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Business News of Thursday, 27 February 2020

Source: B&FT Online

Local content laws in extractive sector remain subject to abuse – report


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Although the country boasts good local content laws in the mining, oil and gas sectors, such laws largely remain subject to abuse because of lack of monitoring, a new report has established.

The report titled: ‘lifting the veil on the typologies and nature of corruption risks in Ghana’s mining, oil and gas sectors’, and conducted by the Civil Society Platform on Oil and Gas (CSPOG), said implementation of local content requirements remain weak and that this may lead to abuses in the awards of contracts, among others.

“Local content requirements may again, be abused when contracts to supply extractive industries are awarded to shell or front companies, resulting in cost inflation and delays in project execution,” the report funded by Star Ghana, UKAid, European Union and DANIDA said.

The report’s findings, which also said weak implementation allows oil and gas companies to self-assess or audit their own performances, a practice it says has the tendency to deny the state of much-needed revenue for development, were revealed in Accra during the launch of a campaign against corruption in Ghana’s extractive sector.

“The government has continuously touted local content achievements with regards to contracts awarded to Ghanaian companies in the Sankofa Gye Nyame Field, however, there have not been any thorough investigation to ascertain whether the supposed local companies are truly Ghanaians.”

See Also: Planting for food and jobs cash in default The report further noted that there is less coordination among state institutions with oversight and monitoring responsibilities over the extractive sector, including the Minerals Commission, Petroleum Commission and the Environmental Protection Agency. “This has resulted in weak enforcement, leading to recent issues with pollution of water bodies and degradation of biodiversity and forest cover,” the report lamented.

On revenue mobilisation from the extractive industries, it highlighted the lodging of oil and minerals revenues into wrong accounts by the Ghana Revenue Authority (GRA), conflict of interest and political capture, among others, as some of the potential abuses to be guarded against.

“One custom officer we interviewed said he had been at one mine for eight years and that he has almost become part of the mine that he couldn’t play his public duty objectively because sometimes the mine was paying him, giving him transportation fare to come to work, as well as allowances and other things. This is a huge risk that we need to prevent,” Samuel Bekoe, who presented findings of the report, said.

He noted that the report also detected gaps in GRA’s practice where it allows companies to do self-audit. While this is a standard practice, he stated that the time lag that it takes GRA to go back and do a full audit is too long.

“Sometimes in the oil sector it took them almost four years and we thought this is something that could cause or lead to officers been influenced to allow certain things to go unrecorded. There is an example of the GRA lag in the oil sector where they did an additional audit and found US$27miliion some years ago despite that Tullow and its partners had done a self-audit.”

Additionally, the report said the involvement of foreigners in small scale and illegal mining against the laws of the country and involvement of politicians in the sale of equity shares of companies in extractive sector are among areas that present corruption risks.

Going forward, it said there is the need to monitor gold filings from refineries closely to ensure that the amount of gold processed is accurately reported, while abuse of ministerial discretion, political interference and capture must be kicked against. “Companies adopt different means to be able to reduce their cost and maximise profit so, it is up to us to check them,” he concluded.

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