KPMG confirms SML cannot take credit for revenue increase in downstream sector

Audit firm, KPMG, has confirmed The Fourth Estate’s finding that Strategic Mobilisation Limited (SML) cannot take credit for revenue increases in the downstream petroleum sector.

KPMG’s audit revealed that while there was incremental revenue growth from 2015 to 2023, except for a decline in 2017, this growth cannot be attributed solely to the services provided by SML.

“One significant contributor to this growth was the increase in taxes over the years, i.e., from two taxes in 2015 to five taxes in 2023. Another significant contributor to this growth is the increase in tax rates in 2016, 2019, and 2021,” the audit report noted.

The decline in 2017, according to KPMG, was due to a decrease in the tax rate, which coincided with a revenue reduction from 2016 to 2017.

The KPMG report also said there had been a steady rise in volumes before SML’s revenue assurance contract with the GRA, with a temporary dip in mid-2020 due to the COVID-19 pandemic. The audit firm’s GRA, National Petroleum Authority (NPA), and SML data analysis showed that average monthly volumes were around 400 million litres in 2019 and early 2020, before a notable drop during the April 2020 lockdown. KMPG noted that volumes rebounded and consistently exceeded 400 million litres after the lockdown.

Additionally, the audit found that the flow meters at various depots used to calculate volumes were faulty. The meters installed by SML on their pipes contained water, leading to inaccurate data that could not be relied upon for tax purposes.

“SML’s flowmeter readings serve as an alternate source for GRA to determine quantities of liftings, distinct from the volumes recorded by NPA and GRA in the ERDMS and ICUMS, respectively. SML has installed flowmeters at 24 out of 26 depots as of 21 February 2024,” the audit report said.

However, “as of December 31, 2023, SML had flowmeter readings for 16 out of 24 depots, representing 76% of total petroleum products lifted. There were no meter readings available for eight depots as of 31 December 2023, due to the delay in operationalizing SML’s flowmeters at these depots. In addition, SML does not monitor liftings for Residual Fuel Oil (RFO),” the KPMG report stated.

The GRA initially supported SML’s claims of helping boost national revenue, citing a 33% improvement in the downstream petroleum sector over the past two years. The GRA’s statement highlighted an increase in reported volumes from 350 million litres per month in 2018 and 2019 to 450 million litres per month in 2020 and 2021, attributing this rise to the introduction of ICUMS and SML systems.

SML also disagreed with an earlier report issued by the president crediting the company for helping save 2.4 billion in revenue which would otherwise have been lost. The company insisted that it had saved the country GHS12.9 billion in revenue from nine billion litres of petroleum products from May 1, 2020, to December 31, 2023.

But civil society organizations such as Imani Africa and the Africa Centre for Energy Policy found discrepancies in the company’s claims after analyzing data from the Ministry of Finance and the NPA. Their analysis indicated modest growth in refined petroleum product consumption, with a 5% increase reported by the GRA and a 7% increase by the NPA in the year SML commenced operations, followed by aligned growth rates of 11% and 10% respectively in the subsequent year.

The Fourth Estate’s investigations revealed that SML’s claim of saving GHS3 billion in the downstream petroleum sector was false.

When The Fourth Estate confronted the Managing Director of SML Ghana, Christian Sottie, he said he didn’t know about the GHS3 billion cedi revenue claim, which had been widely publicized in the Daily Graphic and on the company’s website.

President Nana Akufo-Addo appointed KPMG to audit the contracts between the GRA and SML following the release of investigative reports by The Fourth Estate, which raised questions about the necessity and propriety of the contracts. The audit report indicated that the agreements were entered without parliamentary approval, as the law requires. The President has since requested a renegotiation of some aspects of the contracts.