What is the Future of Social Licence to Operate in the Extractive Industries post the COVID-19 Pandemic in East Africa?
| Pages | 156-163 |
| DOI | 10.3366/gels.2020.0020 |
| Published date | 01 August 2020 |
| Date | 01 August 2020 |
A good relationship between host communities and extractive companies is key in managing some of the risks which are encountered during the energy project life cycle. This relationship is what many scholars have described as a Social Licence to Operate (SLO).
The informal character of SLO implies that companies are at liberty to decide what obligations to fulfil with respect to SLO. These obligations do obviously have financial and economic implications and as such companies will only commit to SLO activities that fit in their budget. Nevertheless, we note that SLO is a non-permanent right and as such it may be granted, withdrawn or subject to change as new information about the project is acquired.
Taking stock of the above, a question arises as to whether a drastic change in the financial status of extractive companies can affect SLO? The answer to this is in the affirmative and this research seeks to address the economic impact of COVID-19 in the energy sector as it relates to the achievement of SLO in East Africa.
The COVID-19 pandemic has undoubtedly led to a decrease in consumption for not only energy resources but also mineral raw materials. Additionally, the COVID-19 pandemic which has reduced oil demand in the transport sector and manufacturing industry has also significantly contributed to the low oil prices. Consequently, there have been massive stress in the oil industry with many companies losing their value including Halliburton, Noble Energy, Marathon Oil and Occidental (OXY)- which have lost more than two-thirds of their value.
The disruptions encountered as a result of the pandemic will have resultant effects in the near future. Post the COVID-19 pandemic, companies are likely change the way they operate and relate with host communities. These changes will with no doubt impact local communities both socially and economically. In the extractive industries, SLO especially in many African countries has been mirrored by the way oil and mining companies have been trying to uplift communities through financing developmental infrastructure such as schools, hospitals and roads. Gestures of this nature by these companies have indeed made it possible for host communities to readily offer their ‘social permission’ for these companies to conduct their businesses. With the current pandemic and the resultant economic crisis, the views on SLO will drastically change and as such this paper analyses the outlook of SLO post COVID-19, specifically highlighting key considerations for companies, host communities and governments. The paper is made up of four sections, this being the introduction.
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