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Guyana shouldn’t look to Ghana for local content guidance
DEAR EDITOR,
The most recent version of Guyana’s local content policy has sparked much commentary this week, some helpful and some less so. As Guyanese cast about for other examples from which to draw lessons, I was surprised to see sections of the media lauding the “highly successful” plan Ghana has in place. It is my understanding that opinion is actually quite divided on the effectiveness of the Ghanaian policy.
First, allow me to state the obvious: local content policy is constructed based on local circumstances. Ghana and Guyana cannot be compared as a 1:1. Local content policies share the same general goals of creating opportunities for local businesses, promoting technology and knowledge transfer and increasing tax bases for governments. How those policies pursue those goals can vary greatly.
For example, Ghana’s local content policy framework, as it stood in 2010, called for maximum local participation across all parts of the supply chain. There is a widespread belief that the targets set are unrealistic given the state of local businesses.
An article by one of Africa’s top analysts, Stephen Yeboah, points out that it can lead to unfair or corrupt contract award processes. He proposes that policies should instead favour only local businesses with proper qualifications and technological expertise.
Despite concerns, Ghana’s local content policy was revised in 2013 to be even more strict, requiring 90 percent of goods and services in the oil industry to be sourced locally by 2020. Experts have criticised this target as even more unrealistic, likely leading to reduced quality of services. International investors and companies, forced to rely on less than effective local businesses, often delay projects as a result.
Naki Mendoza, of the Council of Americas, discusses this issue. He believes that the target cannot be achieved due to, “capacity bottlenecks to allegations of corruption and graft. The setbacks stem from a mismatch between an industry’s demands and the constraints of a local market and can serve as a cautionary tale for countries that are in the early phases of managing natural resources”.
In short, blanket applications of high local content requirements has handicapped Ghana’s local content policy and potentially slowed the evolution of local businesses as a result. And lest there be any confusion about the effectiveness of Ghana’s policy, I note for readers that the government is currently reexamining its local content policy and considering changes to address the issues mentioned above.
There is no simple solution for Guyana’s local content policy. While I am sure that Anthony Paul feels his policy for Ghana has been “highly successful,” we must be wary of taking the easy route and simply applying a template to Guyana. Our government has consulted a number of experts thus far, and it seems foolhardy to think that only one will have the right answer. Let us be patient, seek further input, and craft a policy that works for Guyana in the years and decades to come.
Sincerely,
Clement Smith
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