Ghana’s Local Content and Local Participation Legislation
Many oil-rich countries have used their oil resources as a major tool to propel development and improve the living conditions of their people. It is in the light of this that the discovery of oil in commercial quantities in Ghana in 2007 was embraced with euphoria by many Ghanaians.
This optimism was underpinned by the expectation that the new oil resource would contribute tremendously to an accelerated rate in Ghana’s economic growth and development. The channels through which Ghanaians expect to benefit from the oil resources are through the expansion and deepening of indigenous businesses in the oil and gas sector, increased job opportunities, possible access to cheaper oil and gas resources, and revenue from oil and gas resources for national development.
In an effort to ensure that the oil resources meet the high hopes of Ghanaians, the Government of Ghana through Parliament has passed important enactment such as the Petroleum Revenue Management Act to ensure that the oil resources are well managed to the benefit of the people of Ghana.
The Petroleum Local Content and Local Participation Regulation, 2013, L.I. 2204 was also passed to give legal backing to the Local Content and Local Participation Policy Framework that was formulated in 2011. Largely, the Local Content Regulation seeks to enhance local businesses by increasing patronage of local goods and services within this important sector. Such patronage will in turn improve the capacity and the international competitiveness of domestic businesses.
A key aspect of the Local Content Policy is that it targets a minimum of 90% local participation in all aspects of the oil and gas value-chain by 2020. The legislation requires that an oil and gas company or firm must obtain 60%- 90% of its goods and services from domestic sources within 10 years of its operation in the Ghana oil and gas industry. Similarly, the legislation targets a local content of 60% – 80% in various onshore engineering services within 10 years of operating an oil and gas firm.
Fabrication and construction companies must utilize between 50% - 100% local content within 10 years of operation.
In fact, the only service in the regulation that requires an oil and gas company to use below 50% local content and participation (within 10 years of operation), are those within the health, safety and environmental service areas.
The urgency with which Ghana passed the Local Content and Local Participation Legislative Instrument has been highly commended by key stakeholders within the local private sector, Development Partners and Civil Societal Organizations. It was considered a major step towards ensuring that businesses and the people of Ghana at large benefit from Ghana’s oil resource, and to serve as a benchmark for other industrial areas.
Despite the expeditious passage of the local content and local participation regulation however, analysts and industry experts are not convinced that Ghana has done the necessary preparatory work to ensure that the capacity of local businesses and firms is duly built, so as to enhance their capacity to deliver the desired quality of goods and services to the oil and gas sector.