The public relations department of the Strategic Mobilisation Ghana Limited (SML) issued a media statement on December 19, 2023, claiming that the producers of “The GH₵3 Billion Cedis Lie” investigative documentary did not understand the operations of the petroleum downstream sector. The company accused The Fourth Estate of inaccuracies in the documentary.
The Ghana Revenue Authority, which jointly signed SML’s contracts with the Ministry of Finance, also released a statement on December 20, 2023, with a constellation of false and misleading claims about the content of the documentary and issues surrounding the questionable contracts with SML.
Here are The Fourth Estate’s responses to the claims in the GRA and SML’s statements.
CLAIM 1: Again, it’s NOT TRUE that SML takes $100 million annually from its contract. The Upstream operations of the company has not yet begun, and no revenue has been realized. No monies have been paid to SML; the $100 million per year payment to SML that has been alleged is purely a figment of the author’s imagination and not factual.
Response: The $100 million captured in the story relates to the total amount of money SML will be paid when the new contract is added to the old one. Per that contract, SML will be paid $0.75 per barrel of petroleum produced in Ghana. Ghana currently produces 160,000-170,000 barrels per day and an additional 80,000 from the PECAN field would be added when the development is completed. Going by the current production figures, SML will make at least $38 million a year from the upstream petroleum sector.
The new contract also showed that SML will receive 0.75% of the total volume of gold produced in Ghana. Ghana produced 3.5 million ounces of gold in 2022. Using the 2022 figures, the company’s share of the gold export at a global price of US$ 1,800 per ounce will amount to US$50 million from the gold sector alone. During the contract, if gold production increases, the company will make more.
The downstream petroleum contract currently fetches SML Ghana up to GH₵24 million a month, and about $20 million a year. As told in our story, if this amount is added to the new contract, SML Ghana will be making more than US$100 million every year.
SML also challenged the duration of the contract. We mentioned 10 years in our story, but the company and GRA suggest that the contract is for 5 years, subject to another 5 year-renewal. Our report on the term of the contract was taken from a contract document that said 10 years. If the parties at a point changed the duration, we are ready to concede, but it doesn’t take away the substance of the matter that a company that adds no value to the sector, makes false claims about its services and deletes them when confronted with evidence, has no business making more than $100 million dollars every year for the next five years. All the sectors the company is to operate already has state and private sector agencies monitoring and assuring revenue for the government of Ghana.
CLAIM 2: Again, we challenge him to produce any evidence of wrongdoing in this contract arrangement.
Response: SML is an offshoot of a timber Company, Evans Timbers Ltd. And prior to its contract in 2019 for revenue assurance, it had no experience in revenue assurance. In fact, since its establishment, the Ghana Revenue Authority has been SML’s only client. Ghana’s Public Procurement Act 2003 (ACT 663) provides conditions under which a company could be handpicked for a contract and SML does not appear to meet the requirements. This is the reason we petitioned the Office of the Special Prosecutor (OSP) to investigate possible breaches of the procurement law. We also petitioned the OSP to investigate the parties for possible corruption because we did not get any evidence that the contract is providing any value for money to the state. The content of the documentary shows that SML was not needed in the first place. The National Petroleum Authority and other private companies were already tackling the problems identified in the sector.
CLAIM 3: The downstream petroleum sector’s reported figures have significantly increased because of SML over the time; from an average of 350 million liters per month in 2018 and 2019, to 450 million liters per month as of June 2020. This indicates a rise of more than thirty-three percent (33%) in volume reporting, and an average of an extra 100 million litres per month which translates into revenue.
Response: Data from the National Petroleum Authority shows that petroleum consumption figures in Ghana have been growing from year to year. Consumption grows as more people buy vehicles and the economy grows. It has nothing to do with SML’s work. SML does not check under-reporting, diversion or dilution. The company admitted this and deleted the claim of providing these services from its website after we confronted them. So it cannot take credit for revenue growth when it does not resolve any of the issues that were responsible for revenue losses.
Also, the Ghana Revenue Authority gave us figures for revenue growth in the petroleum sector for a 10-year period. The data shows that the revenue has been growing from 2012 to 2022. SML only came in the middle of 2020 and the data does not support the claim of the growth attributed to SML. Here are the petroleum sector revenue figures from 2012 to 2022.
GRA’s downstream Petroleum from 2012-2022
Source: Ghana Revenue Authority
As shown in the data above, revenue has been on the increase since 2012 before SML’s engagement by the Ministry of Finance and GRA for revenue assurance services.
The steepest was recorded in 2015 when the GRA recorded a 270% increment in revenue against the 2014 figure.
From 2012-2019, the GRA recorded 382 per cent increase in revenue figures.
This gives an average of 47.75 percent growth rate for the 8 years before SML’s engagement.
Since 2020 when SML started its operations, the revenue increased by 41 percent, an average yearly growth rate of 13.6 percent.
The Ghana Revenue Authority attributes the increase in revenue to two factors: tax rates and year-on-year volume increase.
“It is not only the volume increase that gives us an increase in revenue. Sometimes, within the period, there are changes in [tax] rates. The tax is on specifics. It’s on volumes so as the rate changes, … as the volume increases, the revenue will naturally grow,” Napoleon Simons of the Policy and Programs Unit of the GRA told The Fourth Estate.
During the interview with the Managing Director of SML, Christian Tetteh Sottie, The Fourth Estate’s founding Editor-In-Chief, Manasseh Azure Awuni, asked what the company had done to save the country the GHS 3 billion. The MD responded that he did not know of any GHS 3 billion. He could not also justify how they saved the country GH₵1 billion in their first year of operation.
SML claimed it was engaged to check the under-reporting, dilution, and diversion of petroleum products. When asked to mention an instance that the company detected any of these, the company’s MD, said there was never an instance since it began operations in 2020.
CLAIM 4: A careful scrutiny of the work of NPA in terms of taking account and reporting the transactions using ERDMS within the downstream petroleum sector would show that it was not adequate and suited in giving revenue assurance to GRA. The NPA system was designed for its operations and was not suited for providing revenue assurance for tax purposes.
Response: Any action to purchase Petroleum products at the depots starts and ends on the Enterprise Relational Database System (ERDMS). The GRA, the sole organisation tasked with the responsibility to collect taxes told The Fourth Estate that once the volumes are accurately tracked on the ERDMS, the GRA gets its taxes right.
“Once we are able to track whatever is happening on the ERDMS to ICUMS [Integrated Customs Management System], by and large, you would have tracked all your volumes. And once you are able to track your volumes, you are likely to get your taxes right,” said Samson Anim, the head of GRA’s downstream petroleum sector.”
The ERDMS is connected to the GRA’s electronic system. The GRA said in the documentary that figures from the ERDMS are used for tax collection. The GRA does not use the figures SML provides in its so-called monitoring.
SML Ghana has explained to The Fourth Estate that its ultrasound metres are not intrusive, so they are less accurate than the existing metres at the pumps.
Hamdan Abubakari, the Head of Engineering at SML Ghana told The Fourth Estate that contact metres at the loading gantries of the depots, which are calibrated and certified by the Ghana Standards Authority every six months, take more accurate readings than the SML metres, which are non-contact metres installed outside the pipes.
“The contact metres are always the best,” Mr. Abubakari of SML, emphasised why the SML metres are not as accurate as the ones at the loading gantries.”
He said those metres are more accurate because they get the actual amount of fuel that flows through the pipelines and are loaded. The SML metres, he said, are external and use sound technology to take measurements.
The recording from metres at the loading gantries, according to the GRA, is captured on ERDMS, an electronic platform for transacting business in the entire supply chain process within the petroleum chain industry. This platform has the NPA, GRA, bulk distribution companies (BDCs) and (OMCs) on board to ensure transparency, facilitation, and tracking of transactions.
CLAIM 5: SML installed ultrasonic flow meters to check the volumes of petroleum products loaded at the gantries from the depots to reconcile in real time with the volumes recorded in ICUMS. This system additionally assures Customs that no loading activities occur in the depot in their absence. The installed metering system is designed to detect and record the movement of petroleum products at the depots.
Response: At the depot where petroleum products are lifted, there are Customs officials who are the only persons to lock and unlock the depot. No activities occur on the blind side of the GRA officers stationed at the depots. It is completely false, therefore, to suggest that without SML loading could happen in the absence of GRA officials. The ERDMS provides a platform through which the GRA can disable companies that owe taxes from loading petroleum products. Without the ERDMS, no company can lift products from the country’s depots. They can, however, lift without SML.
Besides, officers from the GRA’s Customs Division are physically present at all the depots. Without them validating the waybills and electronic orders, no truck can load petroleum products. Even the keys of the depot tanks are kept by GRA officials. Without them, nobody can open and operate the tanks.
A Senior Revenue Officer (SRO) of the GRA at the Tema Oil Refinery(TOR) Collection, Naomi Chartey, told The Fourth Estate that it is impossible to steal fuel products due to measures that had been put in place by the NPA and the GRA.
“The product is owned by the BDC [Bulk Distribution Companies], so the BDC must be in the known. Customs must be in the known, and for most of the depots, access to the depots is controlled by us. We have national security at the depots. We have NPA reps at the depots. So, by the time you are done [compromising all the players to dupe the system], you will realise that exercise is not even lucrative. Even when there are no systems, it is virtually impossible and we haven’t had such a case ever since,” Ms Chartey said.
CLAIM 6: SML’s work is designed to culminate in the checking of the products in the tank using an automatic tank gauging system. This aims at replacing the current system of Custom Officers climbing the tank using a dipstick to measure fuel volumes. By utilizing this, the GRA can calculate the overall quantity of petroleum products in depots nationwide to gauge revenue, provide Customs with data for reconciliation, and facilitate the tracking of oil movements during inter-depot and inter-tank transfers. Moreover, it aids in identifying leaks and notification of overfills.
Response: Our story showed that there are metres at the various depots to determine the quantity of fuel products in a tank. The NPA is also implementing a similar project across the country and was about to extend it to the depots. That was why the NPA said the attempt by SML to install an automatic tank gauging system is “potentially duplicitous.” The NPA is able to track liftings at the depots to the filling stations and is able to tell the amount of fuel in every tank of each filling station across Ghana. Connecting the depot tanks to the existing once, according to the NPA would have provided end-to-end tracking. Officials of the authority were, therefore, surprised that SML was brought in to also undertake tank gauging.
CLAIM 7: The GRA claims that the upstream and gold contracts “If there is no value addition, SML will not be paid.”
Response: This is false. The contract gives SML 0.75% of total gold production. It will also get $0.75 dollars per barrel. What value will SML add to our gold production or oil production? They are just to monitor.
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