Local Content Law: Companies using junior staff to meet senior management quota – Jagdeo
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…but junior staff salaries remain same despite ‘new’ job titles
Despite the Local Content Act, oil and gas companies continue to come up with new ways to bypass the law. According to Vice President Bharrat Jagdeo, companies have now taken to using their junior staff to fill up the legally-mandated quota for senior management staff, all while the junior staff continue to collect their original salary.
According to Jagdeo during the Guyana Manufacturing and Services Association (GMSA) Mid-Year Dinner, the fact that Guyana was able to get the Local Content Act passed very early into the development of the oil and gas sector is significant since many countries only pass their local content laws decades into the business. However, Jagdeo noted that even with the Act, there were companies still trying to dupe the authorities.
“There are many people who are trying to bypass the provisions of the legislation. It has been brought to my attention, for example, that a company that may have had maybe three foreign directors/managers in the old dispensation, now to get past the legislation since there is a 75 per cent management team (requirement),” Jagdeo said.
“To get past that position, they simply take junior staff and change their designations. So, the management team now becomes larger. So, they fulfil that requirement. But it’s just a designation for junior staff. When you look at their salary structure, their salaries have not changed.”
According to Jagdeo, the Government is keeping a close eye on this. He noted that other companies have also gone the route of giving a Guyanese company 50 per cent ownership, but also charge a large contract fee for management services.
Jagdeo noted that the Government’s experiences with managing local content in the oil sector, as well as Guyana’s affiliation with the World Trade Organisation (WTO) and Caribbean Community (Caricom), have dissuaded it from implementing similar policies in other productive sectors.
“So, the profit margin is smaller, to be distributed based on the shares structure. So that is why, to a large extent, if we start going to every sector, it’s not desirable. Because we’re also part of the WTO, Caricom,” the Vice President said.
“And if we start shutting down every sector to foreigners or imposing requirements for their investment in every other area, we can also have reciprocal behaviour for our investors abroad. Or alternately, they can put up trade barriers to prevent our products going into their market.”
Local Content
According to the Local Content Act passed last year, oil and gas companies operating in Guyana, as well as their contractors and sub-contractors, must procure from Guyanese companies by the end of 2022, 90 per cent of office space rental and accommodation services; 90 per cent of janitorial, laundry and catering services; 95 per cent of pest control services; 100 per cent of local insurance services; 75 per cent of local supply of food; and 90 per cent of local accounting services. These are just some of the 40 different services outlined in the first schedule.
The Act also defines a local company as one incorporated under the Companies Act and beneficially owned by Guyanese nationals. Beneficial ownership is defined as owning 51 per cent of the company. Additionally, a local company is expected to have Guyanese in at least 75 per cent of executive and senior management positions and at least 90 per cent in non-managerial and other positions.
In a recent interview with Guyana Times, Natural Resources Minister Vickram Bharrat assured that the Government was committed to taking action against defaulters. He noted that as long as companies fail to satisfy all the criterion for their Local Content Certificates, these would continue to be denied to them.
“We have a Local Content legislation. And like all laws, you have to abide by the laws. And if companies are not acting in keeping with the laws, then obviously there will be consequences as we have seen the non-approval of a few companies because of the fact they did not reach the criteria set out in the legislation,” Bharrat posited.
“You know there are more than one criteria, one criteria speaks to 51 per cent ownership by Guyanese or a Guyanese company, there is another criteria that speaks 75 per cent managerial staff, there’s another criteria that speaks to 90 per cent of general staffing. So, companies need to satisfy all criteria, not only one criteria too, so once the Secretariat is not satisfied that companies are not acting in keeping with the legislation, obviously they will take action,” Bharrat further said.
Mining, quarrying sectors set for massive expansion – GMSA President
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…says forestry, services sectors also on upward trajectory
Recent developments in the gold mining sector, as well as the quarrying sector, augur well for Guyana’s economic prospects and growth in these sectors. This is according to Guyana Manufacturing and Services Association (GMSA) President Rafeek Khan.
During the GMSA’s mid-year dinner on Tuesday, Khan gave his outlook on the economy. For one, he was optimistic about the recent news that two gold companies in Guyana are either slated to start exploration soon or are currently doing preparatory work. Khan was also optimistic about the forestry sector, in which he is personally involved.
“We’re going to see the mining sector (increasing). Today I saw on the news, two new companies coming in to build capacity. The mining sector has been down. The gold production has been down. But we anticipate, with the building of capacity and investments coming in to the country, we’re going to see those sectors increasing,” Khan said.
“The forestry sector, which I’m actually part of, has actually increased its production, despite the challenges, by 25 per cent to date. We have increased exports by 30 per cent. So, those are some good indicators that we see happening.”
It was revealed by Natural Resources Minister Vickram Bharrat recently that Barrick Gold would be starting exploration soon. Further, ETK Incorporated in partnership with Gran Colombia would also be doing work on the Toroparu mine.
Khan meanwhile also spoke about the pharmaceutical sector, noting that with eight hospitals planned for the country and US$180 million expected to be spent on hospitals, the pharmaceutical sector is likely to be increased.
According to Khan, the oil and gas sector will drive economic expansion in the non-oil sector, including in agriculture and construction.
“As the President has been promoting bilateral trade within the Caribbean, food security and housing, apart from oil and gas, those two sectors are going to drive the economy. Food security moves into a whole array of services, not just the manufacturing and production of food.”
“I heard the quarry sector, the Government has issued 10 quarry licences. The country has an annual demand of 1.5 (million) metric tonnes. And we’re importing 300 (thousand) metric tonnes of that. Eventually, we’re going to see the quarry sector increasing,” Khan further said.
The GMSA President also touched on the services sector, which he noted encompassed from tourism to consultancies. In fact, he noted that the GMSA has seen increased membership in the services sector, including in consultancies, accountancy, and environmental or architectural services. This sector, he noted, is one that is also on a rapid growth path.
The World Bank had estimated earlier this year that Guyana’s 2023 economic growth rate would be over 34 per cent. According to its semi-annual report for Latin America and the Caribbean (LAC) called “Consolidating the Recovery; Seizing Green Growth Opportunities”, which was released in April, Guyana will register a Gross Domestic Product (GDP) growth rate of 34.3 per cent in 2023.
This rate of growth is actually the most in the LAC region and the only one in double figures, once again highlighting the importance of oil exploration to the economy. The second highest growth rate projected for next year is St Vincent and the Grenadines, at 7.3 per cent.
When it comes to the forecast for 2022, the World Bank had projected an economic growth rate of 47.9 per cent for Guyana. In this case, only Barbados, with a projected growth rate of 11.2 per cent for 2022, also crosses over into double figures.
Since these projections, however, the Government, through Senior Minister with responsibility for Finance in the Office of the President, Dr Ashni Singh, has actually upped the growth projections.
While addressing the Guyana-Saudi Arabia Investment Engagement that was held in the dome of the Arthur Chung Conference Centre (ACCC) on Saturday, Singh had revealed that the projected growth for Guyana is now 57.8 per cent. According to him, Guyana’s economic growth will outperform both regional and global averages.
GMSA weary of difficulties at local banks, Jagdeo says gov’t considering a request for revolving fund
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Access to capital has long been a hindrance to the formation and expansion of local businesses but the Guyana Manufacturing and Services Association (GMSA) has a proposal that could change that.
During its mid-year business dinner on Tuesday night, the Association’s President, Rafeek Khan acknowledged this impediment and said a revolving fund would be appropriate to address the issue.
In his words, the fund could “help businesses not to be beggars at international and local banks.”
A revolving fund is established for a specific purpose and used to give loans to members or to be expended or invested for a specific purpose with the condition that repayments are used again for these purposes only.
Businesses in Guyana have long complained about setbacks in accessing financing and there have been targeted efforts in recent years to change that.
Khan said on Tuesday night that lending by local banks has increased by almost 10 per cent, noting that it is a “good sign that the economy is doing well and banks are lending more.”
His comments followed promises by Vice President Dr. Bharrat Jagdeo that the government would consider the revolving fund facility but he emphasised that the private sector must also improve its own financing.
The Vice President said businesses cannot want greater access to financing but are unwilling to explore partnerships or go public.
According to the Vice President, local businesses must look for ways to raise money outside of debt financing.
“Many [businesses] can’t go to the bank because there is transparency in record keeping…it should not be only about government providing the funds to businesses…the private sector also must take steps to improve its own accountability,” Jagdeo added.
He said if the current commercial banks are not fit for purpose, then the government will fix that by bringing in more merchant banks.
Recently, the government issued a license to one new merchant bank and Jagdeo has said that there are several applications for other such financial institutions.
“Several new institutions will be opening their doors in the next few years,” he added.
Meanwhile, Khan said with the oil boom and unprecedented economic growth to take place in the next few years, it presents a golden opportunity for the many businesses that have been holding out for the last decade.
He calls it, “paying the price.” Khan credited future successes to the support offered by lower energy and infrastructure costs.
To this end, competitiveness is expected to increase.
But with that ramped-up competitiveness across sectors, the GMSA President believes local manufacturers must also look to grow into secondary and tertiary manufacturing.
“This is where you see real growth in the economy and value-added. Every sector is preparing to grow,” Khan said.
According to the government’s revised projections, the economy is expected to grow by an average of 59 per cent this year.
Khan believes agriculture and construction, apart from oil and gas, will drive this economic growth.
While the GMSA awaits the official mid-year report which is due by the end of this month, Khan said quarrying and mining, which have been down, are set for a rebound.
The forestry sector, he explained, has increased production by 25 per cent, resulting in increased exports by 30 per cent.
To this end, he made a case for local businesses to be supported in scaling up their capacities for the export markets even as he welcomed the increase in air cargo services.
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Rafeek Khan re-elected as President of GMSA
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Rafeek Khan, Managing Director of Woods Direct, was yesterday re-elected unopposed as President of the Guyana Manufacturing and Services Association (GMSA).
A statement from the Association said that Khan will be supported by Ramsay Ali, CEO of Sterling Products Limited, as First
Vice President and Chairman of Agro-Processing Sub-sector; Dr. Vishnu Doerga of ActionINVEST Caribbean Inc. as Second Vice President and Vasudeo Singh, Chief Financial Officer of Deme-rara Distillers Limited as Third Vice-President & Treasurer.
The GMSA election was held in two parts, as is customary. On March 31, 2022, thirteen board directors were elected through a blended voting process, in-person and virtually. Yesterday, the President, three Vice-Presidents and Treasurer were elected.
In remarks after his election, Khan said it is his vision to create a dynamic and progressive GMSA by ensuring greater representation and maximizing opportunities for the membership of the body.
He stressed the importance of public-private partnerships.
The statement disclosed that sub-sectors within the GMSA have been re-aligned and will reflect Agro-Processing and Agriculture separately, the emergence of an Information Communications & Technology subsector and the merging of Forestry and Mining which will form the Extractive Industries sub-sector.
Read MoreGMSA elects new board of directors
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– Managing Director of Woods Direct, Mr. Rafeek Khan, has been re-elected unopposed to head the Guyana Manufacturing and Services Association (GMSA).
He will be supported by Mr. Ramsay Ali, CEO of Sterling Products Limited, as First Vice President and Chairman of Agro-Processing Sub-sector; Dr. Vishnu Doerga of ActionINVEST Caribbean Inc., as Second Vice President and Mr. Vasudeo Singh, Chief Financial Officer of Demerara Distillers Limited, as Third Vice-President and Treasurer.
In a release, it was noted that the GMSA) held its Annual General Meeting (AGM) for the fiscal year 2022-2023. This was held in two parts, as is customary. On March 31, 2022, 13 board directors were elected through a blended voting process, in-person and virtually.
On April 19, 2022, the President, three Vice-Presidents and Treasurer, the remaining
members, were elected to form the full complement of the Board of Directors.
Mr. Khan, in his brief remarks to the Board, emphasised his gratitude in being re-elected to serve once more as President. He stated, “I am humbled by the opportunity to serve you and the invaluable GMSA membership for a second term. I have no doubt that this year will be even more dynamic and progressive for the GMSA.”
Mr. Khan further explained that it is his vision to create a dynamic and progressive GMSA by ensuring greater representation and maximising opportunities for the membership of the association.
He underscored the importance of public-private partnerships in creating and enabling cohesive and conducive environments. The sub-sectors within the GMSA have been re-aligned and will reflect Agro-Processing and Agriculture being separate, the emergence of an Information Communications & Technology (ICT) subsector and the merging of Forestry and Mining which will form Extractive Industries. This, he notes, will ensure maximum benefits to members are received coupled with aiding where Guyana is currently heading with the advent of the Oil and Gas sector.
Mr. Khan stressed the importance of joint inter-ministerial working groups and how these have aided the GMSA. He hopes to engage more ministries in the future to further compliment the work.
As an addition, a trade and investment committee will be set up within the GMSA to assist in the facilitation of trade relations in Guyana and across the region. “This committee will also help to foster opportunities for investments across all our sectors by seeking out more non-traditional financing,” stated Mr. Khan.
Finally, he added that of utmost importance, he will be working for the membership of GMSA and assisting them to take their businesses to the next level amid the many challenges being faced globally.
The 2022/2023 Board of Directors are as follows: Durable Wood Products – Mr. Rafeek Khan, President of GMSA; Sterling Products Ltd. – Mr. Ramsay Ali, First Vice-President and Chairman of Agro-Processing Sub-sector; ActionINVEST Caribbean Inc. – Dr. Vishnu Doerga, Second Vice-President; Demerara Distillers Ltd – Mr. Vasudeo Singh, Third Vice-President and Treasurer; Agro Services Inc. – Mr. Aditya Persaud, Chairman of Agriculture Sub-sector; New GPC Inc. – Mr. Narendranauth Maraj, Chairman of Chemicals and Pharmaceuticals Sub-sector; Brass Aluminium and Cast Iron Foundry – Mr. Peter Pompey, Chairman of Construction and
Engineering Sub-sector; Superior Woods – Mr. Denish Bisessar, Chairman of Extractive Industries Sub-sector; DENMOR Garment Manufacturers – Ms. Upasna Mudlier, Chairman of Textiles and Sewn Goods Sub-sector; GTT – Mr. Orson Ferguson, Chairman of Information Communication Technology (ICT) Sub-sector; Social Rank Media – Mr. Rosh Khan, Chairman of Services Sub-sector
The executive members include: Banks DIH Ltd.– Mr. Ramesh Dookhoo, Barama Company Ltd. – Mr. Mohindra Chand, Bulkan Timber Works – Ms. Roseann Bulkan, Edward B. Beharry and Company Ltd. – Mr. Raymond Ramsaroop, Environmental Management Consultants – Mr. Shyam Nokta, GAICO Construction and Engineering Service – Mr. Komal Singh, NAMILCO – Mr. Vishal Lalbachan, UMAMI Inc. – Mr. Chris Persaud, Latitude Geospatial Consulting Inc. – Mr. Haimwant Persaud and Tropical Shipping Agents – Ms. Glenis Hodge.
