Govt cracks down on delayed payments to locals in oil sector

…instructs companies to make payments in 45 days

The Guyana Government has moved to crack down on the issue of delayed payments to locals servicing the oil and gas industry, with the Local Content Secretariat now instructing contractors and subcontractors to ensure they pay Guyanese within 30-45 days.

Head of the Local Content Secretariat Martin Pertab

There have been numerous complaints by locals of a systematic delay in the payments of goods supplied or services rendered to major players in the petroleum industry – an issue which has been engaging Government’s attention.
Oil companies have been accused of taking as long as 90 days after the final provision of goods/services before they pay the supplier. This situation gravely affects local businesses, which would then have to contend with a cashflow problem that affects their operations.
“They can’t wait 90 days to pay local companies,” Vice President Bharrat Jagdeo had contended during a press conference just last month.

The Georgetown Chamber of Commerce and Industry (GCCI) has long complained of this issue as well, with President Timothy Tucker previously explaining that this delay in payment can cause a local company to lose profits.
“This is a serious problem with the payment system in the oil and gas industry. It’s too long…if there’s an issue in the invoice, contact that person and get them to fix the invoice; we don’t believe the clock should restart…the process should be going through; any alterations, corrections or omissions can be dealt with from a simple level, but the payment must be completed in a timely manner if you want to build local capacity,” Tucker had contended during an interview with this publication in 2021.
In the Local Content Act, contractors and subcontractors are required to create a Procurement Sub-Plan that includes a supply chain management strategy that is intended to promote local suppliers’ competitive financing and growth with appropriate contract and payment terms.
This provision was created to ensure that Guyanese nationals and Guyanese companies generate capital to expand while becoming competitive and financially independent.

Local Content Master Plan
In a statement issued on Friday, the Ministry of Natural Resources explained that upon further assessments and engagements with stakeholders, the Local Content Secretariat decided to write to contractors and subcontractors instructing them to implement an amendment to their five-year Local Content Master Plan.
“The updated five-year plan must now include a payment period of between 30-45 days upon the correct receipt of an invoice. This will allow Guyanese companies timely and appropriate access to contract and payment terms that facilitate competitive funding and expansion,” the statement explained.
The Secretariat noted too that contractors and sub-contractors have shown their willingness to cooperate with this new requirement and have already moved to make the amendment to their Master Plans.
With this development, the Secretariat cautioned suppliers that the onus is now on them to submit correct invoices.
“To see that this is achieved, the Secretariat continues to encourage contractors and sub-contractors to conduct continuous training and suppliers’ engagement forums. These forums will be aimed at upskilling suppliers in areas of the correct preparation of invoices and tenders, and to be appraised of any upcoming procurement opportunities offered by the companies,” the Ministry’s statement outlined.
The Ministry is also encouraging suppliers who continue to encounter issues with the prolonged issuing of payments to contact the Local Content Secretariat which is headed by Martin Pertab.
The Government has made it clear that the Local Content Act, which was passed in December 2021, will be continuously reviewed and updated overtime in order to close loopholes that are being exploited.
In fact, just last month, the Vice President emphasised that the identification of loopholes in the law was expected in this initial stage of implementation. However, he assured that as these issues are being raised, Government will work to address them.
“We will perfect the law…as we go along,” Jagdeo had said. (G11)