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Opinions of Tuesday, 25 March 2014

Columnist: Adam, Mohammed Amin

Industry is caught off guard by local content law

By Barry Morgan

28 February 2014 00:00 GMT

THE Ghanaian Local Content & Participation Act passed last October comes into full effect on 28 February, according to a surprise directive issued by the Petroleum Commission, to the amazement of industry players who believed a longer grace period would apply, writes Barry Morgan.

Implementation of the policy to date has been flawed and the danger now is that rules may be subverted to scupper the underlying intent of legislation, claims Accra-based Research Development & Financial Consultants (RDFC) chief executive Kwame Acquah.

Acquah, who partners several mid-tier upstream players, including listed and nonlisted pipeline engineering, processing and procurement services companies, argues the Petroleum Commission must dig deeper into the true ownership of local vehicles sporting 51% equity in approved joint ventures.

“It’s a question of due diligence and the Commission must peel away the layers to find the real shareholders and properly assess corporate qualifications.”

Acquah is worried by increasing numbers of Angolan and Nigerian entities entering the market but fronted by Ghanaians to satisfy local ownership regulations, weakening prospects for building a truly indigenous capability.

He fears that international contractors will task existing Nigerian partners to sound out the Ghanaian market and move swiftly to groom a local entity to meet the 51% ownership obligation.

“A message needs to go out to international players that this practice will not be tolerated — especially the bigger companies, which ought to understand the reputational risk they run in getting caught circumventing our laws.”

Part of the perceived problem lies with the role of Ghana National Petroleum Corporation and the Petroleum Commission in pre-qualifying joint venture partners and attempting to control the spread of opportunities across local industry. “It’s getting a lot more competitive because they’re bringing in all these Ghanaian frontmen and the market is getting murkier — international oil companies and their contractors should desist.”

Acquah decries a business model that allows Nigerian money and experience to dominate the scene. “We need to name and shame, because if we don’t, then local initiatives will get swallowed and we shall end up with Nigerian content.”

He says the Commission should be vigilant and sincerely encourage Ghanaian partners to retool and retrain for opportunities in what remains a fragile and nascent upstream market.

“It may be expensive and time-consuming but greater scrutiny should apply to licence renewal because there’s a lot of collusion going on and it must stop.”

Acquah recommends the Commission set up an independent committee of a dozen Ghanaian industry players to help monitor compliance and guard against political interference. He says Nigeria does not allow similar incursion by Ghanaian ventures despite Ecowas (Economic Community of West African States) rules on the free movement of labour, goods and services.

“But if we continue down this road, then regional content rules must be rigorously enforced at Ecowas level.”


Mohammed Amin Adam
Executive Director
Africa Centre for Energy Policy (ACEP)
P.O. Box CT2121 Cantonments, Accra, Ghana.
Tel: +233 20 838 2222
Skype: mohammedaminadam