President Akufo-Addo Suspends SML/GRA Deal, Tasks KPMG To Audit Transaction.

The President, Nana Addo Dankwa Akufo-Addo, has ordered the immediate suspension of the revenue assurance contract signed between the Ghana Revenue Authority (GRA) and Strategic Mobilization Ghana Ltd (SML).

He has also appointed the Audit, Tax, and Advisory Services firm, KPMG, to conduct an immediate audit of the transaction.

In a statement dated January 2, signed by the Director of Communications at the Presidency, Eugene Arhin, the President said, “The President of the Republic, Nana Addo Dankwa Akufo-Addo, has appointed KPMG, the reputable Audit, Tax and Advisory Services firm, to conduct an immediate audit into the transaction between the Ghana Revenue Authority (GRA) and Strategic Mobilization Ghana Ltd (SML), a contract which was entered into to enhance revenue assurance in the downstream petroleum sector, the upstream petroleum production and minerals and metals resources value chain.”

President Akufo-Addo has also tasked KPMG to complete its report in two weeks and “submit appropriate recommendations to him.”

The President has directed the Ministry of Finance and the GRA to suspend the performance of the contract, pending the submission of the audit report.

“The President has directed the Ministry of Finance and GRA to provide KPMG with whatever assistance they will require for conduct of the audit, and has also directed the Ministry of Finance and the Ghana Revenue Authority to suspend the performance of the contract, pending the submission of the audit report, including any payments presently envisaged under its terms.”

SML, after an investigative piece put together by the Fourth Estate in December 2023, debunked claims of being awarded a 10-year contract duration, insisting that it has been given a 5-year contract instead.

SML further dispelled claims that it takes $100 million annually from its contract.

The Ghana Revenue Authority, in a statement issued on Wednesday, December 20, 2023, affirmed that its board and management followed the right processes in procuring the services of SML.

“The Contract is for five (5) years and is performance-based and approved under Section 40 of the Public Procurement Act, Act 663, 2003.”

This follows the Fourth Estate’s report, indicating that SML had been awarded a 10-year contract and that it takes $100 million annually from the contract.

The Fourth Estate also said its investigations have disproved wild claims by SML Company that it had helped save Ghana billions of cedis that would have been lost in the downstream petroleum sector but for its intervention.

The Finance Committee of Parliament on December 23, 2023, recommended a suspension of all payments under the government’s contract with SML from 2024, pending a probe into the contract by Parliament.

The committee said upon a review of the contract, it requires Parliamentary approval under the Financial Management Act, hence the need for the GRA to be notified about the statutory requirement.

 

Read the statement by President Akufo-Addo below

 

Background

Strategic Mobilization Limited (SML) in a statement on Tuesday, 19 December 2023, rejected claims by journalist Manasseh Azure Awuni and his two other colleagues, Evans Aziamor-Mensah and Adwoa Adobea-Owusu, that it is involved in a shady deal that has resulted in the government paying “hundreds of millions” to it without doing any work.

 

 

In an online publication on Monday, 18 December 2023, on its website, www.thefourthestate.com, Manasseh Azure Awuni and his associates, published the following;

“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”.

However, in a two-page statement issued by the public relations unit of SML, on Tuesday, 19 December 2023, entitled; “Statement by SML on the documentary by the Fourth Estate on the yet-to-be-operationalized contract on upstream petroleum production and minerals and metals resources value chain, SML says it has taken note of a documentary that has been aired by the Fourth Estate’s team and response as follows;

“The documentary represents a set of misrepresentations, false claims, and a general lack of understanding of the entire operations of the company. We challenge the Fourth Estate to produce any contract anywhere that is for 10 years. The 5th PPA Board at its 46th Board meeting in a letter referenced PPA/CEO/09/2286/23 approved a contract duration of five (5) years.

“Again, it’s NOT TRUE that SML takes $100 million annually from its contract. The contract, which is yet to be paid risk-rewarded per their projections leading them to that claim. The Upstream operations of the company have not yet begun, and no revenue has been realized. No monies have been paid: the $100 million per year payment to SML that has been alleged is purely a figment of the author’s imagination and not factual.
“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. Again 31% of SML’s monthly earnings goes to GRA as taxes per the law. A good-intentioned and professional investigation would have established SML’s investment cost and compared it to its earnings to make an informed position.

“Again, we challenge him to produce any evidence of wrongdoing in this contract arrangement. SML’s charging formula is standard in the industry and 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 volumes upon which any gap or deficit in the eventual volumes declared will expose those in the chain.

“The downstream petroleum sector’s reported figures have significantly increased because of SML over 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 liters per month which translates into revenue,” the SML statement read.

SML further explained that “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 to giving revenue assurance to GRA. The NPA system was designed for its operations and was not suited for providing revenue assurance for tax purposes.

“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.

“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.

“SML takes pride in its committed and highly skilled technical team, whose combined expertise propels our success in delivering innovative solutions. The team consists of seasoned professionals with diverse backgrounds, ensuring a comprehensive approach to addressing the most intricate technical challenges.

“The SML technical team comprises Ghanaian-trained engineers and expatriates from the United States, with work experience ranging from 5 to 25 years in the petroleum industry and the instrumentation and controls sector. The team’s expertise spans across petroleum engineering, process engineering, IT System Engineering, Cybersecurity Engineering, instrumentation, and controls, as well as Electrical and Mechanical Engineering.

“We are aware of the heightened efforts by the Cartel in the oil ring whose illegal trade is being collapsed and is fighting to undermine the Government’s fight against illegalities in the petroleum sector” the SML statement further read.

 

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