Maximizing the Multiplier Effect of Local Content
Ken McGhee, Chairman and Director of rising boutique consultancy Africa Ubiquity Group spoke to Africa Oil & Power about how the consultancy aims to employ local business service providers to train indigenous talent, leveraging cross-sector collaboration and sustainable development in the wake of the repatriation of oil and gas workers in Equatorial Guinea and across the continent.
What role will Africa Ubiquity Group play in local content development both in Equatorial Guinea and on the continent?
One of the key success stories on the continent in terms of local content development is the Ghana Supply Chain Development (SCD) Program. Having designed the program from the ground up in collaboration with a local team, we mobilized Ghanaian business service providers to train locals who had expressed interest in working in the oil and gas sector, and connected them with contracts with International Oil Companies (IOCs). This gave micro-, small- and medium-sized enterprises the chance to get a foothold in the industry.
In a nutshell, Africa Ubiquity Group leverages this idea of using locals to train locals to procure small-scale contracts. For example, one of the first contracts signed in Ghana through the SCD Program was for painting fences at a pipe yard – valued at maybe $30,000. Yet there is a multiplier effect when it comes to small entities getting contracts with big firms. With this in mind, our services center on designing training programs for both public and private sectors, as well as advising on policy development – using off the shelf Corporate Social Responsibility (CSR) investment projects that have been previously effective in advancing local content.
What are the preconditions for this model to be scalable to other African markets?
Ghana worked because of Ghana. In addition to having a Petroleum Commission – which serves as a buffer between the Ministry of Energy and Petroleum and IOCs – there was a lot more national content to Ghana’s oil and gas sector from the start. Ghana also made a commitment to learning “best practices” from other markets and having the foresight to see how producing countries like Equatorial Guinea and Nigeria were approaching local content policies.
Another key factor is funding, in which we had the support of the U.S. Agency for International Development. Yet even without the funding, having top-level support from local governments would facilitate a win-win scenario, whereby any company would be remiss to bring in its own external consultants to conduct trainings and other CSR initiatives. On a similar note, an enabling environment is critical to the success of the model and its ability to be adopted by government or IOCs. Equatorial Guinea has one of the most conducive environments because companies work exclusively with the Ministry of Mines and Hydrocarbons, which is in part why Africa Ubiquity Group will maintain a base in Malabo, among other strategic locations. Local content frameworks have to require some degree of social investment. Otherwise, local content is confined to hiring percentages.
How can emerging hydrocarbon producers leverage their status as newcomers, in terms of drawing on local content “best practices” from other markets?
Ghana has been more successful in local content because it made a commitment from the start to learn from others, and consequently, avoided a lot of the growing pains. In this sense, emerging producers like Mozambique and Senegal should be on the springboard, building local content clauses directly into their production-sharing contracts. Local content is the way of the future, and ultimately, significantly more cost-effective in the long-term, in terms of reducing travel and expatriate costs, while still paying a very healthy wage to local employees. If local content policies are initiated from the start, then governments don’t have to undo existing practices retroactively.
How would you characterize your long-term market outlook?
I am very optimistic; I have always believed that there is too heavy of an expatriate influence within several key areas of oil and gas production. In a rather perverse way, COVID-19 has countered this, and more processes are going to be in local hands. There are several local content models that have been adopted by other oil- and gas-producing countries, which African countries can follow. While we cannot control the factors in the West, we can develop African content to create a foundation whereby the extractive sector is going to last, and more importantly, local citizens will be the long-term beneficiaries.