New oil policy cracks down on fronting

Government has moved to prevent foreign-controlled businesses from disguising themselves as Namibian companies to access opportunities in the country’s emerging petroleum industry.

Under the National Upstream Petroleum Local Content Policy, companies bidding for petroleum contracts will be required to disclose their beneficial ownership and shareholding structures, with anti-fronting measures targeting arrangements in which Namibians act as nominal shareholders, directors or partners while effective control and economic benefits remain in foreign hands.

The policy, approved by Cabinet at its 25th meeting on 4 August and announced by information and communication technology minister Emma Theofelus on 14 August, also requires large petroleum contracts to be split into packages that Namibian companies can realistically compete for and stipulates that all petroleum contracts must be advertised locally.

“All things considered, this policy mandates that supply and delivery services be exclusively reserved for Namibian businesses, particularly those owned by previously disadvantaged persons," the policy states.

Government says the measures are intended to ensure that the anticipated oil and gas boom translates into genuine local economic benefits rather than opportunities being captured through nominal local ownership structures.

The policy sets strict requirements for businesses seeking to qualify as Namibian companies for local-content purposes.

A qualifying company must be incorporated under Namibian law, have at least 51% Namibian citizen ownership and at least 30% ownership by previously disadvantaged persons, and have its principal place of business in Namibia.

Qualifying close corporations, partnerships and joint ventures are also covered.

Fronting targeted

Simply registering a foreign-controlled business in Namibia will not be enough to qualify for opportunities reserved for local companies.

The policy targets arrangements in which Namibians serve as nominal shareholders, directors or partners while effective control and economic benefits remain with foreign interests.

Companies bidding for petroleum contracts will have to disclose their beneficial ownership and shareholding structures, while operators will be responsible for ensuring compliance throughout their supply chains.

False local content plans or reports, as well as collusion to misrepresent ownership, could be referred to law enforcement authorities.

Government has also placed responsibility on petroleum operators to monitor compliance across their supply chains, signalling that companies could face scrutiny not only over their own ownership structures but also those of contractors and subcontractors.

The policy forms part of a broader push to ensure Namibians capture a greater share of spending, employment and ownership opportunities arising from future petroleum developments.

Jobs for Namibians

Employment is another major pillar of the policy, with government distinguishing between jobs that can be localised immediately and specialised positions for which skills still need to be developed.

“The policy envisions that all unskilled roles will be filled by Namibians, with increasing representation in technical and managerial positions over time,” it states.

Petroleum companies will be required to prioritise qualified Namibians and implement recruitment, training and development programmes aimed at progressively moving local workers into technical, professional and management positions.

Their local content plans must include programmes covering recruitment, training and development. Companies will also be expected to contribute an agreed amount towards a fund for developing skills for the petroleum industry.

International companies will be expected to facilitate the transfer of technology and knowledge to Namibians as local professionals move into more specialised upstream positions.

Procurement rules

Operators will have to submit local content plans containing procurement programmes as a condition of their licences.

Tender evaluations must give weight to local value addition, while the regulator will establish a database of registered Namibian suppliers.

Government also intends to increase Namibian involvement in petroleum procurement decisions and establish mechanisms to oversee contract allocation and compliance with local content commitments.

Contracts, subcontracts and purchase orders exceeding US$250 000 must be reported within 30 days after the end of each Namibian financial quarter. Reports must include the contract value, successful supplier, location of the work, estimated Namibian content and commencement and completion dates.

Namibian participation in ownership

Government also wants local participation to extend beyond jobs and contracts into ownership of petroleum interests.

Namcor has been identified as the primary vehicle for Namibian participation in upstream acreage, while other local companies, particularly those involving previously disadvantaged persons, are encouraged to participate.

The policy recognises that access to capital could prevent Namibian businesses from taking advantage of emerging opportunities and calls for financing structures involving the domestic financial sector, particularly to support businesses owned by previously disadvantaged persons.

A dedicated local content division within the Petroleum Affairs Directorate will initially oversee implementation, although the government ultimately intends to transfer these functions to an autonomous petroleum regulator.