Rwanda: Fuel Probe - Mismanagement, But No Embezzlement
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Focus Media (Kigali)
23 June 2008
Posted to the web 23 June 2008
Sam Ruburika
When the Auditor General, Evelyn Kamagaju, presented her 2006 report before the chamber of deputies in March, her most shocking revelation was that the national strategic fuel reserves had been grossly mismanaged. The stunned deputies were quick to set up a commission to further investigate the matter.
When the seven-member probe team led by Deputy Juvenal Nkusi, the chairman of the standing committee on economic affairs, presented their findings last week, it became clear that "mismanagement" was an understatement of sorts.
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Indeed, the commission discovered that for months checks worth Frw 1.6 billion had been sleeping in the ministry of commerce-so long, in fact, that they had expired.
Frw 1.4 billion of that money consisted of revenue from fuel given by Japan, which had signed an agreement with the government of Rwanda for the proceeds from the sale of the fuel would be allocated through the national budget to development projects. Two other such grants are supposed to follow, although that might now seem unlikely.
The remaining Frw 0.2 billion consisted of guarantees given by private companies when they bought fuel from the national reserves, and who were supposed to return the same quantity of fuel later.
The reason why the checks expired is even more baffling: apparently no one at Minicom had found it necessary to open an account at the National Bank to deposit the money received for the Japanese fuel.
Then one beautiful day somebody discovered the expired checks, resulting in hopefully embarrassed Minicom officials having to contact all the issuers to ask them to kindly write a new check.
"An oversight"
It was, however, not the end of the story, as the probe commission discovered. With the money finally in the bank, it was time to spend it as agreed with the Japanese government. However, no trace of the Frw 1.4 billion was found in the budget accounts.
According to Deputy Nkusi, the investigators were informed that the money had been used in the building of KIST laboratories. The fact that it had been allocated directly, and not through the budget, was described as "an oversight."
And the deputies were in for a few other nasty surprises. For instance, there were noticeable differences between the deposits made at the National Bank, and the records in Minicom's accountancy. "The Auditor General found out that the amount of money mentioned in Minicom's books did not correspond to the value of the deposited checks," MP Nkusi said.
Moreover, the probe team found out that Minicom did not posses any bank records whatsoever regarding the fuel money, and that no bank reconciliation statements had been established.
Furthermore, the Ministry did not possess any registry concerning the amount of fuel imported into the national reserves, nor on the volume used and borrowed to private fuel dealers.
The probe team therefore concluded that Minicom had been negligent, given that no adequate monitoring and supervising techniques on the use of public fuel had been employed.
The reason for this, they found out, was a complete lack of efficiency of the special petroleum unit with in the Ministry, which was understaffed and whose employees lacked the necessary skills and knowledge concerning fuel management.
Indeed, up to date there are only two employees in this unit, and due to a heavy workload they mostly rely on e-mail messages from a Rwanda Revenue Authority (RRA) officer posted at the national reserves, in order to keep their update on the state of the strategic fuel.
Ten million liters, pronto!
The can had been opened, and the worms kept coming out. Indeed, the probe team found other instances of negligence or mismanagement of the national fuel reserves.
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In 2005, for instance, Minicom had contacted the Kenyan company Dalbit Petroleum to order ten million liters of fuel. The deal was brokered between the then Commerce Minister, James Musoni (currently Minister of Finance), and the ambassador of Rwanda to Kenya. The representative in Rwanda of Dalbit Petroleum was contacted, and negotiations led to a draft contract from Dalbit petroleum.
So far so good? Not really. Minicom did not inform the National Tender Board about the Dalbit contract, as required. According to James Musoni, this was due to the fact that there was at the time an acute fuel shortage, caused the breakdown of the Eldoret pipeline which is normally the source of fuel for Rwanda.
However, the deputies were far from impressed by this explanation. "Bypassing the normal tendering process, even in the name of public interest, is still a contravention of the law," Deputy Juliana Kantengwa said.
Out of the ten million liters of fuel requested, only four million were finally delivered. Here, the former Commerce Minister explained that the Japanese fuel grant had arrived, and as a consequence there would not be enough storage facilities for the full consignment of ten million liters.
It is also interesting to note, as Mincom officials explained to the probe team, that the Dalbit order was in fact the second such contract. Some time earlier, the ministry had contacted Gapco, a private fuel company, with the request to supply two million liters of fuel.
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However, when only 800,000 liters had been supplied, an increase in fuel prices occurred, prompting Gapco to demand a higher price for the remaining fuel-even if there was no such provision in the contract.
Some time later, Gapco informed Minicom that it would not be able to supply the rest of the order due to sudden increase in the fuel prices. No explanation was given as to why Minicom remained mute at this breach of contract.
The parliamentarian investigative committee also revealed that at that moment, there were a mere 5 million liters of fuel in the strategic reserves, barely enough to meet the country's fuel needs for one week.
Two million liters missing
It seems that, as the probe team found out, the national strategic fuel reserves exert some magnetic force that attracts incompetence and/or negligence. Indeed, prior to 1997 they were managed by the public enterprise Petrorwanda.
When the company was privatized in 1997, the Anglo-Dutch company Shell did not only take over its infrastructure, but it also signed a contract with the government for the management of the strategic reserves infrastructure. As the probe team found out, the hand-over documents showed that some two million liters of fuel were "missing," which was attributed to poor management of public fuel.
Later on, Shell sold its petrol stations to Kobil, which would also be the logical successor for the management of the fuel stocks. Obviously this would require a new contract between Kobil and the government-yet no such document ever existed. Despite the absence of a formal agreement, the cabinet nevertheless granted Kobil permission to go and manage the strategic reserves.
The probe team discovered another case of stock fuel vanishing into thin air-this time literally. At a certain moment, 64,000 liters of fuel were lost in Gatsata as a result of evaporation.
"The international standard of fuel loss through evaporation is 0.3% for petrol and 0.2% for diesel," Deputy Nkusi informed the members of parliament, and the 64,000 liters far exceeded that. The cause, as identified by Total Rwanda, was that one of the special seals which close the fuel tanks had broken, and it took several days to replace it.
Not enough fuel to face crisis
The probe members also argued that the current fuel reserves are not adequate in case of a fuel crisis (of which the air is abuzz globally). Indeed, the strategic fuel reserves are located at Rwabuye, Gatsata, Kabuye and Bigogwe, which together have a storage capacity of 31.7 million liters. Yet the Bigogwe infrastructure, with a capacity of 5 million liters, is currently in a state of disrepair and cannot be used.
On the other hand, Rwanda's current consumption is estimated between 500,000 and one million liters per day. Therefore, the committee concluded that the country can survive on the reserves for only one and a half month, in case of a long time crisis.
The above-mentioned litany of incompetence and bungled management would make even the most naïve observer suspicious. However, the commission stressed that, although Minicom could not account for the Frw 1.4 billion from the Japanese fuel grants, it had found no evidence whatsoever that this money had been embezzled, but only that it did not appear anywhere in the State Treasury records, as should have been the case.
Conclusions
In conclusion of the inquiry, the probe team suggested that the management of the strategic stocks should be given a special management, with the ministry of commerce elaborating clear regulation on the management and general usage of public fuel.
The commission also pointed out that the fuel management is handled by various institutions, which creates loopholes for errors and irresponsibility; it was therefore suggested that the fuel stocks should either fall under the responsibility of the energy ministry or be managed by a new institution.
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On the issue of rising prices, the committee urged the association of petroleum importers to organize themselves and import fuel directly from the Middle East so as to bypass middlemen. It further urged the Rwanda Utility Regulatory Agency (RURA) to control the quality of fuel imported in the country, considering that Rwanda currently does not check the quality of fuel.
The probe team also urged that new and bigger tanks be built so as to increase the capacity of the strategic reserves.
"In the past, Rwanda has been using between 8 and 10 million liters per month, but today we are using between 20 and 25, so the volume of strategic reserves should also increase," the team concluded.
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Jean-Louis Kayitenkore
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