Local content procurement requirements create a number of significant corruption risks. This is according to a report by Institute for Public Policy Research (IPPR) director Graham Hopwood who recently cautioned that politicians and officials can abuse their power and influence to use local content procurement requirements to benefit their associates and family members.
“At the same time, international oil companies could pay bribes and kickbacks to local companies to serve as fronts and make it look like they are meeting targets for local involvement. Such arrangements can be used to channel funds to politicians, government and public enterprise officials, their families, or affiliates,” warns the IPPR report released last week for May 2023.
Presenting the report, Hopwood said sometimes the companies selected by international oil companies include politically connected individuals who are essentially being paid to seek favours from ruling party politicians.
Local content in this specific context can be defined as the active participation of the Namibian workforce and entrepreneurs in the upstream oil and gas sector through training, employment and local procurement of goods and services.
The research institute report followed a two-day national petroleum local content policy (LCP) workshop held in the capital at the beginning of May 2023. Opening the workshop, mines and energy minister Tom Alweendo also cautioned among challenges that could derail the effective implementation of a local content policy for the oil and gas sector is persistent corruption.
However, at the time, he was quick to add that to mitigate corruption in this sector and tensure in-country value creation reaches ordinary citizens, will require transparency in all operations.
“We must be fair and transparent with our employment procedures, procurement processes, and in exercising oversight over the policy implementation. The more we are transparent in our operations, the higher the chance of realising the objectives of this local content policy (LCP),” said Alweendo.
The LCP workshop has become ever more relevant as Namibia recorded its third major offshore light oil discovery earlier this year.
Meanwhile, Hopwood last week added allegations of favouritism in Petroleum Exploration Licences (PEL) allocation will hinder the implementation of the transparency term the minister voiced at the workshop in the country’s upcoming oil and gas sector.
“Over the years, it is clear that the PEL allocation system favours a very small minority of politically connected Namibians. If that is already happening in the petroleum exploration licence phase, we could see the same pattern or worse in the production phase, especially through local content,” stated the researcher.
The report further noted, international oil companies can end up contracting a local content provider for overpriced or even non-existent goods and services.
“Local content policies are often seen as fertile ground for rent-seeking middlemen who contribute nothing of value but are only interested in getting rich quick. Preventing corruption in local content requires a set of measures aimed at strengthening transparency and accountability systems,” reads the report.
Furthermore, IPPR recommended that licence holders, including international oil companies, must also take a series of actions, including, carrying out their own due diligence and risk assessments of local content suppliers and signing up to and supporting anti-corruption provisions in contract.
It further urged that in order to mitigate risks in local content procurement, there should be clear procurement rules, independent oversight bodies, anti-corruption clauses, beneficial ownership disclosure, and transparent reporting.
Meanwhile, the warning against the devastating impact of corruption on the domestic economy was echoed by Swapo vice president, Netumbo Nandi-Ndaitwah, on Saturday during an election rally at Rundu. “Economic stagnation will remain. The economy will not grow and create the necessary jobs but the number of unemployed youths will grow, thus forcing them to engage in criminal activities,” Nandi-Ndaitwah warned. She further advised all Namibians to identify and fight corruption in every possible way.