Monday, 28 May 2018

Rising joblessness a decade after oil find funfair…. Where did we go wrong?


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Adnan Adams Mohammed

Eleven years after the oil and gas discovery funfair and excitement, ironically graduate and skilled labour unemployment rather appears to be worsening and becoming a national security concern.  The Ghana Labour Force Survey Report commissioned by the Ghana Statistical Service (GSS) estimated that, more than 1.2 million persons from 15 years and older are unemployed in Ghana, representing the total unemployment rate of 11.9%, as at 2015. Also, the National Service Secretariat has estimated that, only 10% of students who complete their national service get employed.

These are staggering figures which portray the high rate of jobless youth in the country. Governments over this past decade have been compelled to adopt what appears to be firefighting and short-term measures to deal with a challenge that require long term and sustainable solutions. Youth Employment Authority (YEA), Youth in Agricultural Programme (YAP), Youth Enterprise Support (YES) and the newest National Builders Corp (NABCo) are some of the short-term vehicles to deal with the rising youth unemployment. But couldn’t a more strategic policy direction in our oil and gas industry provide us with sustainable ways of addressing the unemployment challenge?

Ghana in 2010 begun commercial production of oil and gas from the Jubilee Oil Field, a record three years after discovery. According to energy and labour experts, the multi-billion petroleum sector holds a great key to solving the unemployment situation by providing very lucrative and a wide range of professional, skilled and unskilled jobs. As it is known, the petroleum sector value chain cut across all the sectors of the economy; agriculture (food services), transportation services, professional services (legal, insurance, accounting, management and engineering), hospitality services (accommodation), logistic supply and metal fabrication and welding services among others. These sectors if well developed can provide meaningful jobs for the teaming youth coming out of school each year.

The huge potential of the oil and gas industry is obviously not oblivious to the authorities and that might have informed the relatively quick passage of the Local Content and Participation Legislative Instrument. The clear aim is to promote the use of locally made goods and services and also define local content targets across 10 main upstream supply chain sectors within the oil and gas value-chain to create massive job opportunities for Ghanaians. Each year a conference on local content and participation is organised by the Petroleum Commission, ostensibly to deepen the participation of the Ghanaian. However, participation by local companies in these areas remain low.

An Ernst & Young (EY) Ghana market study to assess the viability of the upstream supply chain sectors in Ghana, to increase local content at the speed and level stipulated by the local content regulation (LI 2204), reveals that in spite of the vast opportunities available, local participation is very low due to high barriers of entry. Partner advisor for EY, Mr. Michael Sackey, explained that “there are more foreigners than local companies in the upstream sector for a number of reasons. One is capability; today, as we speak, we don’t have the capability and it also takes a long time to build the capability: up to ten years.” The other reason he cited is about capital requirement. “We just don’t have the financial muscle to get into that space. While you have the foreign companies, who have been doing this for years,”, he explained.

According to the survey report, activities such as well drilling services are in high demand and attract the highest capital expenditure across the upstream value-chain. However, existing capacity of local suppliers to service the sector is low due to high requirements in skills, capital, HSEQ and technology. This is the area which creates more employment and business opportunities. “Well drilling services will attract the biggest spend up to 2024 in the industry despite the fact that local capacity is quite low.” Meanwhile, local capacity exists in the transportation & supply, HSE and IT & communications areas, yet, these areas do not create many job opportunities. But even in these areas, we share the spoils with foreign interests.

The complaints about lack of capacity and inadequate capital by local companies and individuals have remain the same a decade after discovery of the resource. Much as one concedes that these are real challenges, for these complaints to remain with us even after a decade suggest some lack of seriousness to address them. Considering how worried we seem to be about the worsening unemployment situation and the employment potential of the oil and gas industry, one would have expected a strong effort to address the challenges in order to enable more local content and participation, which will give us the jobs we so badly need.

The other leg of the challenge is enforcement of the local content regulations particularly for Joint Venture (JV) companies. Players in the industry are all blaming the Petroleum Commission (PC) for failing to execute its mandate appropriately. Interacting with some local companies, a major issue that kept coming up was the sharing of the scope of work under contracts. In undertaking projects as subcontractors for the main Operators (International Oil Companies), it is a requirement to state the scope of work and how it is divided between the partners at the time of tender submission; it is also a requirement to ensure that this agreed scope of work is actually carried out by the JV; it is the responsibility of the Operator to see to it that these requirements are carried out as enshrined in the Petroleum Agreements ; lastly it is the role of GNPC as the business owner, and PC as regulator, to ensure that the Operators carry out their duties and that the sub-contractors of these operators follow the rules of engagement and the award conditions. Enforcement of these requires will certainly deepen local participation and create more job opportunities for citizens. But it appears the enforcement is lacking. In a shocking revelation, the former Boss of GNPC, Alexander Mould conceded that, “in practice many subcontractors under the watch of the Operators (International Oil Companies), the National Oil Company (GNPC), and Regulator (Petroleum Commission) flout this rule of engagement; the excuse is simple......‘because they can!’.”

It is obvious that there is the need for a strong will on the side of the government to have a clear policy towards using oil and gas as a major avenue for job and wealth creation and implement it effectively. Also, the regulator of the industry (Petroleum Commission) as a matter of urgency and importance should ensure that the regulations are enforced effectively and efficiently across board including the various JV arrangements. The Commission may also have to review aspects of the regulations to clear all ambiguities in the provisions of the law and also streamline the provisions a well as set realistic targets that reflect best practices in the industry in comparable countries. Only such deliberate and effective approach will bring us close to the excitement were expressed in June 2007, otherwise joblessness will remain a security threat even with all the natural endowments. There however are indications that the current management of the PC is desirous of deepening local content and participation but that must be quickly backed by real action, otherwise the value will remain the same and in the abundance of water, we will remain thirsty.








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