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New details have emerged in Kenya showing how billions of
taxpayers' money was lost through shady fuel deals and irresponsible
handling of Government fuel reserves.
The Auditor General Evelyn
Kamagaju, who first raised the issue of mismanagement of Government
fuel stocks in her 2006 report - sparking nearly a two-month inquiry by
a parliamentary ad hoc commission - has now released new information
that reveals the rot that has been going on in the fuel sector.
In a May 14, 2008 letter
addressed to Senate President Dr. Vincent Biruta and the Speaker
Chamber of Deputies, Alfred Mukezamfura, Kamagaju spilled the beans on
a number of deals that have made Government incur heavy losses or
likely to suffer more through illegal marriages with oil companies.
"On 2 November, 2005,
cabinet agreed that Kobil Rwanda Oil Company leases state oil depots at
Gatsata and buys Shell petrol stations. Cabinet further agreed that the
said leasing and purchase would be subjected to negotiations between
Kobil Rwanda and the Rwanda Government. However, I did not see any
evidence of negotiations between Kobil and the Rwanda Government,"
reads part of the letter whose copy The New Times obtained.
The letter was copied to
the President, Prime Minister, Chief Justice and the Prosecutor
General. A seven-member Chamber of Deputies ad hoc commission led by
Juvenal Nkusi this week confirmed that there was no agreement between
the Government and Kobil, despite the latter having acquired Shell
shares in PetroRwanda - a former state-owned petroleum company.
Ghost company
Both Kamagaju and the
Nkusi commission expressed worries that in the event of any losses on
the part of Kobil, the Government was likely to suffer the consequences
since Kobil Rwanda Oil Company is a ghost company by Rwandan laws.
"From documents available,
including confirmation from the Nyarugenge Higher Instance Court,
legally, Kobil Rwanda Oil Company does not exist," the AG said in her
letter.
Officially, Shell shares
in PetroRwanda were bought by Kenya Oil Company (Kenol), only for the
latter to put the management of its Rwanda businesses into the hands of
Kobil, which is said to be its subsidiary.
"Currently, Kobil manages
the Gatsata Depot but it is not clear under what arrangements. There is
no agreement between the Government of Rwanda and Kobil regarding the
management of Gatsata depot and the management of Government fuel
stock," Kamagaju said.
She added that it was
strange that Kobil, a company that is unregistered, is using Shell tax
file/TIN number, adding that "it appears Shell initiated the process of
selling its business in Rwanda immediately after expiry of its
licence."
The AG indicated that
Kobil also applied and got approval for an Investors' licence in 2006,
which amounts to the oil company getting a ten-year licence.
"I have also seen Kobil's
tax returns filed with Rwanda Revenue Authority, including 2005 Shell
tax losses. Government may be losing taxes. This needs to be
investigated further," Kamagaju warned.
She further revealed that
the Government had not taken any action on fuel losses amounting to
246,816 litres (attributed to Shell Rwanda) and another 129,899 litres
(attributed to the Ministry of Commerce officials) as highlighted in
her 2004 report.
The AG also reiterated
that the Ministry of Commerce (Minicom) does not maintain any stock
records for both the strategic fuel and the Japanese grant.
The Government has, since
2006, been receiving fuel grants from the Government of Japan, whose
proceeds both the AG and the Nkusi Commission said were never reflected
in the State's Consolidated Financial Statements.
Govt lost over Frw400m in four months
"We compiled a stock
movement schedule from available records which revealed unreconciled
differences of 301,244 litres of petrol and 149,480 litres of diesel,"
she noted, adding that during the same time, her office also
established another 249,953 litres of diesel that were unclear, and
which need to be substantiated by Minicom.
The document also shows
that the Government suffered a loss of Frw429,088,440 between October
2006 and February 2007 as a result of Minicom selling both the Japanese
fuel grant and strategic fuel stock below cost price.
"Government may not be
able to replenish its strategic stock from sale proceeds ..If the
Government is to replace the strategic fuel that was sold between
November 2006 and February 2007, it would have to add up to over
Frw400,000,000, otherwise the sale proceeds would procure much less
quantities," the AG continued in her letter.
'Evaporation' cost
Also in question is an
operational loss of 65,217 litres of petrol which Minicom took
responsibility for without putting to task Total - the firm that
manages Kabuye storage facilities - to explain how the loss came about.
The House Commission said
that according to Total, the litres evaporated, but the AG has
challenged that too, arguing that the proportion of the loss was too
much considering that the lost fuel was part of only 1,268,901 litres
of unleaded fuel at the time.
She indicated that the
fuel that allegedly evaporated represented 5.14 percent of the total
litres, which is far much higher that the standard 0.3 percent.
The AG also highlighted
cases where Minicom officials gave out fuel as loans to dealers without
any interest, but still failed to recover it on time, causing delays
spanning from 38 days to three years.
"Moreover these loans are not recorded in Minicom books as debts."
Both the parliamentary
probe team and Kamagaju pointed out the long delays by dealers to repay
the Government fuel and the expiry of repayment cheques worth
Frw1,888,421,266 held by Minicom but not banked on time.
Although Minicom officials
say the expiry was a result of delays in creation of a separate bank
account for proceeds from the sale of Japanese fuel grants, the AG
insists she never received "satisfactory explanation for the unusual
delays."
In addition, both the
Nkusi Commission and AG say that dealers who took Government fuel both
on loan and on credit, never gave securities, thus the risk of
non-recovery was very high.
Dalbit saga
On the controversial
Dalbit Petroleum deal which saw former Commerce Minister Protais Mitali
(now Youth Minister) award a tender to the Kenyan firm in total
disregard of the law, Kamagaju said she did not get any verifiable
evidence that indicated there was a crisis to justify the hurried
procurement at a high cost.
" .there is no document
indicating how the procurement decision was arrived at, how the
supplier was identified and how the price was negotiated."
The deal included 4
million litres worth $3.4 million after the Government slashed the
volume from 10 million litres when it obtained the first consignment of
the Japanese fuel grant.
The deal, which was
initiated by former Commerce Minister James Musoni (now Finance
Minister) was, according to officials, sanctioned in the interest of
the nation to curtail a possible crisis, an argument most MPs have
rejected.
However, despite the
seriousness of the issues raised by the AG, the Chamber of Deputies
never discussed that information this week when deputies were
discussing the Nkusi Commission report.
Observers say the MPs
avoided opening a 'Pandora's Box' at a time when they are left with
less than two months to the end of their mandate. Next parliamentary
elections are due in September.
Source: All Africa Global Media 20th June 2008
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