LOCAL CONTENT BILLS IN GHANA: Who is checking the effects, impacts and consequences?

16-03-2018

LOCAL CONTENT BILLS IN GHANA: Who is checking the effects, impacts and consequences?

Local Content, “our own people first” and other popular statements are in fashion, especially since Donald Trump started declaring America first. Basically, who can be against his/her own people and interest first, after all politicians are chosen by us and have to do the right thing for us the people, right?

The problem, however, is the answer to the question: Is a particular Local Content law proposal really in the interest of our country or just in the interest of some people, pressure groups or companies?

Who or which institution is overseeing, calculating and informing the MPs who vote on the proposed Local Content Bills on the possible (negative) consequences? 

Not politicians, because they willingly leave information out or highlight only the positive consequences to push their political and party agenda.

The simplest and one of the most recent and actual examples of what can happen if you can’t oversee the consequences is BREXIT. Everybody had and has an opinion on Brexit. A small majority of the people that voted, (which is not the same as the majority of the people) voted in favor of Brexit and now everybody is trying to find out what the consequences of Brexit will be for the United Kingdom. An assessment that should have been done thoroughly before the Brexit question popped up.

Most people who answered in favor of Brexit did so because (let’s call a spade a spade) they were fed up with all the foreigners over-floating the United Kingdom instead of other reasons. However, the reason that many foreigners are moving to the UK is not because the UK is the greatest (as most British like to think) but mainly because most other developed European countries have closed almost all the gaps in the system for illegal immigrants.

After almost 1 year in negotiation with the EU the good people of the UK now start getting to the conclusion that maybe they didn’t make the right choice and maybe leaving the EU is not solving the problems we voted for or against and maybe we will be worse of outside the EU than within.

The reason: Lack of good non-political colored information.

The point I am trying to make is not about Brexit or UK but on the consequences for Ghana of pushing a Local Content Agenda without researching and informing policy makers and the public on the consequences of these bills.

Now to the Ghanaian Local Content Bills.

What I first and always note when I see a new Local Content Bill proposal, is that the parliamentarians and other politicians pushing the bill didn’t do their homework well, the bills are mostly full of mistakes. Often they don’t take existing laws, international agreements, international multi-and bi-lateral agreements or the constitution in consideration. All this despite the fact that most parliamentarians are lawyers.

A beautiful example of this, was a few years ago, in which parliament was pushing for Local Content and promoting the printing of Ghanaian school books by Ghanaian companies only, by putting duties and levies on foreign printed books. Completely bypassing the fact that Ghana is a signatory to the UNESCO Agreement on the Importation of Educational, Scientific and Cultural Materials.

Covered by Article 1.1 of that agreement which states: “The contracting States undertake not to apply customs duties or other charges on, or in connection with, the importation of: books, publications and documents, educational, scientific and cultural materials, listed in Annexes B, C, D and E to this Agreement; which are the products of another contracting State.” etc.

In other words, the levies proposed on imports of foreign books to promote local printers by these parliamentarians were illegal, resulting in a lot of wasted time (and money) in parliament.

Despite the fact that, if Local Content Bills are not in conflict with existing laws and agreements to which we are signatories, who is analyzing the consequences of passing the proposed bill?

A good example is a “genius” measure of the Bank of Ghana to safeguard the value of our Cedi and control outflow of foreign currencies in 2012/2013, even threatening the general public that if doing so illegally this could lead to imprisonment up to 18 months. The measure was reversed 5 months later because the consequences were dear, and not only to the steep fall of the cedi but also a self-inflicted shortage of, mostly USD on the local market, leading to higher local prices of the USD.

So even if all these “learned” economists at the Bank of Ghana couldn’t foresee this happening? Didn’t anybody calculate the possible consequences in different models and cases before the introduction of the measures by the BOG?

No, let’s go to the most unrealistic Local Content Bill I have seen so far: The Cabotage Bill.

Cabotage is all sea and water transport within the economic (sea) zone and all local inland water bodies of Ghana.

The bill starts as follows: This is an Act to restrict the use of foreign vessels in local trade in order to promote the development of indigenous tonnage and to establish a Cabotage Vessel Financing Fund, (so far so good). A vessel shall not engage in the carriage of cargo and passengers within Ghana’s maritime jurisdiction unless that vessel is wholly built and registered in Ghana, owned by a Ghanaian citizen and manned by Ghanaian officers and crew.

I am not involved in shipping, nor cabotage nor have I ever worked in the sector but by just using my common sense I quickly come to the conclusion that this Bill is not realistic for the following reasons:

Most cabotage in the future will be needed on behalf of our developing oil industry. The oil industry is one of the highest regulated (safety wise) industries in the world, some will be salvage and fire vessels and supply vessels.

I can safely conclude that most of the vessels needed are highly specialized vessels.

In fact, a director of a company supplying underwater equipment for the oil industry confirmed to me that, he is using vessels that can drop equipment 3000 meter under sea level with an accuracy of 2mm. And although his company is one of the largest companies in the world to do so they don’t have their own vessel for that. His company rents a vessel, of which there are only a few in the world, for a short period of time because there is no full-time job for them in the whole of West-Africa.

Do you think Ghana can build all these specialized vessels (cost price over 400 Million USD) without any industrial capacity, without a shipyard or experience in this sector? And also important not enough work for it.

On top of that, these days ships are not wholly build in any country in the world anymore, because the best components don’t always come from the same country, so how will Ghana comply with that part of their own requirements?

Ghana has a very small sailing experienced population, mostly with fishing experience only and not in working on highly specialized vessels. Ghana hardly has any sea-faring officers since the Black Star Line collapsed and there has hardly been any schooling or training for nautical sector.

So a wonderful bill (for dreamers) will be passed with conditions that no one can comply with, thus further blocking the development of our maritime industry. I am not even talking about the exceptions granted who create further corruption.

The recent Downstream Petroleum Bill at this moment under cabinet, is another beauty, completely bypassing the reality of the commercial world and oil industry, but one of my previous article already touched upon that.

My biggest problem with Local Content Bills is that they are brought before parliament without any or minimal calculations on the (mostly financial) consequences for Ghana and what others consequences could be there for Ghana.

I love examples so let me give you an old one:

I am a hunter, but like many hunters I love nature as well. In the Netherlands there are people and organizations who take the position that a hunter can’t love nature because he kills animals, which are part of nature.

Many years ago, there was a discussion which resulted in an end of hunting in the Naarden forest in Holland to protect the Spoonbill birds and give them a sanctuary area. Hunter organizations were warning that it would be a disaster because there were also foxes and other predators in the forest.

The Nature friends won their case and 2 years later there were no more Spoonbill birds in the forest anymore due to the stop on hunting of foxes, beaver, rat’s etc. The Dutch government spent millions to try to reintroduce Spoonbill birds and the Friends of Nature agreed that hunters should monitor and keep the number of predators low. This could have been prevented by an independent study and advice to parliament, but unfortunately this decision was taken on a local government level. The Dutch parliament has the "rekenkamer" which is the Dutch independent assessment organisation who is responsible to assess any bill before going to parliament.

Lesson learned: A good solution and proposal on paper does not always have the best results.

Local Content and Local participation proposals can have results which are at least not the best and in some cases the worst, so thorough checking before taking the wrong steps is more than necessary.

A local example is that a Foreign Company was forced to close a part of his catering company because they were not allowed to supply the Upstream Oil Industry anymore because it fell under the Local Content Bill for the upstream Oil sector. They sold (actually were forced to sell) that part of their company to a local employee, who couldn’t keep the client due to low standards.

The result was that the client started to order from a capable catering company from La Cote d’Ivoire and our local content jobs and participation was completely lost. (I don’t know the actual situation 2018)

I know for a fact that one of our foreign Oil companies is producing lubricants in Ghana and supplying the mining sector. In the Local Content Bill before parliament on the downstream oil sector this company will lose the mining sector as clients because of Local Content regulation. These lubricants will then be supplied by local companies who are importing these lubricants resulting in the loss of Ghanaian jobs.

To cut this whole story short:

Local Content is basically a fair deal for Ghanaians but the pitfalls and results of badly investigated and calculated Local Content Bills can be disastrous for Ghana many years after the implementation.

I don’t think this or the next governments will stop entering or continuing the path of Local Content that is why I recommend that:

Ghana installs an independent and capable LOCAL CONTENT ASSESMENT BOARD or committee who will check, calculate, compare to international obligations and agreements, compliance, effects on climate etc. and comment on every bill containing any form of Local Content before going to parliament!

This will help our MPs make a balanced vote, enhance our democracy and strengthen Ghana.

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This article was published by Nico van Staalduinen under his own name. Mr. van Staalduinen currently heads the European Business Organisation (EBO) in Ghana.

Source: https://www.linkedin.com/pulse/local-content-bills-ghana-who-checking-effects-van-staalduinen/

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