The GH¢3bn Lie: Government pays hundreds of millions to company despite false claims about its work

In a control room in Tema in the Greater Accra Region, officials of Strategic Mobilisation Ghana Limited (SML) tried to convince The Fourth Estate of its wild claims that it had helped to save Ghana billions of cedis that would have been lost in the downstream petroleum sector but for its intervention.

The company also tried to justify why it receives up to GH₵24 million monthly payments from the government of Ghana in a questionable contract it signed with the Ministry of Finance and the Ghana Revenue Authority (GRA).

A year-long investigation by Evans Aziamor-Mensah, Adwoa Adobea-Owusu and Manasseh Azure Awuni of The Fourth Estate, however, revealed that the company, with the help of a section of Ghana’s media, had made false and unsubstantiated claims of its operations that have served as the basis for the payment it received.

It appears the Ministry of Finance and the GRA were aware the claims were false, for some officials of the GRA said they had confronted the company about its claims of savings and volumes on two separate occasions.

A few hours after the reporters confronted the management of SML with the findings of the investigation and asked for a response, the major services it claimed to render to the government disappeared from the company’s website.

The investigation also uncovered that at a time players in the downstream petroleum sector were questioning the relevance of SML’s involvement, the Minister of Finance, Ken Ofori Atta, initiated a more outrageous deal that would entitle the company to over $100 million every year for the next 10 years.

In the first of this series, we focus on a 2019 contract the Government of Ghana signed with SML. The contract was signed at a time when superior and comprehensive measures had already been introduced by the government in 2018 to curtail losses in the downstream petroleum sector.

SML admits false claim of services it renders to the GRA

SML Ghana started what it calls “revenue assurance” services to the GRA in the downstream petroleum sector in June 2020. The downstream sector is responsible for the refining, distribution, and retail of oil and gas products. The Managing Director of the company, Christian Tetteh Sottie, said SML was an offshoot of a timber company he would not name.

Online records, however, link SML to Evans Timbers Limited. The CEO of SML, Evans Adusei, is also the CEO of Evans Timbers GH, a company that won a defamation case against The Informer newspaper in 2014. In that case, Justice Uuter Paul Dery, who was later dismissed by the Judicial Service of Ghana for bribery and corruption, ruled that the newspaper could not substantiate its claim that Evans Timbers GH used its political connections with Chief of Staff Kojo Mpiani to undertake dubious transactions.

 

Information The Fourth Estate obtained from the Office of the Registrar of Companies shows that Evans Adusei is the sole shareholder of SML. Also, Evans Adusei and his daughter, Esther Adusei, are the directors of the company. SML’s principal activities are “general trading and services, import and export of general goods and audit service activities.”

The Managing Director of SML, Christian Tetteh Sottie, was Ghana’s Controller and Accountant-General from 2005-2009 and is currently a board member of the Internal Audit Agency. He was once an Assistant Commissioner at the GRA.

In 2019, when the GRA entered into an agreement with SML Ghana, Mr. Sottie was the Technical Advisor to the Commissioner General of the GRA. Mr Sottie left his job as the Technical Advisor to the GRA Commissioner General in the same year to manage SML Ghana in 2020 when the company started implementing its contract with the GRA.

The GRA has been the only customer of SML Ghana since its establishment, according to Mr. Sottie. This means at the time the company was handpicked for the contract through the single source procurement method, it had no prior experience in the services it claimed to have expertise in.

A procurement expert and consultant, Kobina Ata-Bedu, says the contract raises questions about a possible breach of Ghana’s procurement laws. He questions the basis for which a company that had no prior experience in the services being procured was single-sourced for the contract.

To justify its contract and why it has been paid hundreds of millions of cedis by the government of Ghana, SML falsely claimed that it was rendering a wide range of services that had stopped malfeasance in the downstream petroleum sector.

On its website, SML stated: “The SML Digitalisation of downstream petroleum product measurement has stem(sic) the tide of under-reporting, diversion and dilution of fuel products and general non-compliance in the petroleum industry sector.”

As part of this investigation, The Fourth Estate team spent months interrogating the systems put in place by the Government of Ghana through its sector agencies and third-party contractors to curtail the anomalies SML Ghana claimed to be tackling. The team had rare access to the National Command Centre of the National Petroleum Authority (NPA), where we interviewed officials of the NPA and private sector service providers.

Third-party companies working with the NPA were responsible for checking dilution, diversion, under-declaration and other anomalies in the sector. The Customs Division of the GRA also has officials at the depots and various entry points to ensure that all petroleum products that enter the country are properly accounted for. They do this with independent monitors who police the processes for the owners of petroleum products at various points of the product chain.

The Fourth Estate team also toured some fuel depots in the country and interviewed depot operators as well as oil marketing companies and officials of the GRA. The evidence gathered showed that SML’s claim that it was checking diversion, dilution and under-declaration was completely false.

Our investigation revealed that the introduction of the Enterprise Relational Database Management System (ERDMS) in 2018 had curtailed the continuous operations of oil marketing companies that owed the government in taxes and margins and did not pay within the stipulated time. This was confirmed by the GRA and NPA.

The NPA and GRA said the ERDMS had curtailed under-reporting and other anomalies in the downstream petroleum sector.

A company called Rock Africa was also engaged by the NPA to electronically monitor the tankers that load petroleum products at the depots. The electronic seals send signals to the NPA Command Centre if a truck discharges products outside the fuel station it is supposed to discharge.

This, according to the NPA, curtails the diversion of tax-free petroleum products that are declared as exports to landlocked West African countries but sold in Ghana.

Another company, Nationwide Technologies Limited, had been engaged to undertake fuel marking, which tackles the problem of dilution and the smuggling of petroleum products into the country.

Our investigation showed that the problems that occasioned revenue leakages in the sector were being tackled by different companies to the satisfaction of state authorities, but SML was not one of them. SML, regulatory authorities, and independent operators in the sector could not establish any of the problems SML was solving.

Mr. Sottie also admitted to The Fourth Estate that SML was not into checking underreporting or anomalies in the downstream sector.

“We don’t go into that,” he said when we asked whether SML had “ever detected or identified any issues of under declaration.”

Despite evidence to the contrary, SML made false claims on its website about resolving the problems of “under-reporting, diversion and dilution of fuel products and general non-compliance in the petroleum industry sector.”

Officials of the Petroleum Division of the GRA expressed shock when The Fourth Estate team mentioned the listed services SML claimed to provide. SML was contracted to render the services to the GRA.

The GRA officials, led by the Head of Petroleum, Meshack Kwame Danso, were present when we visited SML to confront the company with our findings. Before we started our interview, the GRA officials said SML needed to clear the air on the stated service before we began our interview.

The Company’s Managing Director, Christian Sottie, said SML did not state anywhere that the company was providing services that checked under-declaration, dilution, and diversion of petroleum products. When we pointed out the claims to the management of SML from the company’s website, Mr Sottie said the information was put on the website in error.

“Oh no, we are not involved in diversion. We are only at the depots. If the thing [petroleum product] is lifted, we don’t know if [it is diverted],” Mr. Sottie said.

He added: “It is GRA, Customs, that will determine where it goes, and they will follow up. We are not capable. We don’t have men outside.”

A few hours after our meeting, the claim of providing services that checked dilution, diversion and under-declaration disappeared from the website of SML.

The Executive Director of the Africa Centre for Energy Policy, Benjamin Boakye, told The Fourth Estate that players in the industry were surprised when the government awarded a contract to SML. He said solutions to most problems in the sector had already been provided and they wondered what SML was coming to do.

Mr Boakye said the remaining problems in the sector were not at the depots, where SML was stationed to monitor. By problems, Mr Boakye was referring to the non-payment of taxes and margins by OMCs after the sale of products. Even at the depots, the GRA confirmed to The Fourth Estate that it was practically impossible to lose products—and by extension, revenue to the state—even if there were no electronic systems in place.

False Claim of Saving Ghana GH₵3 billion

The Fourth Estate also confronted the Managing Director of SML Ghana with the figures the company churned out as savings Ghana made in the downstream petroleum sector because of its operations.

First was the claim SML made in March 2021 that it had saved Ghana over GH₵1 billion in revenue because of its services.

The company started its operations in 2020. From the revenue figures we obtained from the GRA, the difference in the total revenue from the downstream petroleum sector between 2019 and 2020 was GH₵800 million.

So, if all the incremental revenue in the sector were attributed to the company’s operations, it would still fall short of the GH₵1 billion it claimed to have saved Ghana.

In February 2023, SML Ghana made a more audacious claim that became the banner headline in Ghana’s biggest newspaper, the state-owned Daily Graphic. The story also received wide coverage in major media outlets in Ghana. In its report to the media, the company claimed its operations had helped to save Ghana GH₵3 billion.

The Minister of Finance, Ken Ofori-Atta, was the first to mention billions of losses in the sector, which SML Ghana was going to save. When he commissioned the operations of SML in 2020, Mr. Ofori-Atta claimed that, by engaging SML, the government had eliminated the problems before SML’s entry and “it was about two to three billion cedis of losses”.

“We are excited about this change where we can now determine and get the exact revenues we want,” Ken Ofori-Atta said.

SML Ghana admitted it did not perform the services it listed on its website as curtailing irregularities in the sector and deleted them from its website after we confronted its management.

But even if the company was carrying out those services and all the incremental revenue within the period of its operations was credited to its efforts, the figure would have been GH₵2.4 billion cedis and not the GH₵3 billion it claimed to have saved.

When we put these facts to the managing director, he said he did not know about the GH₵3 billion savings.

“What I want is the agreement from here that the figures are not accurate and that we cannot say that your intervention saved GH₵3 billion,” The Fourth Estate’s Manasseh Azure Awuni insisted that Mr Sottie should admit the false claim, which was still on the website of the company even while the interview was taking place.

“I had told you that [in terms of the] GH₵3 billion, I am not aware [of it] because when we were told about the publication, we even called the journalist … I think he [journalist] picked it out of context,” Mr Sotie responded. “I can’t remember the GHS 3 billion. I remember the GHc 1 billion.”

MANASSEH: But the GH₵3 billion was from your outfit?

MR SOTTIE: Yes, you remember when you were talking, I was still speaking about GH₵1 billion. Because, after one year, that was the statement I put out.  

MANASSEH: So, who put the GH₵3 billion out?

[The IT Systems Engineer of SML Ghana, Prince Sarpong, interrupts the interview and whispers into Mr. Sottie’s ears].

MR SARPONG: It was a mistake because if you look at other publications, it was just a consultation between GRA and SML. I did the presentation, and I was giving them the expected revenue. Our system can generate expected revenue, so what we did was not even an accurate figure because only GRA can give accurate figures. So, that is a caption by journalists.

MANASSEH: The problem here is that if the journalist made a mistake, it is also on your website this morning even as we speak [in July 2023]. This has been there since February [2023]. So, if a journalist makes a mistake and reports something I did not say, and I put that same thing on my website, then it means an endorsement.

MR SOTTIE: As for me, I don’t know about any website matters.

When asked how much SML was paid for its services in the downstream sector, Mr. Sottie said he did not know. The GRA has not responded to our Right to Information request for the contract and payments made to SML. We sent letters to the GRA in July and November 2023 but neither letter has been acknowledged. The Ministry of Finance is also yet to respond to our request for information sent in November.

Sources close to the Ministry of Finance have, however, revealed that payments to SML are done monthly. Payment details sighted by The Fourth Estate show that SML receives up to GH₵24 million a month for its contract in the downstream sector alone, a figure that may rise when the company finishes the extended contract to undertake tank gauging at the depots.

With the current figures, the company receives at least GH₵240 million for services whose value it could not show when we asked.

“SML Ghana is essentially a plugin into the revenue stream of the state taking money for no job done because what they are supposed to be doing is already being done. It’s just people finding ways to hive off some of our revenues into private pockets and the reasonable thing to do is to cancel that contract,” Benjamin Boakye said of the contract.

Is SML Responsible for Revenue Increment in the Downstream Petroleum Sector?

While SML Ghana claimed its activities resulted in revenue increases—which it interpreted as savings for Ghana—in the downstream petroleum sector, the GRA told The Fourth Estate that revenue increments in the sector are due to two factors.

One of the factors, according to the GRA, is an increase in the volumes of petroleum products imported and consumed in the country. As the economy grows and more people buy vehicles, industries and other economic activities that are fueled by petroleum products also increase. The volumes of petroleum products, therefore, grow naturally from year to year.

“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.

SML Ghana admitted to The Fourth Estate that it does not import petroleum products and its operations have not added a litre of petroleum product to the volumes.

Since SML started its operations, the government of Ghana has increased tax rates twice and added new taxes on petroleum products, according to the GRA. This means more revenue for the government, and a company that played no role in either of the two variables cannot take credit for revenue increment and purported savings for the state.

The GRA and NPA said revenue losses in the sector occurred when oil marketing companies lifted petroleum products from the depots and absconded with taxes. Some OMCs also claimed that the petroleum products were meant for sale in other West African countries and, therefore, were not supposed to attract tax, but they turned around to sell them in the country. The state regulatory institutions have put in measures to track and stop these practices and SML Ghana is not involved in any of these systems.

The measures put in place before SML Ghana was contracted were said to be adequate according to players in the industry and state regulators.

The CEO of the NPA, Dr Mustapha Hamid, said the ERDMS installed by the NPA and linked to the GRA’s system “allows us to disable people from operating or lifting petroleum products once they are found to be in default of whatever statutory margins or taxes or levies that they haven’t lived up to. So, the absence of the ERDMS at that time where things were done manually and so on was perhaps some of the regulatory challenges. But since that system was installed, a lot of that has been stemmed.”

Sukhwinder Singh, the manager of the Accra Plains Depot Limited, said there was no problem with the ERDMS. He said it ensured “hundred per cent” efficiency and transparency.

The ERDMS was introduced in 2018 a year before SML was engaged. Officials of the GRA said the ERDMS resolved the loss of revenues that occurred when the process was manual. Apart from helping to track volumes, the ERDMS ensures that the trading and transportation of petroleum products are done on a digitized platform that has the GRA, NPA, oil marketing companies and bulk oil distributors on board. An oil marketing company that is indebted to the government in taxes and margins is automatically disabled on the ERDMS from loading petroleum products anywhere in the country.

“Once we can 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 can track your volumes, you are likely to get your taxes right,” said Samson Anim, the head of GRA’s downstream petroleum sector.

The Managing Director of SML Ghana, however, said his company had taken credit for revenue increment in the sector because its operations may have deterred those diverting and under-declaring fuel products.

When asked to name at least one instance in which SML Ghana detected anomalies in the sector or by any sector through his company’s work, Mr Sotie said there was none.

This was in addition to his earlier admission that the company did not perform any of the functions aimed at curbing the anomalies—under declaration, diversion and dilution of petroleum products.

Refusal of Information on contracts and payments

When The Fourth Estate asked the Managing Director of SML Ghana how much his company was paid by the government for its services, he claimed he did not know.

The GRA officials we interviewed for this story also said they could not give us the cost and copies of the contract when we asked. They said they did not have the authorisation to disclose such information and suggested that we write to the Commissioner General of the GRA for that information.

In July 2023, we wrote to the Commissioner General of the GRA but have since not received any response.

The Fourth Estate has also written to the Ministry of Finance, which jointly signed the contract, but we have not received any response to our questions.

The Right to Information Law, under which we made the request considers it a refusal if the institution or agency fails to respond after 14 days.

What SML Currently Does

SML Ghana has metres attached to pipelines at the fuel depots, which record the volumes of products that flow through the pipelines to the loading gantries and give SML real-time records of the volumes that go through the pipelines.

Operators in the industry say the real-time readings at the depots mean nothing because taxes or revenues are not collected in real-time. They are collected only after the fuel product is lifted and sold.

Besides, the Ghana Revenue Authority and the National Petroleum Authority do not use SML’s figures to collect taxes or margins on petroleum products.

The gantries are where fuel tankers of the OMCs load petroleum products. The readings of these metres at the gantries determine the volumes of products that leave every fuel depot at the end of each day. These recordings at the gantries are the ones used for tax purposes and not the SML Ghana readings.

SML Ghana also scans the Waybills that GRA officials receive at the fuel depots, which are intended for later reference should an issue arise with an oil marketing company’s indebtedness and there’s the need for a reference.

Sources within the GRA told The Fourth Estate that their officials can scan these documents if they are given the scanners, equipment and resources given to SML through the contract. The sources say GRA does not need a third-party company to scan documents GRA officials collect as part of their work at the depots.

The Executive Director of ACEP told The Fourth Estate, “A very flamboyant GRA with a lot of people packed there who are supposed to deliver the same service. And we assume suddenly that they cannot deliver that function and we need the private sector to be able to do that. I think perhaps, it’s time to evaluate some of these arrangements and save ourselves some money.”

Why GRA Uses “More Accurate” Metres for Revenue, not SML Readings.

SML Ghana has explained to The Fourth Estate that its ultrasound metres are not intrusive, so they are less accurate than the other metres.

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.

The ERDMS is connected to the Integrated Customs Management System (ICUMS). Taxes and revenues from the sector are calculated from the volumes that go through the ERDMS and customs.

None of that involves the figures churned out by SML through its “revenue assurance” services.

At all the depots, GRA officials measure the volumes of petroleum products in the tanks before the beginning of work at the end of each day’s business. The GRA has custody of the seals to valves of every tank, and, until the designated GRA officials open, no depot in Ghana can load petroleum products.

These and other rigorous measures make the role of SML irrelevant in the sector, according to some operators of the depots who want to remain anonymous.

Duplication of Roles

The management of SML also told The Fourth Estate that the scope of its contract had been expanded to include the tank gauging at the depots. With this service, the company said it was in the process of installing an automatic tank gauging system that would show the quantity of fuel in the tanks at the depots.

Apart from the fact that the GRA gauges the volumes of products in the tank at the beginning and end of business every day, some of the depots have already installed tank gauging systems. When The Fourth Estate team visited Chase Petroleum, one of the biggest fuel depots in Ghana, we saw the metres, whose measurement corresponded with the recording of the GRA officials stationed at the depots.

The Chief Executive of the NPA, Dr Mustapha Hamid, told The Fourth Estate that some management members of the NPA had raised concerns about possible duplication of roles when they learned that SML Ghana had been contracted to undertake automatic tank gauging.

“Potentially, we consider it duplicitous. However, we have agreed to meet with them [SML] to understand the real rationale for which they also want to do an automatic tank gauging system,” Dr Hamid told The Fourth Estate.

The NPA has a system that tracks the lifting and transportation of fuel products from the depots to the tanks of the oil marketing companies. With that system, the NPA can tell the volumes of petroleum products in all the fuel stations across Ghana at any given time.

The authority says it was already in the process of extending it to the depots to have an end-to-end system and wonders why another company was engaged to do the same thing.

The GRA further added that even without the other electronic systems put in place, it would be almost impossible to lose petroleum products at the depots, where SML has its metres. Officials of the GRA explained that many players with different roles and interests are present every time to police the products at every point.

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.

Cancel SML’s  contract

The Executive Director of ACEP, Ben Boakye, said the SML Ghana contract is only a duplication of roles being performed by the NPA, the GRA and other third-party companies in the sector. He, therefore, demands a cancellation of the contract.

When asked if he would have advised the GRA Commissioner to contract SML for this revenue assurance services if he were still the technical advisor, Mr Sottie said he could not answer.

Source: The Fourth Estate