Jorge de Morais
Did you know Algeria started commercialising its oil in 1956, Nigeria in 1958, and Angola in 1965?
So this is at commercial levels, of course.
Now, you also know that all these countries are still producing today. This is an industry that has been operating for more than 60 years.
I’ve seen many presentations in which we talked about 25 years. But it can go really beyond that. This is important because you must understand that this is a long-term game.
If Namibia starts producing oil today, you can enjoy its benefits for a long time.
Now, the question is, how will Namibians benefit from it? The usual response is through local content. Now, what is local content?
We all agree that local content has four main points. We have an exclusive service for local companies. We have exclusive jobs for local workers. We have exclusive purchases from local companies. We also have an investment in the country with special terms and conditions that benefit local companies.
We can, for example, talk about ownership. The question is, is this enough?
In Angola, we’ve been producing oil for more than 50 years. Today, the service industry represents US$18 billion. From this US$18 billion, how much do you think local content benefits?
After 50 years in Angola, only 2%.
So, the fact that you have the policies in place and precisely what needs to be done does not guarantee that after 50 years, the country will have proper local content that will benefit its people.
There are many reasons for this. Some say it is a lack of knowledge, some say it is a lack of a skilled workforce, some say it is a lack of equipment, some say it is a lack of infrastructure, some say it is a lack of essential services, some say it is a lack of cash, and some say it is a lack of trust based on your reputation or experience.
The biggest one is corruption. And the result is 2%. How can we avoid this bleak scenario? How can we look at Namibia 25 years from now and be proud of what was achieved?
First, we need to understand the work that needs to be done. Let’s imagine that a meeting between the private and public sectors is called. This meeting aims to establish a 25-step road plan with local content.
The main objective is to select which sectors we want to focus on for the local content. Three main sectors were identified.
The first is a non-specialised, non-oilfield sector. Many Namibian jobs and businesses operate in this sector.
The second is the non-oil and gas sector, with some Namibian companies operating at this level or in this sector.
The third one is the specialised oil and gas sector. Now, fast travel, 25 years from now. The same group of people meet again, and this time, we can see a lot of smiles on their faces. And your president at that time starts his announcement. He says, my fellow citizens, I’m very proud to announce that we reached our local content 25 steps road plan objectives.
We managed to have a local content presence at 80% for the non-specialised-specialised, non-oilfield, 65% for the specialised-specialised, non-oilfield, and 20% for the specialised-specialised oilfield.
This has a direct impact on our GDP. Today, we have a US$25 billion country GDP compared to the US$13 billion 25 years ago, in 2025.
Today, we have a US$10,000 GDP per capita compared to a US$5,000 GDP per capita 25 years ago.
Today, our unemployment rate is down to 5% compared to 20% 25 years ago. The numbers are debatable, of course. But the important thing here is that Namibia managed to protect its oil and gas sector and ensure that it set very high standards.
Why high standards? Your Namibian waters are exceptional—they are ultra-deep. To reach the seabed, you must go through 3 kilometres of water. Once you reach the seabed, you must go again for 3 kilometres of rock.
These operations in this environment are complicated and require high technology. And the role I’m still talking about 25 years from now, the role of Namcor during these 25 years, was vital.
Why? Namcor was set at the table in every block to acquire the necessary information to learn to manage the blocks and the fields independently.
It’s important because it ensures Namibia’s energy security. By learning how to manage these blocks and these fields independently, during all these years, Namcor also ensured that knowledge transfer was done through the SMEs for the good of the Namibian companies. So Namcor managed to help build skilled human capital, technical centres, solid infrastructures, local company champions, and a financial world chest.
Now, Namibian companies are ready to operate in an open Africa and beyond. If the people in this room do the right thing, this could happen in 25 years.
Now, yes, I am a dreamer. A lot of people told me this in the past. And I will continue to dream. How do we go from here to there? There is a straightforward way to do it, but it is a highly complex formula.
It would help if you started by attracting foreign direct investment. And how do you attract foreign direct investment? It would help if you had assets.
The asset that you have today that is attracting all these operators and foreign companies is oil. That’s what is getting them here. That’s your main asset.
But if you keep this asset only at this stage, you will limit your progression and growth.
So, you need to add value to the country through this asset. And once you add value to the country through this asset, you must acquire new assets.
These new assets are mainly knowledge, equipment, infrastructure, and sometimes emergency acquisitions of other companies or key alliances, such as cash.
To get those assets, you need foreign currency. To attract foreign direct investment, you need to remember one thing. You cannot hide from your past. You cannot hide from your history. Whatever you did in the past will define how much money you can get today. It’s essential to have institutions that build trust, good infrastructure, a skilled workforce, and essential products and services.
These are all things that Namibia have, but these are all things that can be improved as well.
How do you add value to the country? You need to identify the gaps. I would like to see what services expats require. Can you provide services in the country without bringing expats?
You need to identify the imported products and determine what standards must be added in the country.
Once you focus on the gaps, you will see the opportunities ahead. This part is necessary, and you must remember one thing: stability is a must.
In some countries in Africa, you need a stable currency. You need stable money. And all the efforts made during these years to build your business can be wiped out in a few months.
In Angola, we had a depreciation of 20% in one month. We lost millions of dollars just because of that.
Whatever you can do to stabilise your currency, you must do it. Otherwise, you can lose a lot in a very short time. It would help if you controlled the inflation and the devaluation.
You also need a straightforward process to pay for items abroad. Most of the equipment and the knowledge you will need will be imported. You don’t have it here. Namibia can grow if you have the correct payments and processes to get these services. It would help if you also had a constant influx of foreign currency to support the local companies. If you don’t have that, you will also create a bottleneck. And all this is to build assets.
I repeat a straightforward phrase: Money follows assets. If you want to get money, build assets—proper assets.
You have a couple of things here. Timing is key. While some of you wait to understand what is happening, what will happen? Others are taking your place.
Nature hates voids. If you don’t fill it, someone else will. Don’t wait. Act now. Time is critical.
Most of you had speeches about training people and ensuring you build capacity.
It’s not the only thing. You need to remember that you already have local talent in Namibia. You have people that are very knowledgeable in what they do. Placing the following in the private or public sectors would be best. They will leave for better pay if you don’t care for these people. And most likely, the better pay will be a big international company.
While trying to develop your country and create a local content policy that benefits the Namibians, you will lose your best people if you don’t care for them or anticipate this move. Ideas are also important. But to get ideas, you need to have data. You need to have access to this data.
The best way to avoid this industry is to ensure you don’t have access to this data. So pay attention and make sure that you have access to the data. Seek for it.
Look for it. Please don’t wait for people to give it to you. There are no free lunches in this world. And if you wait, the train will just pass.
Business models. It’s essential here that you focus. You don’t try to do everything everywhere.
Today, there are a couple of big companies in every country. The government or the private sector supported all these big companies in these countries in one way or another.
These big companies also manage to support smaller companies around them. What I’m trying to say here is to create local champions. Focus on five, ten, and fifteen local champions. Don’t try to do everything everywhere.
Funding here needs to be strategic. The people trying to get money quickly in this field will fail.
Right now, it’s not the time to eat the cake. It’s time to go to the kitchen and ensure we can cook a big cake. This will require time.
You’ll need to put money on the table and will not get the benefits right now. You’ll need to be patient, and you’ll need to make sure that you grow and that you create assets that are strong enough so that they can mature and stand by themselves.
I want you to retain four things from this presentation. First, this is a long-term game. Therefore, it requires patience, focus, and resilience. Twenty-five years from now, if people in this room make the right decisions, you can at least double your GDP.
At least double your GDP. Twenty-five years from now, you should have 20% of local businesses operating at the heart of the action, meaning the specialised oil and gas sector.
I heard in the master classes that this is hard, that it is not possible, and that it is an area reserved for big international companies.
I’m afraid I have to disagree because we are proof of it. You need to focus and ignore the naysayers. Remember, timing is crucial, and the time is now.
Jorge de Morais is the founder of Kaeso Energy Services. He delivered this presentation at the Local Content Conference in April 2024.
