Develop policies to grow local business--Zen Petroleum boss

Government has been asked to develop policy interventions to ensure implementation of local content regulations to help grow indigenous businesses in the oil and the mining sectors, to ensure profit retention as against capital flight by the multinational companies.

 

The Oil Marketing Companies (OMC) business in the country is valued at some US$40million a year and is currently dominated by multinationals -- with Shell Ghana, whose products are marketed by Vivo and TOTAL, being the biggest.    

The mining industry’s value is anticipated to reach US$3.8billion in 2018, up from US$3.3billion recorded in 2013, as bauxite and gold production see modest increases. 

Mr. William Kwodwo Tewiah, Managing Director ZEN Petroleum -- an indigenous fuel solutions provider, in an interview with B&FT said: “If we don’t take time the mining and oil sector businesses will go the way of telecommunications companies, where there will be no Ghanaian business -- just foreigners.

“Unless there is some policy direction to tilt the trend toward local businesses, then I'm afraid competition will take indigenous businesses out.”

Mr. Tewiah spoke on wide range of issues regarding the country’s local content policies, and explained that local content is not about local employment; there is a big difference between local content and local employment.

Local content, he said, “is when you have banks, media-houses, hospitals, industries, that are Ghanaian-owned or have the majority shareholders here; then the profit stays here”.

He observed there is an element of confusion that the country needs to clear up regarding the local content direction. Thus, he noted the need to be consistent with the local content direction for all sectors: “We need to get to a point where there is clear definition for local content, and that should be a factor for equity and management in the business of this country.

“The policy needs to be very clear; a lot of people including the mining companies will tell you that local content is about how many Ghanaians they can employ, and that is rather local employment.

“Local content is who owns equity in the business, and who controls the business; so what we are trying to do is to create companies in Ghana which are predominantly Ghanaian owned and managed, and are providing goods and services for a mine.”

Local content in the mining industry, he said, is a ‘complete joke’ -- adding that nobody can even talk about it and be able to keep a straight face; its actually embarrassing that there’s no local content in the mines today.

Mr. Tewiah expressed that local content in the mining sector is rather seen as a moral obligation and not a legal obligation backed by laws.

He pushed for a law to ensure that in the next five years all the companies providing various services in the extractive sector have to be 75 percent locally owned.

“If all the food must be supplied by a local catering service, all the fuel supply, security personnel among others are handled by local companies; this will help grow the local economy and promote job-creation.”

He explained that local content is about ownership of the country’s business: “It is not about how many Ghanaians are employed -- so local content is what happens in Dubai, where the Emiratis own the companies but they employ foreigners.

“But the important thing is that the profit remains in the country; the profit adds to the wealth of the country because people in the country who are making the profit take the decisions; they have management control of the companies. That is what local content is all about.”

Last year there was implementation of the Petroleum Regulation on Local Content and Participation, which stipulates that Ghanaian companies will be given first preference in bids for new petroleum licences. 

There will also be a minimum 5% stake for local companies in every oil contract awarded to an international investor. 

In addition, the policy calls for international oil companies to give first consideration to procuring goods and services from within the country -- and to employ qualified Ghanaians where possible, with few exceptions granted.

Government aims for local firms to control 90% of oil activities by 2020, an ambition that Mr. Tewiah believes is both necessary and achievable. 

“Ghana has to create cottage industries around its resources the same way that Scotland did, whereby today you now have Scottish oil and gas service firms working all around the world,” Tewiah said. 

This measure has received broad support from most operators in the country, provided implementation is done on a careful and considerate basis.

“In the downstream oil sector there are 105 oil marketing companies, but the important thing to point out is that the top-two are foreign companies and they have the largest market share -- and that is bound to grow because we’ve also licenced more of them to come.

“There are other foreign companies that are coming to participate in the local downstream sector,” he stated.

ZEN Petroleum -- which currently supplies about 10 million litres of diesel to some mining companies including Goldfields Ghana Limited -- Mr. Tewiah said started operations five years ago with specialisation in fuel-supply to the mining companies, a segment of the business that is even more challenging.

He said although the company is young, it has grown its market share from zero percent in 2008 when it started to about 50 percent in the mine-fuel supply business.

The company recently set up agencies in Mali, Liberia and neighbouring Burkina Faso to supply fuel to mining companies in those countries, and with plans to expand to other countries in the ECOWAS market.

“We are confident of making a mark in the OMC business in spite of the firm grip that multinationals have on the industry,” Mr. Tewiah remarked.