Contrary to claims that the Ghana Revenue Authority (GRA) contract with Strategic Mobilisation Limited (SML) to monitor and audit the Downstream Petroleum Sector in 2019, Upstream Petroleum Production in 2023, and the Minerals and Metals Resources Value Chain in 2023 was bad, it is turning out that the state generated good revenue from the deal.
The GRA, since signing the revenue assurance contract with SML in December 2020, recorded an appreciable increase in revenue generation.
Classified documentation obtained from the vault of the Ministry of Finance indicates that the GRA revenue generated jumped by some GHC12, 981, 376, 688.00.
The improvement in revenue generation was due to the effective mechanisms SML deployed in tracking activities in downstream petroleum from 2020 to 2023.
The whole deal was made to look bad following media that the deal was cooked to benefit certain persons instead of the country.
The public discourses after that media falsities made President Nana Addo Dankwa order the suspension of the GRA-SML deal and went further to order an independent audit.
The President ordered the KPMG to conduct the audit, but the report was yet to come out.
The GRA at all material times said that there was nothing fishy deal about the deal.
The GRA, in a letter dated January 16, 2024, alerted the President of concerns about operation ramifications and disruptions that would arise from the suspension of operations.
The letter, which was signed by Rev. Dr Ammishaddai Owusu-Amoah, said: ‘’Having carefully reviewed the concern and based on our own understanding of the contracts and the deliverables, we are of the opinion that the system that has been installed to enhance revenue assurance, for control purposes, and also to aid with ongoing investigation could with your kindest permission be allowed to run. The system will continue to record data in real time until your further directive after the conclusion of the investigation.
“We can confirm that the suspension to all intents and purposes will lead to revenue losses following the suspension. There has been a huge gap in the control system and also the update of the Oil Marketing Companies (OMCs) accounts,” the letter said.
It said: “We, however, want to assure you that the contract remains suspended and no payment would be made on the contract until your directive.’’
Discourses on the GRA-SML deal started following a documentary by the Fourth Estate media outlet that SML was pocketing some $100 million for no work done.
However, the GRA denied publication by ‘The Fourth Estate’ that it awarded a ‘questionable’ contract to Strategic Mobilization Ghana Limited (SML) to monitor Upstream Petroleum Production and to audit the value chain of Minerals and Metals Resources.
In a statement, the authority affirmed that, together with the Ministry of Finance, it signed a consolidated contract with SML to monitor and audit Downstream Petroleum Sector in 2019, Upstream Petroleum Production in 2023, and the Minerals and Metals Resources Value Chain in 2023.
It explained that the contract is designed to operate for five years, contrary to the 10 years published by media organization, The Fourth Estate.
“The new and consolidated contract which is for a term of five years and not ten years as alleged by the publication and was agreed upon based on the performance of SML in monitoring the downstream petroleum sector and the provision of instant reconciliation of real-time data in the sector,” the statement signed by the Communication and Public Affairs Department of the GRA said.
Cataloguing the performance of the downstream petroleum sector under the assurance contract, the GRA said before the engagement of SML, the authority operated a manual system for t
ccording to the GRA, the use of dipsticks for measurement was archaic and posed a risk to officers who climbed a ladder to measure the fuel in the tankers.
“It was inefficient and prone to revenue leakages. Currently, oil deposited by the Bulk-Oil Distribution Companies in the depots is measured by SML with the aid of sensors installed on the depots (Red flow metres). During offloading from the depots, SML again measures all the various lifting of the Oil Marketing Companies (OMCs)”.
It insisted that all the pieces of information are captured and reconciled with data from the ICUMS, which is done with the GRA petroleum unit.
The statement said if there are discrepancies, Customs inform the OMC to enter a post-entry to correct the differences.
It pointed out that SML in the petroleum sector provides additional data, independent of the Customs ICUMS data capable of validating anomalies in quantities imported, discharged and accounted for by way of taxes.
The GRA continued that the revenue assurance exercise undertaken by EY Ghana and later by the Revenue Assurance and Compliance Enforcement (RACE) of the Ministry of Finance confirmed systemic deficiencies in the accounting and collection of petroleum taxes between 2015 and 2020.
“The mode of transmission of data from various sources and systems was fraught with inconsistencies resulting in loss of revenue”, the statement said, adding that “extensive reconciliation had to be done on the various platforms and institutions within the Petroleum Downstream value chain to collect revenue that would have otherwise been lost.”
It emphasised that the work of SML over the period has led to a significant increase in the figures reported in the downstream petroleum sector, from an average of 350 million litres per month in 2018 and 2019, to 450 million litres per month from 2020/2021.
This, it said, represents over a 33% increase in volume reporting and an average of an extra 100 million litres per month at a levy rate of ¢1.44.
Defending earlier figures from SML, the GRA maintained that the extra revenue variance gained for the two years will exceed ¢3 billion, which performance is attributable mainly to the introduction of ICUMS and SML systems.
“Based on the performance of Strategic Mobilization Ghana (SML) Limited, the Ministry of Finance directed that the existing contract of SML be expanded to cover the petroleum upstream and the Mining Sector to minimize the risk of revenue leakages. The Consolidated Contract seeks to leverage the experience, technology, and know-how of SML Ghana Limited in the Downstream Petroleum Sector and the Minerals and Metals Sector to provide revenue assurance in the Upstream,” it stated.
The GRA stressed that the consolidated contract, which is a risk-reward contract, seeks to bring efficiency in Revenue Assurance Services provided to GRA.
By this, it said, SML, per the contract, is required to provide resources for the execution of the contract. By implication, if there is no value addition, SML is not paid.
“In short, the principle of risk and reward is the fulcrum of the contract. The contract is for five (5) years and is performance-based and approved under Section 40 of the Public Procurement Act, Act 663, 2003. The Board and Management affirm that all legal and proper processes were followed in procuring the services of SML. ”
It disclosed that SML solely financed the capital expenditures and cutting-edge technology that is employed in the monitoring and auditing services provided to GRA in the Downstream Petroleum Sector
“GRA is confident that with the introduction of various initiatives, technology, and revenue assurance measures such as this, GRA will continue to see a significant increase in revenue
such as the about 50% year-on-year increase in revenue this year. However, GRA will continue to explore more methods of blocking leakages and increasing compliance to enable us to attain a national tax to GDP ratio of over 18%,” the statement ended.
SML also said the documentary represents a set of misrepresentations, false claims, and a general lack of understanding of the company’s operations.
The Public Relations Unit of SML, in reaction to the documentary, challenged the Fourth Estate to produce any contract anywhere that is for a 10-year period, adding ‘’The 5th PPA Board at its 64th Board meeting approved a contract duration of five years.’’
SML said: ‘’It is not true that SML takes $100 million annually from its contract, which is yet to be operationalized.’’
It said that the $100 million payment claim by the Fourth Estate is a figment of their imagination, as no revenue has been realized because operations have not started.
‘’SML’s engagement with GRA is solely a risk reward contract. GRA invests nothing in the entire investment chain. There is no cost commitment from the GRA. SML is not exempted from the payment of duties and taxes,’’ it said.
According to SML, 31% of SML’s would-be monthly earnings goes to GRA as taxes and that a good-intentioned and professional investigation would have established SML’s investment costs and compared to its earnings to make an informed position.
‘’We challenge Fourth Estate to produce any evidence of wrongdoing in this contract arrangement. SML charging formula is standard in the industry, and the same is being used by other service providers in the industry. SML’s work forms the base data at the depots for revenue assurance and auditing. They declare the base volume upon which any gap or deficit in the eventual volumes declared will expose those in the chain,’’ it said.
