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.
