Vice President Bharrat Jagdeo has warned that the Guyanese government will be implementing stronger penalties for companies engaging in ‘fronting’ to circumvent the Local Content Act (LCA), which will be amended soon.
‘Fronting’ or ‘rent-a-citizen’ is a phenomenon that has the potential to reduce the financial benefits accumulated by Guyanese and runs counter to the spirit and intent of the LCA.
Speaking at a press conference on June 13, 2024, at the Office of the President in Georgetown, Jagdeo highlighted the government’s commitment to ensuring that the benefits of the LCA genuinely flow to Guyanese citizens.
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“The foreign companies that are using local companies as a front—this is particularly as it relates to registration under the Local Content Act—will face consequences,” Jagdeo said, adding that “local companies that are complicit in this too, will face consequences, not just the foreign companies.”
He explained that the government has been scrutinizing the ownership structures of companies to ensure compliance.
“You have to show ownership of the company, more than 50% ownership of the company that it is Guyanese. Some foreign companies give notional 50% ownership but get paid all sorts of fees for the services they’re providing, so it’s not a real benefit that flows to Guyanese,” Jagdeo explained.
The Vice President revealed that the Guyana Revenue Authority (GRA) is actively investigating these practices.
“We are looking at it carefully. In the update of the Local Content Law, we will plug some loopholes and strengthen the enforcement and the penalties for doing so,” Jagdeo pointed out.
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This announcement follows a June 10, 2024, statement from the Ministry of Natural Resources, which oversees the sector through the Local Content Secretariat (LCS).
The ministry highlighted the intensification of tracking unethical practices where foreign companies use local entities as facades to meet local content requirements.
The government, in collaboration with the GRA, is actively pursuing measures to curb these instances of “rent-a-citizen.”
This partnership aims to identify and penalize offenders, reinforcing adherence to the ethical and legal standards stipulated by the LCA.
As such, the ministry had called on all stakeholders to support these measures and uphold the integrity of Guyana’s local content framework.
Currently, the Local Content Act mandates companies to utilize Guyanese goods and services in 40 sectors. By regulating the scoring system in oil companies’ procurement processes, the government ensures that companies certified as Guyanese receive preferential treatment.
“Soon we’re going start checking on this issue,” Jagdeo said while explained that the government seeks to foster a transparent and equitable petroleum industry that genuinely benefits all Guyanese.
