation in the oil and gas sector procurements in Uganda. The study used a cross-sectional survey design using a quantitative approach. A total 1,271 SMEs were targeted from which a sample of 304 respondents were selected. The study found promotion of business competitiveness strategy has the strongest effect on local firms’ procurement participation. Use of local goods and services has the second strongest effect on procurement participation. technology transfer has he least effect on procurement participation in the O&G sector of Uganda. It was concluded that technology transfer significantly affects procurement participation on the O&G sector of Uganda especially through participation in skills development program, R&D and allocation of resources to that effect. It was also concluded that use of local supplies significantly affects procurement participation in the O&G sector of Uganda especially with issuance of procurement guidelines and their simplification and standards certification to promote quality and exclusive local tendering. It was inferred that promotion of business competitiveness affects procurement participation in the O&G sector through business registration, Licensing, Compliance, Business Development, and facilitation of Financial access. To enhance procurement participation, the study recommended that the Petroleum Authority of Uganda in pursuit of its mandate of developing R&D in the sector, should undertake to identity R&D areas and develop R&D sponsorship proposals and market them with Foreign Oil companies for R&D in partnerships with local SMEs. the Petroleum authority in pursuit of its mandate on monitoring should regularly monitor the O&G suppliers and enforce the requirement that locally registered SMEs are given first priority for locally available supplies and services. Monetary penalization of IOC who do not use prequalified list of locally registered suppliers could be sought. It is recommended that IOC should rotate their framework contracts by considering the prequalified list of local suppliers to promote competitiveness of local SMEs in the O&G sector.