Namibia’s draft oil policy lacks compliance penalties

The draft oil and gas local content policy that aims to regulate the petroleum industry has been criticised for lacking clear penalties when foreign companies do not comply and can easily be used for corruption.

The Petroleum Upstream Unit in the Presidency started consultations on the draft National Upstream Local Content Policy for the upstream (exploration and production) oil and gas sector at Lüderitz on 1 September before it is extended to other regions.

Namibian Association for Offshore Oil and Gas Service Providers founder Knowledge Ipinge says the country has already been facing cases of fronting, where foreign companies use Namibians to meet local requirements.

“The policy lacks provisions for mandatory shutdowns, financial penalties for violations and blacklisting of those foreigners who exploit Namibians.

We are already observing serious fronting risks, spearheaded by foreign companies that use desperate Namibians to meet local requirements,” he says.

Ipinge says the policy provides a structured approach to genuine local empowerment, but there are still challenges and risks that must be addressed to ensure it truly translates into meaningful local participation and benefits.

While the policy outlines clear requirements, it lacks specific penalties for non-compliance.

According to the policy document, any person who submits a false report or acts as a front for a foreign company to meet local content requirements commits an offence and may face legal action.

However, there are no clear penalties for companies that fail to meet their commitments.

“A citizen who acts as a front or connives with a foreign company or foreigner to deceive the ministry by representing a Namibian company to achieve the local content requirement under this policy is liable and may be reported to relevant authorities or law enforcement agencies who shall take action in accordance with the relevant Namibian laws,” reads the policy.

Oil and gas business consultant Tekula Nekwaya says the policy does not have any non-compliance or punishment strategies to hold companies and people accountable.

“There is no punishment or penalty strategy for companies that do not comply with the policy,” says Nekwaya.

Additionally, there should be independent bodies that audit the government, particularly the upstream petroleum department, to make sure that when local content plans are submitted by the oil companies, they are actually true.

“The government will receive these content plans but who will check to see that the government did not receive bribes to favour some companies?” asks Nekwaya.

He adds that another strategy should be put in place to hold the government accountable.

During the consultations at Lüderitz on Monday, Petroleum Upstream Unit in the Presidency deputy head Carlo McLeod assured that the government will enforce compliance to make sure promises result in real benefits.

“The policy sets clear rules and targets. Oil companies will be monitored. They will be required to report on progress and they will be held accountable,” he said.

Speaking at the third Namibia Oil and Gas Conference in Windhoek, lawyer Shafimana Shimakeleni said there is no specific penalty prescribed in the existing legal framework for non-compliance and the only penalty that could be imposed on non-complying companies is in the Petroleum (Exploration and Production) Act which empowers the minister to cancel an exploration licence.

“Right now, the Petroleum Act empowers the minister to cancel an exploration licence if a company fails to comply with local content provisions but that’s a drastic step in reality.

It’s unlikely to be used without exhausting every other option,” said Shimakeleni.

He said other jurisdictions apply financial penalties for non-compliance, in some cases, up to 5% of the value of a project.

However, he added that the country has to consider whether to deter through strict penalties or apply administrative measures with room for representation.

The ministry’s policy document requires oil and gas licence holders to produce an annual local content plan which will include a section on procurement detailing the involvement of local firms in supplying goods and services.

The definition of ‘local’ in the policy is that at least 51% of the equity in a business must be owned by Namibians.

It mandates that companies holding exploration and production licences submit a plan detailing how they will procure goods and services from these local firms.

Institute for Public Policy Research executive director Graham Hopwood says transparency must be central to the country’s local content framework, not just an afterthought.

He warns that, without proper oversight, local content rules can be exploited by politically connected insiders or front companies, bringing few real benefits to Namibians.

“To prevent this, there should be anti-corruption clauses in contracts, independent oversight bodies and procurement rules to stop overpricing and bid-rigging,” says Hopwood.

He criticises the Business and Intellectual Property Authority for privatising beneficial ownership information, therefore, making it difficult to know who the actual owners of companies are.

“There has to be public disclosure of beneficial ownership and transparent reporting on jobs, spending and beneficiaries. Making everything public by default transparency inspires confidence and stops corruption before it starts,” says Hopwood.

In an age of information overload, Sunrise is The Namibian’s morning briefing, delivered at 6h00 from Monday to Friday. It offers a curated rundown of the most important stories from the past 24 hours – occasionally with a light, witty touch. It’s an essential way to stay informed. Subscribe and join our newsletter community.