AG uncovers more rot in fuel deals

KIGALI - New details have emerged 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. Ends

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AG uncovers more rot in fuel deals