President Dr Irfaan Ali said that his Government will have to continuously review the Local Content legislations in order to address the loopholes that foreign companies use to manipulate the systems in place to ensure that Guyanese benefit from the oil and gas sector.
On Tuesday, it was disclosed that despite the Local Content Act, oil and gas companies continue to come up with new ways to bypass the law. According to Vice President Bharrat Jagdeo, companies have now taken to using their junior Guyanese staff to fill up the legally-mandated quota for senior management staff, all while the junior staff continues to collect their original salary.
Asked recently about how his Government intends to deal with this issue, President Ali told this publication that there is a number of ways to crack down on such manipulating acts.
“You know in any system people look for loopholes but there is a number of ways in which you can crack down on this. For someone to sign up a document as a partner in an international company or a large company that is doing different size or volumes of work, they have to have some amount of shareholding and they have to prove where they get their money from to get the shareholding. They have to show beneficial interest so there are ways.”
“There are ways in which the different institutions in the country can actually go after those who try to abuse a system or just try to use loopholes to just satisfy the criteria,” the Head of State told reporters.
Moreover, President Ali also hinted at the possibility of further strengthening the Local Content legislation to clamp down on such loopholes.
“There is continuous analysis of the laws. We are young in this. We have just passed the Local Government legislation so definitely, there will be continuously reviewed. There will be continuous analysis to deal with loopholes and to deal with areas in which people think they can manipulate,” the President indicated.
Guyana passed its Local Content laws in December 2021, which details a series of measures geared towards ensuring that Guyanese and locally-owned businesses benefit from the oil and gas sector.
The Act stipulates that oil and gas companies operating in Guyana, as well as their contractors and sub-contractors, must procure from Guyanese companies by the end of 2022, 90 per cent of office space rental and accommodation services; 90 per cent of janitorial, 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 some of the 40 different services outlined in the first schedule.
The Act also defines a local company as one incorporated under the Companies Act and beneficially owned by Guyanese nationals. Beneficial ownership is defined as owning 51 per cent of the company.
Additionally, 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.
But speaking at the Guyana Manufacturing and Services Association’s (GMSA) Mid-Year Dinner on Tuesday evening, VP Jagdeo pointed out that even with the Act, there were companies still trying to dupe the authorities.
“There are many people who are trying to bypass the provisions of the legislation. It has been brought to my attention, for example, that a company that may have had maybe three foreign directors/managers in the old dispensation, now to get past the legislation since there is a 75 per cent management team (requirement),” Jagdeo said.
“To get past that position, they simply take junior staff and change their designations. So, the management team now becomes larger. So, they fulfil that requirement. But it’s just a designation for junior staff. When you look at their salary structure, their salaries have not changed.”
The Vice President assured that Government is keeping a close eye on this. He noted that other companies have also gone the route of giving a Guyanese company 50 per cent ownership, but also charge a large contract fee for management services.
Only recently, Natural Resources Minister Vickram Bharrat assured that the Government was committed to taking action against defaulters. He noted that as long as companies fail to satisfy all the criteria for their Local Content Certificates, these would continue to be denied to them.
