Local content spend is estimated at US$720 million in 2023, reflecting the capabilities of the private sector and adherence to the Local Content Act, legislated at the end of 2021. Dr. Martin Pertab, Director of the Local Content Secretariat, noted though, that enactment has not been without challenges, including payment delays, bundling of contracts, and issues related to compliance and fraud.
“[We] received 43 annual plans totaling somewhere around $720 million, [which] has projected investment or expenditure in the forty carved out areas,” Pertab stated.
The Secretariat said US$700 million went to local content in 2022.
The estimate accounts for local content penetration of 40 categories of services, listed in the first schedule of Guyana’s Local Content Act.
Dr. Pertab highlighted strides in addressing payment delays, a critical concern for local companies. The average payment duration has been reduced from 90-120 days to 30-45 days, facilitated by amendments in companies’ approved local content plans. Additionally, he noted that efforts to counter contract bundling have been fruitful, with companies refraining from this practice to ensure their expenditures are recognized as local content, crucial for meeting Act-imposed targets and avoiding fines.
The US$720 million assessment was derived from an aggregate of estimates contained in 43 submitted local content ‘annual plans,’ focusing on procurement, employment costs, and capacity building. Of this amount, Pertab said US$518 million is projected for procurement opportunities. The Secretariat has registered approximately 850 companies, implementing stricter registration requirements to combat fraud and ensure compliance with tax laws.
“For consistency, we have continued to track projected expenditure of the 40 carved-out areas during the half-year period. As of June 2023, our actual expenditure, related to the 40 carved-out areas was somewhere around US$322 [million], representing 62% of [our] annual target,” Pertab stated.
The Local Content Secretariat is also prioritizing capacity building, launching a paid internship program in collaboration with the Guyana Technical Training College. This aims to bridge the gap in qualifications and experience, offering students practical exposure and employment opportunities.
Looking ahead, Dr. Pertab said the Secretariat intends to collaborate with the Women Chamber of Commerce and Industry (WCCI) to promote women-owned businesses. The Secretariat aims to facilitate the entry of small and medium-sized enterprises into the sector, addressing challenges like access to capital and contract duration.
Minister of Natural Resources, Vickram Bharrat, revealed that nearly 6000 Guyanese are employed in the oil and gas sector, accounting for 70% of the total workforce. He stressed the importance of capacity building, in providing certification and training, especially in technical fields. The government’s work, he explained, extends to providing and encouraging the provision of international scholarships.
Bharrat acknowledged challenges in local content implementation, particularly the issue of fronting. Guyana’s Local Content Act categorizes a company as local, even if it is a joint venture between a foreign company and a Guyanese firm, once the latter has majority ownership. But fronting happens when Guyanese nationals allow their identities to be used as placeholders for apparent joint ventures, without actual meaningful participation.
“Martin is moving towards doing more of an in-depth due diligence before he issues a certification… I’m appealing to Guyanese… do not engage in these activities, and if we want to truly [be] involved in the sector and provide goods and services, let us do it the right way and not be a front for international companies.”
The annual renewal process for the local content certificates will be essential for monitoring changes in company ownership and management.
