Local content law: Six years after its implementation

“…Over the years, we have learnt that it is not enough or not sustainable for government to focus on direct receipts from oil and Gas activities…one area we look at as ensuring sustainable benefits from the exploitation of resources is through local content policies or initiatives…” Director of Local content-PC

“…Where are the legacies? The legacy, what are we going to point out to say this is what we have been able to achieve, that is what local content is for… Are we developing local companies to take over”?  CEO, Zormelo and Associates, Douglas Zormelo.

“For me, I applied direct; I was called for interview, went through some recruitment process and at last, I was given the job. I am currently working with Comms department of xxx company”, Local Employee of O&G.

Ghana’s Local Content (LC) law was passed six years ago. The Local Content and Local Participation Bill was formulated and passed into law in 2013, LI2204 in Ghana’s Parliament. It ensures compliance with local content targets as set in the Regulations; Petroleum Commission (PC), a Ghanaian regulating body ensures the utilization of Ghanaian personnel, materials, services and businesses in the industry. It coordinates the flow of information amongst all relevant agencies and collaborate with other institutions on matters concerning the industry. It also develops guidelines, directives and policies to promote local content and undertake public education on local content policies, laws, regulations, philosophy and implementation.

The local content law, LI2204 insists on employment and training of Ghanaian nationals, promotion of research and development, participation of local industries in the provision of services, and technology transfer provisions which seek to address the subject, are collectively referred to as local content or national content. Thus, Local Content refers to the percentage of locally produced materials, personnel, financing, goods and services rendered to oil industry and which can be measured in monetary terms.

The other side of LI2204 promotes Local Participation which refers to the level of Ghanaian Ownership in the oil and gas industry. To qualify as a Ghanaian/indigenous company, the company must have at least 51% of its equity owned by a Ghanaian with 80% executive and senior management positions and 100% non-management and other positions occupied by Ghanaians

The LC was founded on these five key tenets:

Increase patronage of goods and services, maximize employment, maximize technical and skill transfer, increase in international competition and enhance linkage between oil and Gas sector and the rest of the economy as well as maximizing the patronage of Ghanaian goods and services and thereby increase in-country spend; Increased employment of Ghanaian professionals by ensuring the localization of job opportunities; Facilitate Technology and Skills Transfer through Training, Research and Development; Enhance local participation by encouraging Ghanaians to have equity ownership and management participation in upstream petroleum activities; and Develop local capacities resulting in increased capabilities and competitiveness of indigenous Ghanaian companies and individuals.

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The director of Local Content (LC) of Petroleum Commission (PC), Kwaku Boateng has disclosed that about 4,556 Ghanaians have been employed in about 16 major oil and gas companies in Ghana. This, he noted excludes staff of PC and Ghana National Petroleum Commission (GNPC) adding “about 75% of Ghanaians form the entire oil and Gas employment population”.

After six years of implementing the LC law, Mr. Boateng says Ghana is relatively benefiting with regards to infrastructure and knowledge transfer. “Now when you go to Takoradi, a lot of interesting facilities are being put up there. We have a cement plant, we have a pipe coating plant, we have a machine shop doing pipe-line threading, we have world-class training center –Rigworld Training Center, and a Rigworld Solution producing bolts and nuts and other spare parts for oil and gas and other mining sector…” He added that “three waste management facilities and five fabrication models have been set up by the oil and gas sector. He stated that a contract value costing about US$ 6.2 billion have been awarded to joint ventures. Ghanaians secured value of contract costing about US$ 1.2 billion and uncountable indirect employments.

In the area of agriculture, PC is in talks with some stakeholders to promote planting food for the industry instead of the companies importing all produce from abroad. “We are in talks with the Western Region House of Chiefs and the Minister of Agriculture, to encourage farmers to get into greenhouse farming…” This Mr. Boateng noted will reduce importation of farm produce like vegetables, fruits and poultry from South Africa and elsewhere.

Mr. Kwaku Boateng posited that before the implementation of the local content law, Ghana was only benefiting from direct receipts like royalties, taxes and government participation and other funds generated from oil production. But that was not enough and hence perceived the LC as a sustainable measure to maximize benefits from oil production. “…over the years, we have learnt that it is not enough or not sustainable for government to focus on direct receipts from oil and Gas activities…One area we look at as ensuring sustainable benefits from the exploitation of resources is through local content policies or initiatives”

Perhaps if the Local content law was not in place, industry players would have on so many occasions flouted Ghana’s trade regulations without punishment but as it is now, the LC law requires that every contract that exceeds $100,000 must be submitted to PC for approval a situation that PC says adherence is strict. Mr. Boateng revealed that some time ago, about 10 Oil and Gas companies awarded huge contracts without PC’s approval and were fined between GHS20,000 to GHS400, 000 for. He hinted that PC was investigating about 10 contract breach cases.

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With the implementation of the Local Content Law in Ghana, many indigenous companies have secured joint ventures opportunities with oil and gas foreign companies “In this case, the Ghanaian companies must have at least a minimum of 10% equity shares”, Mr. Boateng said.

One indigenous company that is making leaps in the Oil and Gas industry is Zormelo and Associates. It has been in existence since 2008. It is an upstream service provider. Z&A has been recruiting for many Oil and Gas companies in Ghana for both onshore and offshore. It recruits for Tullow Ghana, MODEC, and FPSO, among others. Digesting on the impact of the Local Content law six years after its implementation in Ghana, the Chief Executive Officer of Z&A and president of Association of Service providers, Douglas Zormelo intimated that the law has helped especially in skill and knowledge acquisition. He explained that many indigenous employees have acquired specialized skills from a cross section of expatriates. He also noted the succession plan as enforced by the LI2204; the indigenes are being trained by the expats to take over. He cited for example, Tullow having a Ghanaian director. He believes that Ghana is “making in-roads because Cosmos, Tullow, and MODEC have Ghanaians at the top levels”.

Amidst these tracked records of achievements within six years of implementing it, the local content law is plagued with some challenges that need to be addressed. The local content director, Mr. Kwaku Boateng enumerated some;

1.Mismatch of professional entities forming joint ventures resulting into lack of skill and knowledge transfer.

  1. Ghanaian companies are small in size “in terms of their capital turn over and the level of technology installed capacity.
  2. Some of the companies do not have adequate financial resources to recruit expatriates.
  3. Many of the foreign contracts still go to the big or the foreign companies therefore rendering the LC somehow incapacitated

Adding to challenges, the president of Association of Service Providers Mr. Zormelo also outlined the underlisted as faced with the oil and Gas industry which affect the local players;

  1. the local service providers are not allowed to recruit expats a case the players are advocating for, with PC.
  2. fronting, Ghanaian companies help foreign companies to acquire the necessary documents to enable them operate in the Oil and Gas industry in the country. Mr. Zormelo described it as “corruption hitting local content.
  3. salary disparities. the bitterness of this issue is noted to have influenced a strike staged by a section of MODEC staff etc.
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Meanwhile, the director of Local Content at PC, Mr. Boateng has pointed out some aspects of the LI that need to be reviewed. He even noted the review process is on-going and it is expected to complete by March, 2020 after Parliament approves it.

He mentioned for instance, a set target of Ghanaians with equity share of 10% in a joint venture is scaring some investors away and thus called for a review of that aspect of the LI. He also noted the demand for quarterly, half-year and annual reports is overwhelming the companies. A portion of the LI requires that the Oil and Gas companies submit a five-year research and development plan but complains flowing from the companies show that it is expensive and Mr. Kwaku Boateng suggested a review of this. He has also observed within the time that since Ghana is not an industry-based producer, some set targets are unrealistic stressing for instance, supply and provision of goods and services targets are high such that the Ghana service providers are not able to meet the target.

Meanwhile, the president of the Association of Service providers, Mr. Zormelo has advised PC to ensure that the oil and gas industry leaves legacies behind especially when the foreign companies have left. “…is there any company that can do what Tullow is doing today? What are we going to point out as our achievement? That is what local content it is for, are we developing local companies to take over” explaining, “not to say local companies should sack the foreign companies” but insisted “the local companies must have the competence to do the things that need to be done.”

He also advised PC to call for stakeholder consultation to point out issues confronting the Oil and Gas industry as far as Local Content law is concerned so their opinions could be included in the ongoing review of LI2204.

At least according PCs local content director, there are over 4000 local oil and gas employees in Ghana and one of them currently working with the corporate communications department of one of the multinational companies in Ghana shared her experience how she got recruited. “For me, I applied direct; I was called for interview, went through some recruitment process and at last, I was given the job. I am currently working with Comms department of xxx company.”

By Loveridge Animonyam Ampratwum Okyere

The author is a broadcast journalist with the Class Media Group.