-says `fronting’ still has to be addressed
Local content opportunities abound here as the Guyana Brand is well known but just needs tapping into through better marketing and exploring investment partnerships, President Irfaan Ali said on Tuesday.
“The brand can’t do all the work for us, we have to help the brand just as the brand is opening up the opportunity for us. Guyana is our brand,” Ali told the opening of the Local Content Summit held at the Pegasus Hotel and Corporate Suites.
“…You fight for local content, more in local content, but what are you doing for this content? How are you positioning this brand? For the brand to get stronger you have to also build the brand. So if you think knocking the brand every day is in your interest, then God help all of us because this is the brand that will have to secure us. This is a brand that will have to position us,” he charged.
He pointed to the Caribbean Airlines in-flight magazine and the companies that are advertised prominently there from various countries in the region, noting that the number of ads from Guyana’s is miniscule.
“Go through all the ads especially the local ads and tell me how large the brand Guyana is shared. It hurt me because I will see every brand [featured prominently except ours]. We have a brand that is helping us and we still put the brand in fine writing. These are important things. These are very important things”, he said.
The President noted that since the enactment of Local Content legislation here, over 6,000 jobs have been created for locals and the number of businesses registering for certification continues to grow daily.
Reasoning that the mindset of limiting local content was only to participate in the local economy, Ali said that with regional integration, those views have to be transitioned to meet modern demands.
“If we believe local content is about achieving local things, or participating only in the local economy, then we will be limiting ourselves and our growth. Local content is to build local capacity to compete anywhere else in the world and to position our local companies to be number one companies in the region. That should be the goal. How do we position every sector that we’re building in this country to be number one in this region, and to be competitive in this region, and make use of every opportunity in the region? That is what local content allows us to do.
“It allows us to accelerate local growth and local development to meet regional and international needs and I think we have to reset our minds into that context. So I do not believe that any messaging or any discussion on local content should be around what are the local opportunities. It should be how we move what we have”, the President said.
Ali informed that based on information that he has received, for this year, the Secretariat has estimated that procurement activities will increase to US$550 million, which is a 5 per cent increase from 2023 to 2024, but a 25 per cent increase from 2022.
“Now, what is important out of this is that it is estimated that 6,000 jobs were created as a result of the local content, legislation and what it brought to the economy… We saw that the registration for local companies would have increased tremendously…” he pointed out, while also noting that “fronting” was still prevalent.
Fronting
“We also saw that there are some issues that we have to address, which include fronting and rent seeking, that is renting a local company, or renting a local name, or renting citizens. That is a hindrance to local content that must be addressed very, frankly, very honestly, if we are to be truthful about the conversation on local content.”
However, over the last three years, the President said, this country has built tremendous capacity in many areas.
“Now, what local content has allowed us to do is to build capacity. To build capacity, it requires us to change our model. So there are a number of things that go hand in hand; building our capacity, building scale, modelling, value creation, those are things that go hand in hand. How do we ensure that we have value creation, through the modelling, the business modelling, through the scale at which we operate, and through capacity building? When we started out on this local content journey, we realised that the scale of what was required was so large that no single company or capital formation could match the scale of what was required, but slowly we saw companies coming together, we saw consortiums being built, we saw a partnership being created”, he said.
He continued, “Why is scale important? As a sector grows, the scale of operation in the country will also grow and this is not only for oil and gas. This is for every other aspect of value creation. We speak about financial services. We speak about insurance. We speak about infrastructure. We speak about agriculture. We speak about tourism, we speak about transport and logistics. Every single area. We speak about pharmaceuticals and healthcare [and] we speak about services. The scale of operation is changing, so we have to ensure that our business model is also reflecting that change in scale, and this is where summits like these and seminars like these are important because it allows a level of networking that allows you to bring capital together, to bring human assets together, to integrate companies and to build a scale that is required to address the opportunities ahead of us.”
The local banking sector, the Head of State posited, also has to accelerate the change of its model to allow for more growth for locals in the business sector. “Banks cannot no longer be a counter that you deposit money and you get some, well you don’t get much interest anyhow, and you get a business model around that and then you look at the best opportunity for lending and you lend to that so, your returns are very high…,” he said
“… Banking and finance is an art, is art of utilising liquidity in the system through structure mechanism to grow wealth and create wealth, and we need to move up this value scale in the banking sector… more on a daily basis, analyzing the opportunity in the market and this requires some investment from the banking sector. It requires the banking sector to use opportunities for the country but importantly, in modelling those opportunities, and then going out to clients. Now, this just requires a big shift in the business mindset of [banks] and the client. Because if the bank is to use liquidity to create wealth, then the bank must be able to make an investment in analyzing the opportunity and creating plans, business plans,” he added.
He opined that the banks here are “still working in a very archaic fashion, waiting for someone to bring in a business proposal to get financing and then they look at the least risky opportunity” and that needs to change.
“The bank has to see itself as a facilitating role in the development and expansion of the economy and make investments to facilitate the deployment of capital to make use of those opportunities and to do this, the bank must not only have a local look at things but a regional look,” Ali said.
