RELIEF may be on the horizon for local businesses dealing with timely payment woes in Guyana’s oil and gas industry. Historically, these businesses have faced protracted payment cycles, sometimes extending up to 90 days post-invoice submission. This delay has posed considerable challenges for local suppliers.

In response to these challenges, the Local Content Secretariat introduced a mandate for oil and gas companies to expedite payments, reducing the window to 30-45 days upon receipt of a correct invoice. This regulatory shift was lauded as a transformative step, aimed at enhancing cash flow for Guyanese businesses and fostering a more supportive economic environment.

Despite these advancements, the 30-45-day payment period still presents hurdles. Local businesses often navigate rigorous invoicing protocols, where any deviation can trigger additional delays. This situation prompted Guyanese enterprises to voice their concerns, highlighting the persistent financial bottlenecks.

Acknowledging these ongoing issues, President Dr. Mohamed Irfaan Ali, has urged oil and gas companies to ensure prompt payments. Echoing this call to action, Alistair Routledge, President of ExxonMobil Guyana Limited, affirmed the company’s commitment to addressing payment delays and collaborating with local suppliers to identify viable solutions.

One such solution under consideration is the implementation of invoice factoring. This financial mechanism allows businesses to sell their invoices to third-party financial institutions at a discount, thereby obtaining immediate cash flow without incurring additional debt. Routledge elaborated on this approach stating, “By collaborating with financial institutions, we can provide companies with an option to access funds as soon as a valid invoice is submitted, even if standard payment terms are longer. This initiative ensures continuous cash flow, enabling businesses to meet their obligations and invest in future growth.”

Invoice factoring is anticipated to be a welcome development for Guyanese businesses, particularly in the context of the Government of Guyana’s revised and expanded Local Content Act. This legislation designates 40 sectors for exclusive Guyanese participation, including key services such as accommodation, janitorial, food supply, accounting, legal, and customs brokerage.

As of April 2024, over 800 companies have been incorporated into the Ministry of Natural Resources Local Content Register. In 2022, registered companies collectively earned US $440 million, with a nearly 20 percent increase in 2023, reaching US $524 million. These figures underscore the significant economic impact of local content regulations, amounting to nearly $1 billion in revenue.

The synergy between the updated Local Content Act and the rapidly expanding oil and gas sector is poised to create substantial employment opportunities for local businesses. The adoption of invoice factoring will be crucial in ensuring that these businesses can sustain their operations, manage expenses efficiently, and continue to thrive in a dynamic economic landscape.