President Nana Addo Dankwa Akufo-Addo has ordered the cancellation of portions of a controversial contract between the Strategic Mobilisation Limited (SML) and the Ghana Revenue Authority (GRA).
However, other parts of the contract believed to provide value have been revised.
A press statement released by the Communications Directorate of the Jubilee House said the President acted based on findings and recommendations provided by audit firm KPMG.
By a letter dated Thursday, April 18, 2024, the President instructed the Ministry of Finance and the Ghana Revenue Authority to renegotiate the contract.
Furthermore, the President ordered the two government institutions to closely monitor and evaluate the contract periodically to ensure that it meets expectations.
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“The upstream petroleum audit and minerals audit services have not yet been commenced, and no payments have been made in respect of those services; therefore, they may be terminated.
“However, given that the upstream petroleum audit and minerals audit services could prevent significant revenue leakages, the President has directed that the Ministry and GRA conduct a comprehensive technical needs assessment, value-for-money assessment, and stakeholder engagements before implementing such services.”
As part of the recommendations, the President added that “the transaction audit and external price verification services may also be terminated”.
According to KPMG’s findings, GRA obtained partial value or benefit for those services. This was also due to a lack of monitoring on the part of GRA to ensure that SML performed the services as stipulated in the contracts.
“KPMG’s investigation found that GRA has introduced external price verification tools as part of ICUMS, among its other functions. This renders the reliance on SML for external price verification redundant.”
However, the President recommended that there was a “clear need for the downstream petroleum audit services provided by SML. GRA and the State have benefited from these services since SML commenced providing them. There has been an increase in volumes of 1.7 billion litres and an increase in tax revenue to the State of GHS 2.45 billion.
“KPMG also observed that there were qualitative benefits, including a 24/7 electronic real-time monitoring of outflow and partial monitoring of inflows of petroleum products at depots where SML had installed flowmeters and six levels of reconciliation done by SML. This minimises the occurrence of under-declarations. However, it is important to review the contract for downstream petroleum audit services, particularly the fee structure. Given the experience and proficiency of SML over the last four years of providing this service, the President has directed that the fee structure be changed from a variable to a fixed fee structure. Other provisions of the contract worth reviewing include clauses on intellectual property rights, termination, and service delivery expectations.”
The Ministry of Finance and the Ghana Revenue Authority have been tasked with immediately implementing these directives and updating the Office of the President on the progress made.
Background
President Akufo-Addo, on January 2, 2024, ordered an audit into the contract between the Ghana Revenue Authority (GRA) and Strategic Mobilisation Limited (SML).
The audit to be conducted by KPMG was slated to last for two weeks.
The President’s action followed an investigation by The Fourth Estate, which revealed that SML had been awarded contracts that entitle the company to more than $100 million every year.
The company admitted it was not performing the advertised services that claimed to tackle under-reporting, diversion and dilution when the investigative journalists confronted it with evidence. It has since deleted those claims from its website.
The Managing Director of SML, Christian Tetteh Sottie, also admitted that the company’s claim that its services had saved Ghana GHS3 billion was false.
President Akufo-Addo further instructed the Ghana Revenue Authority (GRA) and the Ministry of Finance to adhere to his directive and furnish KPMG with all necessary documentation for the upcoming audit.