Ghana risks losing GH¢1.5bn to fuel smuggling | Business News 2017-08-23

Business News of Wednesday, 23 August 2017



Mr Agyemang-Duah, said more than 4,000 jobs would be lost this year if nothing is done

Revenue generated from taxes and levies have helped governments over the world to provide health, educational, road and other infrastructure for the benefit of citizens.

It, therefore, becomes worrying when a few unscrupulous beings and entities decide to use unorthodox means to deny the state its due. It even gets more disingenuous when innocent and legitimate businesses get caught up in the melee.

Such is the situation now in the downstream revenue sector as the country risks losing a whopping GH¢1.5 billion in taxes and levies due to incidents of smuggling of fuel products. Ghana lost an estimated GH¢800 million in 2016 as a result of the problem, which reached its peak last year. But for smuggling, Ghana would have gained more than GH¢5 billion in revenue in 2017.

The Association of Oil Marketing Companies (AOMCs), earlier this year, vented its frustrations through a press conference calling on the government to halt the incident, which was fast crippling their businesses and creating job losses.

The President of the AOMCs, Mr Kwaku Agyemang-Duah, said more than 4,000 jobs would be lost this year if nothing was done about the problem.Modus Operandi
Culprits pose as exporters, enjoy low taxes and subsequently divert fuel products they are expected to export to Mali and Burkina Faso back to Ghana and sell them at prices lower than those of the OMCs whose prices contain full blown taxes/levies.

The products, which are supposed to be exported find their way back onto the local market through illegal channels and are sold on table tops at lorry parks across the country.
The situation is so widespread it is normal practice to find motorists queuing for cheap and adulterated fuel being sold on table tops instead of purchasing them from designated fuel filling stations. The smugglers are believed to divert as much as GH¢1.5 per litre into their private pockets.

A highly-placed national security source told the Daily Graphic that steps were being instituted to stop the illegal practice and also, bring perpetrators to book but recent distress calls expressed through the Daily Graphic by some Oil Marketing Companies (OMCs) seems to suggest otherwise. Industry players some OMCs namely GOIL, Puma Energy, PETROSOL, Shell and Engen have expressed the various challenges they are going through in the hands of smugglers to the Daily Graphic and have suggested ways by which the government can bring the situation under total control.
The National Petroleum Authority (NPA) and the Chamber of Petroleum Consumers (COPEC) also suggested ways to halt the smuggling of petroleum products.GOIL and PUMA Energy
GOIL, a market leader in the petroleum industry has been one of the hardest hit in the smuggling saga.

Highlighting the quantum of losses, the Managing Director of GOIL, Mr Patrick Akorli, said the company was losing an average of GHC20 million a month to fuel smugglers and noted that the figure might shoot up if government does not act.

On her part, the Brand, Events & Communications Officer of Puma Energy, Ms Laura Asimeng, said OMCs volumes were consequently under pressure, meaning revenues were falling and businesses couldnot sustain operations due to activities of fuel smugglers.

She said “while we encourage industry competition, we do not wish to see each other unfairly affected by these illegal products.

“Puma Energy is investing in giving Ghanaians access to very cheap fuel as well as improving the standards of filling stations we take over. This way, our customers can spend less cash, get more quality fuel and enjoy a quality fuelling experience.

“We want to see the fuel smuggling stopped so we can continue to invest with confidence.”PETROSOL

An indigenous company that has been gravely affected by smuggling activities is PETROSOL. The Chief Executive Officer (CEO) of PETROSOL, Mr Michael Bozumbil, noted that there was dwindling sales volume as a result of the sale of illegal products on the market at cheap prices.

“The margins are dwindling because in order to survive, we are compelled to drastically reduce our prices, thereby, virtually scraping off our margins and this negatively affects our profitability and survival.

“There is the heavy burden of pre-financing huge petroleum taxes to the state because we have to pay petroleum taxes and levies to the state within 21 days after taking the products from the depots, irrespective of whether we have fully sold the products or not else we will be stopped from loading and made to pay huge penalties.

“We are, therefore, compelled to borrow from the bank at high interest of about 30 per cent to pre-finance the state, with a margin of about four per cent ,” Mr Bozumbil noted.ENGEN and VIVO Energy Highlighting the challenges facing his company, the Managing Director of ENGEN, Mr Henry Akwaboah also stated that the smuggling syndicate’s activities were negatively impacting on his company’s sales.

“Peddling of fuel in gallons at lorry parks and by the road side is impacting us negatively.
“The source of supply of these peddlers are the diversion of products loaded as exports to neighbouring Burkina Faso and Mali which still end up in the country cheaply since they do not attract taxes.

“This has led to a decline in industry sales by 16 per cent year to date,” Mr Akwaboah noted.
For her part, the Corporate Communications Manager of Vivo Energy, Mrs Shirley Tony Kum, also stated that the main problem facing the downstream oil sector was the sale of illegal products and its associated risk and impact on investments and risk of unemployment to Ghanaians as retail sites fold up and employees are laid off. COPEC The Executive Secretary of the COPEC, Mr Duncan Amoah, stated that fuel fraud via tax evasion has robbed Ghana and other African governments of millions of US dollars in tax revenue annually with further losses to the unsuspecting public.

Delay in implementing measures against smuggling has emboldened the fuel smugglers to step up their operations from hitherto covert to now overt such that they now operate huge illegal tank yards dotted all over the country with most in the capital, he noted.

Most legitimate OMCs are known to be struggling with cost of utilities especially electricity charges for their operations thereby making the industry hardly profitable whiles the fuel smuggling syndicate also squeeze the remaining volumes from them in broad day light, Mr Amoah noted.

Fuel smuggling causes harm to environment, results in increased fuel consumption and worsen public health as most of the smuggled fuel remains largely untested and certified for public use but still finds its way to the pumps.

Smuggling also means that the many legitimate OMCs doing legal transactions are gradually being pushed to the periphery as these illegal operators now command a sizeable portion of the market, which should have been operated by the legal operators, most OMCs have lost huge sales volumes since the advent of this syndicate which is threatening to completely cripple some of the struggling OMCs out of business.
OMCs are shutting down and laying off staff due to activities of illegal fuel trade. This is leading to loss of legitimate jobs whiles the belebele phenomenon seems to be on the rise lately.

Assurance from the NPA
The industry regulator, the NPA has moved in to assure the OMCs and all legitimate businesses within the petroleum downstream sector of its readiness to bring the situation under control.

“The NPA together with the National Security has instituted measures to halt the activities of smugglers,” the acting CEO of the NPA, Mr Hassan Tampuli said.

Whilst we commend the NPA for the measures they have announced to curtail this menace, we would encourage them to ensure these measures will actually work and be implemented quickly. All OMC’s want to see these smugglers caught so we can have confidence that both downstream industry and Government

Mr Tampuli, however, declined to give further details on the exact steps taken to stop the activities of smugglers of petroleum products citing “security reasons.”Way Forward
The various OMCs and COPEC suggested various ways to curb the outlined challenges. They have called for the tightening and enforcing of both physical and electronic tracking systems to improve security at the various entry and exit points which were likely to help curb and reduce if not eliminate the overwhelming influx of illegal fuel into the country and keep the genuine fuel traders in business whiles the consumer doesn’t have to worry about standards or quality since there wont be any uncertified products dumped into the market.

Reviewing of licenses to exporters with proper audit and enforcement of proper electronic tracking of export of fuel to the neighbouring landlocked countries, immediate installation of tracking devices on all export bulk road vehicles will greatly enhance the operations of the Ghana Revenue Authority (GRA), which continues to lose several millions on a daily basis to the activities of these fuel smuggling syndicate.

They also suggested that legislation should be paired with strong enforcement of punitive measures to deter others.

The OMCs, who received awards at the recently held COPEC awards, were unanimous in pleading with the government to take immediate and decisive steps to protect the legitimate downstream petroleum industry from collapse.

They held that their businesses and government risked suffering further revenue losses if nothing was done about the fuel smuggling menace.

It is obvious the activities of fuel smuggling syndicate is having an adverse toll on the government revenue and the sustenance of a viable private sector to generate revenue and creation of employment.

The earlier the NPA, National Security, the Customs Division of the GRA and other security agencies collaborated to clamp down on the activities of these nation wreckers, the better it will be for the government, OMCs, the consumer and the environment.