TIRI MASAWI
The final rules governing who benefits from Namibia’s emerging oil and gas industry will be decided by President Netumbo Nandi-Ndaitwah, after Cabinet approved the local content policy last week.
Namibia Business Review understands that despite Cabinet approving the policy, the final say on the document will come from the President before it is adopted as a binding policy for the industry.Secretary to Cabinet Emilia Mkusa confirmed on Monday that Cabinet’s recommendations have been forwarded to the Upstream Unit in the President’s Office for a final determination.
The policy is expected to shape how companies employ Namibians, buy from local businesses, transfer skills and technology, and create ownership and business opportunities as billions of dollars in oil and gas investment take shape.Mkusa said the President wants the policy to balance the interests of Namibians, the country and investors.
“The President wants to make sure that the policy is not lopsided. She wants the document to be aligned in a way that caters fairly for the aspirations of Namibians and the country as well as investors. It is important that we adopt a balanced document that does not favour one side,” Mkusa told Namibia Business Review.
The development means the policy approved by Cabinet last week is not yet the final document that will govern the industry.
Senior government sources told Namibia Business Review that the document remains open to adjustments before it is fully adopted and publicly released.“The approved document is not yet public and is still open for adjustments before being fully adopted and publicly released,” the source said.
Two other sources from the industry and private sector confirmed that the document remains open to adjustments.
The policy is built around increasing local participation and ensuring that more of the value from Namibia’s oil and gas resources benefits Namibians.
It also takes a hard line against companies that use Namibians as a front to access opportunities without giving them meaningful participation.
The Upstream Petroleum Unit under the Presidency is tasked with reviewing existing frameworks and driving urgent legislative amendments to the Petroleum (Exploration and Production) Act to legally transfer key oversight powers from the sector ministry to the executive.
Presidential spokesperson Jonas Mbambo yesterday confirmed that the policy has been submitted to the Presidency for review and possible adjustment.
“I only came back to work today and have not gotten time to engage with my principal in depth about what her expectations with the document are but I can confirm that the document is now with the Upstream Petroleum Unit for review,” he said.
FROM JOBS TO TECHNOLOGY
The policy requires companies operating in Namibia to invest heavily in technology transfer.
It also provides for scholarships, skills transfer, local procurement and opportunities for previously disadvantaged communities.
The government and operators are expected to publish their local-content commitments and report on Namibian employment, training expenditure, procurement from Namibian firms, ownership, contract values and progress over time.
The policy says such reporting is necessary because ambitious local-content percentages would otherwise be impossible to verify.
Companies that violate the requirements will be subject to agreed sanctions.
The policy also promotes equal pay for equal work between previously disadvantaged and previously advantaged Namibians.
PAPER OWNERSHIP NOT ENOUGH
One of the strongest parts of the policy deals with fronting.
It warns that simply requiring Namibian equity participation can encourage fronting.
Instead, it says the more important objective is to build genuine Namibian productive capacity through skills, technology transfer, management expertise and competitive suppliers that can survive beyond an individual petroleum project.
The policy proposes that all unskilled positions be filled by Namibians.
It also calls for increasing Namibian representation in technical and managerial positions over time.
It warns against window dressing and tokenism.
The policy says fronting includes cases where racially disadvantaged people are appointed or introduced to a company on the basis of tokenism but are discouraged or prevented from substantially participating in the company’s core activities.
It also speaks against benefit diversion.
This includes cases where economic benefits received because of a company’s status do not flow to racially disadvantaged people in the required ratio.
The policy further discourages opportunistic intermediaries that use a favourable status to secure business while placing significant restrictions on suppliers, service providers, clients or customers.
Among the indicators of fronting are cases where racially disadvantaged people listed as shareholders, executives or managers are unaware of or uncertain about their role in a company.
The policy also identifies situations where racially disadvantaged people in executive or management positions are paid significantly below the market norm.
NOT EVERYTHING CAN BE FORCED LOCAL
The policy also recognises a basic problem facing Namibia: the country may not yet have the capacity to provide everything the oil and gas industry needs.
It says local-content requirements should distinguish between goods and services Namibia can provide competitively now, those it could provide after targeted capacity building, and highly specialised services where localisation would currently increase costs without creating sustainable capability.
That requires a proper national supply-chain and capability assessment, according to the policy.
WHO WILL REALLY BENEFIT?
The question of who ultimately benefits from Namibia’s oil and gas resources is already attracting public attention.
Institute for Public Policy Research executive director Graham Hopwood said Namibia needs a clear and effective local content policy that creates opportunities for Namibians to benefit from the proceeds of the industry.
He said the oil and gas industry should create tangible opportunities beyond being purely extractive and should bring benefits beyond those that can be predicted for the fiscus.
“Young people are questioning (not always accurately), via social media, what is happening and who is really set to benefit from the upstream petroleum discoveries,” Hopwood said.
He said Namibians need to see citizens participating meaningfully as suppliers of goods and services to the oil industry and through ownership.
Hopwood warned that the consequences could be serious if the benefits are seen to be going mainly to a narrow, often politically connected elite.
“Namibians will ultimately lose faith in the oil and gas project and ultimately in our 36-year-old democracy,” he said.
He said Namibia has been talking about its commitment to local content since 2021.
Now, the Cabinet has approved the policy, but the public is still waiting to see the final document.
Hopwood said transparency will be critical to its implementation.
“Who gets the contracts? Who ultimately owns those companies? How much value actually stays in Namibia?” he said.
He said Namibia has already seen what can happen when a valuable natural resource, government discretion and politically connected local beneficiaries intersect.
“That was the 2019 Fishrot scandal,” Hopwood said.
He said Namibia is still dealing with the aftermath.
“Therefore, Namibia should build safeguards before petroleum revenues and procurement become enormous, rather than responding after scandals occur,” he said.
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