Ghana’s SML Deal: A Scandal of Billion-Dollar Proportions

In a shocking exposé that rocked Ghana towards the end of 2023, the Fourth Estate unearthed a concerning alliance between the Ghana Revenue Authority (GRA) and Strategic Mobilisation Ghana Limited (SML), a mysterious startup. This alliance purportedly saw substantial annual sums funnelled from the state to the private contractor under the guise of revenue assurance in the petroleum downstream sector. But the revelations didn’t stop there. Further investigation revealed that, under the finance minister’s explicit instructions, SML was set to become the primary auditor of the upstream petroleum and minerals sectors, potentially costing the country over $120 million annually. Over the contract’s lifespan, SML’s total earnings could soar to over a billion.

In response to public outrage and the Fourth Estate’s documentary, the GRA issued a statement justifying its partnership with SML. They claimed a 33% improvement in revenue from the downstream petroleum sector over the two-year period from 2018 to 2021, equating to around 100 million litres per month in volume differential.

However, ACEP and IMANI conducted a thorough analysis, cross-referencing data from GRA and the National Petroleum Authority (NPA), challenging the GRA’s claims. Data from both sources showed marginal differences. In the year SML began operations (2019/2020), GRA’s data indicated a 5% growth in refined petroleum product consumption, while NPA reported a 7% growth.

Volumes (NPA) (Million litres)
Volumes (GRA ) (Million litres)
2018/19
4,507.03
4,366.80
2019/20
4,803.65
4,599.38
2020/21
5,262.43
5,088.55
2021/22
4,975.12
4,740.32

From this analysis, it becomes clear that GRA’s claim of SML’s intervention resulting in a 100 million-litre monthly consumption increase cannot be supported by their own data. In fact, the actual growth over this period was around 62.95 million litres, as per NPA data, and 60.15 million litres according to GRA’s data.

Furthermore, the GRA failed to acknowledge the decline in consumption/demand in 2022 and 2023. This raises concerns about the credibility of their claims regarding SML’s significant contributions. Additionally, the growth rates in consumption prior to SML’s intervention exceeded those attributed to SML, suggesting a lack of data-driven decisions.

Contrary to GRA’s claims, no extraordinary events occurred between 2018 and 2022. Historical data from the NPA demonstrates that the growth in petroleum product consumption has been inconsistent over the years, with some years experiencing significant growth even without SML’s presence. In 2022, consumption even declined.

There is no evidence to support a 33% consumption increase attributed to SML.
The NPA data is more reliable for revenue assurance, and this is what GRA should use for revenue purposes. The quoted GHS 3 billion by GRA lacks accuracy and cannot be traced to reliable data sources. Multiple exogenous factors drive petroleum consumption in Ghana, making it challenging to isolate SML’s impact.

In 2021, SML claimed substantial savings in the state’s revenue outlay. However, ACEP and IMANI conducted a meticulous examination of SML’s data and found significant inaccuracies. A comparison of SML’s month-on-month volumes for key products (AGO, Petrol, and LPG) with GRA’s data revealed intentional inflation by SML to validate its contract.

During this period, data provided by the NPA surpassed that used for revenue purposes. Despite this, SML received gross payments ranging from GHS 700 million to GHS 750 million, highlighting the disconnect between the claimed benefits and the actual data used for revenue account.

The extension of the SML contract follows the same flawed pattern as the original agreement. The lack of stakeholder consultations with other state actors responsible for revenue assurance, such as the Petroleum Commission, GNPC, Mineral Commission, PMMC, and National Security, raises doubts about the Minister of Finance’s approach.

The extension also includes gold production, which raises further questions. The decision to share large-scale revenue with SML, especially when revenue mainly comes from large-scale mining, appears questionable. Moreover, extending the contract to cover other minerals, including those yet to be commercialised, presents a potential drain on state resources.

The appointment of KPMG to investigate the GRA-SML relationship raises concerns about conflicts of interest. KPMG’s involvement as a contractor of GRA and its multiple roles in government and the private sector pose potential conflicts. Similar episodes in other countries involving KPMG affiliates have resulted in serious conflicts of interest, confidentiality breaches, and loss of public trust.

The SML situation offers an opportunity to:

• Examine various revenue assurance practices across sectors, including telecoms and ports, to free up resources for development.
• Address issues related to illicit products and tax evasion in the downstream sector.
• Ensure that GRA receives its legally mandated share of mineral revenue.
• Rectify the state’s losses due to SML’s operation.

In conclusion, ACEP and IMANI call on those in power to rectify these issues and restore transparency and accountability in Ghana’s revenue assurance efforts.