Transcript
WOMAN
When you look at Ghana's Local Content legislation, the LI 2204, it provides specific objectives for local content for localisation but the overarching goal is to ensure that there is value creation and value retention. But then when you look at further into the shadows of the law, it fails to consider employment and it tends to consider a supply of goods and services. But it does not consider that the other sectors of the economy that could feed into the localization agenda. So within Ghana, yes, we have achieved some level of employment, we have achieved local participation in supply, but it has not been great. Now, I cannot give specific data on the achievements because the reporting has been in bulk. When oil and gas companies report that they have spent X amount in this sector, they do not even show to what extent, or how much of that share goes to local suppliers and to which specific local suppliers. Because it could even be that we have local suppliers taken advantage, but it is a monopoly or duopoly. And that does not ensure that the benefit is shared and trickles down.
MAN 1
Ghana has been effective, I think, to some extent. If you look at some of the numbers of oil companies, like Tullow, for example, show in terms of employment that they employ more Ghanaians at senior management levels, and so on. In terms of the contract volumes that are going to local private sector, it's large. But it is not really clear what exactly we are setting out to achieve and whether or not we are making progress. How much progress have we made since we set out these agenda? So, it's sort of difficult, it's mixed. You can't really tell if we are on track or we are not on track. So I think that is the challenge. So in terms of effectiveness, I think the jury's still out.
MAN 2
I think some effort have been made on paper to meet targets. And those targets are really talking about the numbers of employments, the number of contracts. But there are always deeper detail behind those numbers. For example, if Tullow says they have been able to deliver 90% local content, how much does that constitute in terms of value against the 10% that is not local? So if you have 10% foreign taking salaries that are higher than the 90% local, I mean, the local content doesn't mean much. So we have to really look at value creation, ensuring that we really have the people who can deliver the kind of skills that are highly paid, and that takes time. If you really want the numbers, you can get the numbers delivered by you. For service contracts, we're told that, for example, the Sankofa oilfields outsource over $1.7 billion to local companies. The question really is, if $1.7 billion came into the Ghanaian economy, I'm sure you- everybody will feel it, but nothing much has changed. It tells you that they also outsourced it or they also sourced a lot of the input from abroad. So we have to think thoroughly at what services are being sourced, what inputs are being sourced. Are they locally produced? And if they are not, what are the strategies to really target those? Rather than throwing numbers out there without actually digging deeper behind to see what the substance really are. I think the established [INAUDIBLE] have come through generations of producing interfacing with various communities. And they've gotten to a point where they don't really care much about where their capacity is coming from. Once there is capacity and it's appreciated, then that capacity can deliver that job. They look more or less at what- who, really, is doing their job. But China has, probably, more strategy to send people out as backed by their loans. So when they sign a contract, they want to ensure that they check all the boxes that says we need to bring in Chinese companies to deliver the job. So when you have a local content policy that says that you should have to recruit local Ghanaians, for example, that comes in conflict with what the Chinese also want. And in most cases, African governments are not able to enforce their local content regulation because they want the money, they want infrastructure to show for the next election. And therefore, they are not able to resist those temptations. So that is the difficult bit where we can't find any document, but everybody you speak to tells you that China has a strategy to ship people out as part of their loan package to Africa.
MAN 3
The Chinese first entered into Africa in the mid-1990s. And their first point of call was Sudan. And they came as national oil companies that didn't have much global footprint, in terms of the oil industry. And so, they came thinking that, OK, we could do things here in the way that we do it in China. And so they tried to bring- if they have an oil block, they would try bring oil here, the labour and the capital that they would need for their structure to take place. But over the years, we've see a shift away from that, regarding the Chinese. Because they also trying to learn from the international oil companies how to do business abroad. And so, and I think, maybe, that is where the Sudanese have been fortunate and have been able to take advantage of. So while the Chinese are leaning to move away from it, they are also pushing them to also move away from that, sort of, approach. And so, I'm not surprised that in Sudan, you have a Chinese company but they seem to have been able to achieve some level of localization linkage development. And compared to a place like Ghana where we have an international oil company, yet we seem to be struggling a little bit with our linkage development and localization. Mind you, timing is also a factor in here. So maybe Ghana could get better as time goes by.
MAN 2
I mean, I'm a local person. If I front for somebody and I'm willing to keep it a secret, regulation cannot uncover it. You know, no policy can uncover it. Somebody swear on oath to say that I own a business and he has a transaction with a foreign company to keep that secret- it is really difficult to have a regulator that will be able to dig deeper to be able to know who really is behind it. The solution, really, is to build a real capacity. The solution is to encourage people to team up, to show face that they have the numbers, they have the money to be able to take up the opportunity, else you can't stop fronting when the local capacity doesn't exist.
WOMAN
Fronting is a very difficult challenge in Ghana. The law requires that before a foreign company acquires a petroleum agreement, that foreign company must partner with a local- must have a local partner who must have at least 5% equity. Now, we understand it is [INAUDIBLE] knowledge that the oil and gas industry is capital intensive. Now, we have local companies that cannot assess cheap financial resources in-country. At the same time these local companies have to partner with these international oil and gas companies. And the international oil and gas companies need these local companies. So there is now a market to create partnerships and nothing else. And that has led to the fronting that we see. Fronting has been a difficult challenge that Petroleum Commission has been battling with. And so far, it is quite difficult to see the way forward, to be honest. So I like it when the Deputy Minister mentioned that, well, the government, knowing all these challenges, is now looking at their warehousing option, where we can now see how state institutions who have good cash can participate in the sector.