Aug 15, 2022 News
…defends lengthy wait for payment of goods, services
Kaieteur News – In wake of concerns being raised by small and medium sized businesses of having to wait as many as six months to receive payments for goods and services already provided to oil and gas companies, the major player in the field, ExxonMobil, has not only admitted to forcing companies to wait for several months to receive their pay, but is also defending the lengthy waiting time.
President of ExxonMobil Guyana, Alistair Routledge during an interview with the Newsroom on Friday sought to justify the extensive period in which businesses wait for their payments. He said that the costs are subject to a rigorous process which is an accepted norm around the world and that their clients have the assurance of being paid, despite there is no definitive timeline.
Routledge explained, “A lot of people have said that that seems like a long time, but in reality it’s not when you think about what’s required to go through proper invoicing, checking and processing payments.” According to him, “ What’s more important for a business, we find, is that they have the certainty of the payment so that they know what working they need and that they can work to do.”
To this end, he made it clear, “the worst thing is to commit or say there is a payment timeline but in reality it isn’t, so you also need to understand what is the trigger for the start of that time and then having the certainty.”
Routledge said Exxon is focused on working with institutions such as the Central Bank and the Government of Guyana, as well as private sector bodies like the Georgetown Chamber of Commerce and Industry (GCCI) and the Center for Local Business Development to address the mechanisms that are needed to effect changes geared at modernizing the availability of funding. This he noted will position Guyana “so that the right kind of internationally accepted financing pools are available for companies so that they can operate in a way that is internationally competitive and at a cost that is competitive.”
Routledge assured that ExxonMobil closely monitors its payment timelines as its objective is to ensure its contractors are happy working for the company, knowing that they would be paid. The issue of contractors not being paid on time was highlighted by Minister of Natural Resources, Vickram Bharrat when the first consultation was held with the private sector in May this year, following the passage of the Local Content legislation in December last year. The law was passed to concretise benefits for locals from the budding oil and gas sector. During the session, Minister Bharrat told oil companies in the room that failing to pay local companies on time for services already provided was stifling the growth and development of small and medium size businesses.
He explained that it is the practice here in Guyana for contractors to be paid shortly after completing jobs so as to ensure the business has the resources required to start new projects. On the other hand, he said that while some companies can wait for several months to be paid, they are sometimes told that issues were encountered with the invoices, thereby forcing a longer waiting time or double the time for payments, even though the glitches in the system were not their fault.
The minister urged the foreign companies to set a timeline for the processing of payments which will otherwise result in the ‘death’ of local contractors, effecting unfair competition as well.
Meanwhile, the Attorney General, Anil Nandall, S.C in an interview with this publication explained that local businesses have complained of a systemic delay in payments for good supplied and services rendered. “They complained that this delay is having severe impact on their limited capital and liquidity thereby hampering their ability to discharge their contractual obligations,” he added.
According to him, the local businesses related to the government that in many instances, they are unable to secure sufficient credit facilities and as a result, they have to flunk the financial capital in some occurrences. It was noted that in some instances where they are required to pay VAT (Value Added Tax) in relation to monies that they have not yet received, in respect to transactions that they have not received payments for. As such, Nandlall noted that the businesses are requesting some form of regulations that would limit the timeframe for the credit arrangements. “One avenue that is being explored is the promulgation of regulation for the Local Content Act to address the issue,” the AG note.
The Vice President, Bharrat Jagdeo himself had also flagged the issue during a feature address at the Guyana Manufacturing and Servicing Association (GMSA) mid-year dinner. He noted that a 90-days payment term to smalls firms in Guyana is not acceptable. “We are getting around to regulating that to ensure that Guyanese companies could have better payment terms,” Jagdeo noted.
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