Home Top Stories Local Content enforcement: Fines to be imposed as LCS clamps down on...
…field visits ongoing to ensure compliance
Recognising that within Guyana’s burgeoning oil and gas industry there may be companies operating in defiance of local content stipulations, the Local Content Secretariat (LCS) has embarked on an initiative aimed at identifying, penalising, and in some cases helping, those firms.
LCS Director Martin Pertab told Guyana Times that the exercise commenced this week, and, so far, one company has been visited by the Secretariat’s Compliance Unit, which is currently staffed with four personnel.
Pertab assured that, where applicable, defaulting companies would be penalised via fines, as outlined in the Local Content Act, and in some cases, the LCS would work with them to bring them up to compliance.
The LCS Compliance Unit is, among other things, aiming to find firms that are failing or struggling to implement their Local Annual Content Plans, or local firms that are “fronting” for foreign entities.
For example, Pertab noted that, upon applying for their Local Content Certificate, some companies may prove that they have the required staff ratio, but would subsequently default on this. To qualify as a local company, a firm must be 51 per cent owned by a Guyanese national, while its management team must comprise 75 per cent Guyanese. Additionally, its overall staff complement must be 90 per cent locals.
According to Pertab, during the site visits, the Compliance Unit would want to see “evidence that Guyanese are actually making the decisions…”
He also noted that “if there is any change to the ratio, and they don’t inform us, then they’re in breach of the Local Content Law.”
He warned that there are in place provisions by which defaulting companies can be fined.
On the other hand, he said companies that are experiencing challenges in implementing their Local Content Annual Plans would receive support in reaching their targets. “We wanna work closely with them to help ensure compliance. That’s the idea behind us having these site visits,” Pertab said.
The Local Content Act states that contractors, sub-contractors and licensees operating in Guyana’s petroleum sector must submit a Local Content Annual Plan, outlining in detail their procurement, employment, and capacity development plans for the reporting year.
Meanwhile, there are over 800 companies that have been issued with a Local Content Certificate, and Pertab has admitted that the Unit would not be able to visit all of them. For this year, the goal is to target the Tier One companies, which amount to about 30. He said the Unit would be targeting companies that have a sizeable number of contracts, and those where joint ventures are in place.
The ultimate goal of the initiative, Pertab emphasised, is to “tackle rent-seeking, and ensure that the information submitted to the Secretariat by businesses and companies is accurate and a true reflection of the beneficial ownership, management, and employment structure of the entity.”
Mobile App
Meanwhile, the LCS will be launching a mobile application to provide Guyanese businesses and companies with realtime access to information related to procurement and other opportunities in the industry. According to Pertab, this would help address the issue of “information asymmetry” in the oil and gas industry.
“From their phones, businesses and companies registered with the Secretariat could log into the application, check for updates, and even contact contractors and sub-contractors operating within the industry,” he detailed. Moreover, he said the LCS is working on developing a Five-Year Strategic Plan, with assistance from the World Bank. “The Strategic Plan will guide the Secretariat in achieving its mandate as set out in the Act, and shall include institutional arrangements, specific activities, proposed programmes, timelines and targets required to ensure that the Secretariat’s functions are met over the five-year period,” Pertab explained.
Revision & Sensitisation
Work has also commenced on drafting a revised Local Content Act, focusing on key lessons learned since the operationalisation of the LCS. Pertab said the objective is to ensure the continued prioritisation of Guyanese companies and individuals in supplying goods and services to the oil and gas industry.
Moreover, in keeping with its mandate stipulated in the Local Content Act, the Secretariat would be launching its public sensitisation campaign aimed at increasing public awareness of both the Act and its purpose, as well as the Secretariat and its functions. The commencement of this exercise would coincide with the publication of the draft legislation for comments/feedback. Therefore, the feedback generated from this exercise would not only help to broaden the understanding of the effectiveness of the Local Content Act, but would provide valuable insights into the proposed draft legislation.
Currently, the Local Content Act lists 40 different services that oil and gas companies and their sub-contractors must procure from Guyanese companies. For instance, these companies must procure from Guyanese companies 90 per cent of office space rental and accommodation services; 90 per cent of janitorial services, laundry and catering services; 95 per cent of pest control services; 100 per cent of local insurance services; 75 per cent of local supply of food; and 90 per cent of local accounting services.
These are just a few of the services highlighted in the first schedule of the Local Content Act. The Local Content Act mandates penalties 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. These fines range from as low as $5 million to as high as $50 million.
The local private sector has since lobbied for an increase and expansion to this list of services. (G11)
