Unit set up to go after fronting, other activities that undermine local content – Secretariat Head

– amid complaints received by Secretariat

Days after a local private sector organisation complained about sham partnerships aimed at reaping the benefits carved out for Guyanese in the oil and gas sector, the Local Content Secretariat has indicated that it will be going after those companies involved in these illegal practices.
This is according to the Chief Executive Officer (CEO) of the Local Content Secretariat, Dr Martin Pertab, who was at the time speaking at the opening of the Ghana-Guyana Local Content & Capacity Building Conference on Thursday.
He noted that high on the Secretariat’s agenda for this year is to initiate a very rigorous framework that focuses on addressing various challenges that have recently emerged, seeking to undermine efforts to push local content within the oil and gas industry.
Pertab disclosed that the Secretariat has received complaints about companies being engaged in ‘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.
However, with the renewal cycle coming up for companies that are registered as local companies, Dr Pertab stated that checks will be made to ensure these businesses are not trying to undermine local content efforts.
“Before these renewals are granted, we have set up an Enforcement Unit, through which we will be able to visit some of those businesses to see whether or not Guyanese are there and whether the information [about fronting] submitted to us is accurate because at the end, we have put in so much for local content and if we have fronting or any other secret activities that will undermine our efforts or undermine overall the objective of local content, which is to ensure Guyanese benefit, because of that 51 per cent ownership which should have gone to a Guyanese… [but is] going to the IOCs (International Oil Companies) or foreign companies, it will result in capital flight,” the Secretariat Head pointed out.
In a statement on August 5, the Georgetown Chamber of Commerce and Industry (GCCI) expressed consternation at the emerging trend in the private sector and amongst the citizenry of sham partnerships.
The GCCI noted that as the leading advocate for local content in Guyana, it has always pushed for local participation to be done in a manner that engenders meaningful and genuine partnerships.
“These faux ventures – referred to as ‘fronting’ or ‘rent-a-citizen’ – run counter to the spirit and intent of the Local Content Legislation (LCL). It has the potential to decimate ‘in-country value retention’ which is one of the main objectives of the LCL.”
“Such rent extraction creates a gamut of problems for a country, including the inability to realise its full growth potential. It is our collective responsibility to ensure that we act as responsible stewards for Guyana’s development,” the Chamber said.
According to the GCCI, it will continue to be intolerable of individuals and companies who “front” in an effort to bypass the local content laws. Additionally, the Chamber expressed worry about private sector members who attempt to justify the practice and even lobby for it to be normalised, noting that this is being complicit in a dangerous act.
“As such, the GCCI encourages the Local Content Secretariat to continue its vetting of companies applying for a Local Content Certificate, or its renewal, in a thorough fashion. As an organisation, we will continue to support the efforts of the Local Content Secretariat to weed out this parasitic behaviour which dampens the prospects for Guyana’s future,” GCCI further said.
After being passed in the National Assembly in December 2021, the Local Content Act was enacted in January 2022. The Act lays out 40 different services that oil and gas companies and their subcontractors must procure from Guyanese 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.
Meanwhile, only last week, Minister within the Ministry of Public Works, Deodat Indar had spoken out against the practice of fake partnerships, during the Guyana Manufacturing and Services Association’s (GMSA) mid-year dinner. He had accused certain members of the private sector of undermining the Government’s efforts to improve local content, through their “rent-a-citizen” scheme.
However, this issue is not limited to Guyana. During the opening of the two-day Ghana-Guyana conference, CEO of Ghana Petroleum Commission, Egbert Faibille Jnr, disclosed that his country is also grappling with ‘rent-a-citizen’.
According to the Ghanian official, the earlier Guyana takes far-reaching steps to stop this practice, the better it will be for local content in the country. (G-8)