Jagdeo warns Guyanese caught up in rent-a-citizen scheme

Jun 17, 2024 News

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— says Govt. to strengthen enforcement and penalties

Kaieteur News – Vice President Bharrat Jagdeo has issued a stern warning against the exploitation of Guyana’s Local Content Act through deceptive practices like ‘rent-a-citizen’ schemes. And he warned Guyanese involved in the business to desist or else they will face the full force of the law.

The Ministry of Natural Resources recently announced that it will be working with the Guyana Revenue Authority (GRA), as they intensify efforts to eliminate the practice known as ‘rent-a-citizen’ or ‘fronting’. The issue refers to the unethical practice where foreign companies use local individuals or local entities as mere fronts to meet local content requirements, while the actual control and benefits remain with the foreign entity. At his last press conference held at Office of the President last Thursday, Jagdeo highlighted the misuse where the foreign companies utilise local entities as fronts to bypass regulations meant to benefit Guyanese citizens. He said, “This is particularly as it relates to registration under the Local Content Act, that’s where it makes sense. So that they can enjoy benefits that are preserved for our people that we put in the act for our people.”

The Local Content Law serves to provide for the implementation of obligations on persons engaged in petroleum operations or related activities in the petroleum sector; prioritizes Guyanese nationals and Guyanese companies in the procurement of goods and services and enables local capacity development. In fact, the First Schedule of the Act ring-fences 40 categories of work for Guyanese participation via the supply of goods and the provision of services which include: food supply, rental of office space, accommodation, insurance, accounting and legal services.

So by a foreign company using a local company to show 50% Guyanese ownership, the foreigners will gain access to the aforementioned areas that are prioritized for locals. The Vice President said, “Some of the foreign companies coming in they are giving notionally a 50% ownership but then they are getting paid all sorts of fees for the services they provide etcetera so it’s not a real benefit that flows to the Guyanese.”

Jagdeo outlined forthcoming measures aimed at strengthening enforcement and penalties under the updated local content legislation. He noted that the local companies that are complicit will also face consequences, not just the foreign companies. “And we have to in the update of the law, we will plug some loop holes and strengthen the enforcement and penalties for doing so but right now the GRA is looking at some of these companies because they are by fancy accounting defeating the purpose of the act,” he added.

In a statement on Monday, the natural resources ministry stated, “This practice undermines the objectives and spirit of the Local Content Act, which aims to ensure that the citizens of Guyana benefit meaningfully from and participate actively in the nation’s natural resources sector.”
To address these issues, the government, through the ministry, is actively pursuing measures to curb instances of rent-a-citizen. One such measure is working with GRA. “This closer working relationship aims to identify and penalise those engaging in fronting, ensuring that all stakeholders adhere to the legal and ethical standards set forth by the Local Content Act,” it was stated.

Moreover, the ministry stated that it remains committed to fostering a transparent and equitable petroleum industry that benefits all Guyanese. “We urge everyone to support these efforts and uphold the integrity of our local content framework,” it was further stated. In an invited comment, the ministry told Kaieteur News that while the offence of fronting is not expressly defined in the Interpretation Section of The Local Content Act, it is provided for in Miscellaneous: Part V1 of the Act. Section 23 (1)-(3), with the marginal note, Offences and Penalties, provides for the offence of submitting false or misleading information to the Secretariat knowingly and for the offence of any Guyanese national aiding and abetting anyone to contravene any provision of the Act in order to defeat the local content obligations under the Act.

To this end, the Ministry explained that the two offences are in nature Summary Offences, therefore not indictable, and attract a penalty, in the case of an individual, a fine of five million dollars, and for a body corporate, a fine of ten million dollars. The Act, gives the Local Content Secretariat, the authority, by instituting criminal legal proceedings, to charge individuals or corporate bodies for submitting false or misleading information or aiding and abetting anyone to contravene any provision of the Act in order to defeat the local content obligations under the Act.

Section 23(1)-(3) states: “A person who submits, or causes to be submitted, a local content plan, report, record, or any other information pursuant to this Act knowing, or ought to reasonably have known, that the submission is false or misleading, commits an offence and is liable on summary conviction — (a) In the case of an individual, to a fine of five million dollars; (b) In the case of a body corporate, to a fine of ten million dollars.”

Consequently, the Local Content Secretariat has issued Guiding Principles, in the form of Local Content Register Registration Information, which are the criteria, pursuant to the Act for registering/operating a joint venture company in the Upstream petroleum industry, and pursuant to the provisions of the Act.

As part of the requirements, a Guyanese company forming a joint venture with a non-indigenous company must have a minimum of 51 per cent equity participation in the joint venture arrangement; submit Declaration of Beneficial Ownership and demonstrate evidence of equity contribution to the Joint Venture.

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• Bharrat Jagdeo, GRA, Guyana’s Local Content Act, Guyanese

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