Local Content Act: Local Content Secretariat thorough on due diligence for applications amid “fronting” – Bharrat

To ensure that only Guyanese companies benefit from the 40 stipulated areas under the Local Content Act, and amid prior cases of “fronting”, proper due diligence is being taken to scrutinise applications tendered to the Local Content Secretariat.
This has been the position taken by Natural Resources Minister Vickram Bharrat in responding to complaints by stakeholders that their certificates are taking longer to process.
While engaging media operatives on Monday, he posited, “We know that there are a few loopholes that people took advantage of in the past. One such issue is economic rent, or rent in a citizen or Guyanese basically fronting for companies. These are things that we have to strengthen on what qualifies you to be a citizen of Guyana,” he explained.

“Sometimes, people complain that Local Content Secretariat is taking a bit longer to process their certificate. It is a real complaint, and it’s mainly because some people are trying to front for other companies. So, we have to ensure that we go further in our due diligence…That’s why maybe there’s a delay in the issuance of certificates in some cases,” he added.
Government has already identified some ‘grey areas’ since the framework was created, and they are on the cards to be strengthened.
A major issue was fronting – a practice also called ‘rent-a-citizen’ whereby foreign companies employ Guyanese and/or Guyanese businesses in order to bypass the provisions of the Local Content Act, including the stipulation that only companies that are 51 per cent owned by a Guyanese can benefit from the 40 carved out service areas. The Act defines beneficial ownership as owning 51 per cent of the company.
Also, a local company is expected to have Guyanese in at least 75 per cent of executive and senior management positions, and at least 90 per cent in non-managerial and other positions.
Bharrat pointed out that it is a practice seen around the world, where contractors seek to benefit from such opportunities; but, at the same time, Government is resolute in ensuring that Guyanese benefit from these opportunities.
He explained, “The whole purpose of the Act was to ensure that we bring benefits to the people of the Guyana. We have seen countries where there is oil and gas but the citizens don’t truly benefit from it. It is the operators, the contractors and subcontractors, and we know the needs of the oil and gas sector. When a contractor or an operator comes to your country, they have suppliers that follow them to your country. It’s a norm around the world. It is not something that is new to Guyana.”
In December 2021, the National Assembly passed the Local Content Act which outlines 40 different service areas that oil and gas companies and their subcontractors must procure from Guyanese and Guyanese-owned companies. These include 90 per cent of office space rental and accommodation services; 90 per cent of janitorial services, laundry and catering services; 95 per cent pest control services; 100 per cent local insurance services; 75 per cent local supply of food; and 90 per cent local accounting services.
The Local Content Act mandates penalties such as fines ranging from $5 million to $50 million for oil and gas companies and their sub-contractors who fail to meet the minimum targets of the legislation, as well as those who are in breach of the Act.
The Natural Resources Ministry is currently gearing up for its sensitization workshop, as mandated under the Local Content Act, which is expected to gauge the country’s capacity to supply the oil industry, and further, influence amendments to the current framework.
The minister told reporters that, at some point in time, amendments would be made to the Local Content legislation as the country’s capacity develops.

Amendments
He said, “We will, at some point in time, have to make some updates from amendments to the Local Content legislation, as we would have promised in the past when we were doing consultation to draft the bill… I will not tie myself to timeline as to when we will complete it, but what we are going to start just after the budget is the local content sensitization workshop throughout the entire country, and that is a requirement in the legislation.”
One of the reasons for this workshop – which is a collaborative effort between the Ministry, the operator and contractors – is to ensure that people understand truly what is local content, and how they can benefit.
While it is not a consultative aspect for the amendment, Minister Bharrat outlined, it will be instrumental in measuring the capacity which exists in the country.
“This is the local content sensitization workshop, but it will help us and put us in a better position to understand the capacity that exists within a country. When we drafted that Bill in 2021, to be quite honest, we didn’t have a true sense of the capacity in the private sector. Right now, the private sector is working with a number of organizations to do a true assessment of our capacity.”
It has been acknowledged that, since 2021, the country’s capacity has significantly expanded, and so has production.
“So, we have to be real about our capacity in-country. A lot has changed from 2021 to now. This workshop, by going around the country and by listening to people, I think it will put us, as Government, in a better position to truly assess what has changed from 2021 in terms of capacity to offer goods and services to the oil and gas companies,” the Natural Resources Minister expressed. (G12)