Dr. Eric Boachie Yiadom
In recent times, Strategic Mobilization Limited (SML) has faced scrutiny, particularly after a documentary aired by renowned Ghanaian journalist, Manasseh Azure, questioned the company’s role and effectiveness in the tax revenue mobilization efforts of the Ghana Revenue Authority (GRA).
The documentary cast doubts on whether SML was truly contributing value to the state, or if its role was merely a financial burden on the government. As an entity specialising in revenue assurance services, SML has been instrumental in modernising Ghana’s petroleum revenue tracking systems, yet its contract and the company’s value proposition have been under fierce debate.
This article seeks to revisit the ongoing conversation around tax revenue leakages in Ghana’s petroleum sector and explore how technological advancements can be further leveraged to enhance revenue assurance. By highlighting the contributions of Strategic Mobilization Limited (SML) and its role in addressing some of the challenges, we aim to foster a collaborative dialogue among stakeholders.
Together, we can identify solutions to refine and scale up technology-driven approaches, ensuring more effective revenue mobilisation, reducing tax evasion, and building a sustainable framework for the future of Ghana’s economy.
Historical Context of Revenue Leakages in Ghana
Over the past decade, Ghana has faced significant challenges in its tax revenue mobilisation efforts. Tax revenue leakages have been persistent, especially in the petroleum sector, which is a key area of revenue collection for the government. Discrepancies in the reported volumes of petroleum products lifted and the taxable volumes recorded by the Ghana Revenue Authority (GRA) were common before SML’s involvement.
A review of the period between January 2019 and April 2020 reveals significant discrepancies between the reported liftings by the National Petroleum Authority (NPA) and the taxable volumes recorded by the Ghana Revenue Authority (GRA).
For example, during this period, the gap between NPA liftings and GRA taxable volumes amounted to 3,206,808,783 litres, resulting in a substantial loss of tax revenue. This discrepancy was driven by issues such as underreporting, fuel diversion, and a lack of real-time data tracking, which allowed for gaps in accurate reporting.
Prior to the implementation of Strategic Mobilization Limited (SML)’s technology-driven solutions, the volume data between the two authorities often diverged significantly, leading to tax revenue leakages.
As illustrated in the accompanying graph, which compares the volumes lifted by NPA (blue line) and the taxable volumes recorded by GRA (green line) from 2019 to 2023, the gap between these volumes was particularly wide before SML’s intervention. The year 2019 saw a consistent gap, with the NPA’s reported liftings far exceeding the GRA’s taxable volumes.
However, following the introduction of SML’s real-time monitoring systems and automated reconciliation tools, the gap has been significantly narrowed. By 2020, the data discrepancies began to diminish, with the gap shrinking to 260,893,885 litres by August 2021.
This reduction showcases the success of SML’s technological innovations, including electronic metering systems and automatic tank gauging, which enabled more accurate tracking of petroleum products, leading to improved tax compliance and an increase in government revenue.
Reducing the Gap Between NPA Liftings and GRA Taxable Volumes (2019-2023)
SML’s Technological Solutions and Their Impact
SML, a Ghanaian-owned company established in 2017, specialises in providing revenue assurance, monitoring, and specialised audit services. The company’s role in enhancing the revenue mobilisation process was highlighted in its partnership with the GRA to introduce a real-time monitoring system for petroleum liftings.
Prior to SML’s intervention, Ghana’s petroleum sector relied heavily on manual checks, which often led to underreporting and discrepancies in the recorded volumes of petroleum products. The introduction of SML’s Electronic Metering Management System (EMMS), a state-of-the-art solution, transformed the way the country tracked fuel products. The system enabled real-time monitoring of petroleum products at the depots, ensuring accurate measurements and improving transparency in the revenue collection process.
SML also deployed ultrasonic flow meters at all depots across the country, allowing for accurate monitoring of fuel liftings. The data captured by these meters is transmitted directly to the GRA, ensuring that every liter of fuel lifted is accounted for. This real-time data integration has significantly reduced discrepancies, which were a major cause of revenue loss.
Additionally, the Enterprise Relational Database Management System (ERDMS) is a centralized digital platform developed by the National Petroleum Authority (NPA) to trade and regulate petroleum transactions in Ghana. It provides a comprehensive view of petroleum product movements, pricing, and levy obligations. The ERDMS ensures that all transactions are recorded, and that no petroleum product is lifted or sold without proper documentation.
While the ERDMS serves as a robust trading platform, Strategic Mobilisation Limited (SML) complements its audit functionality by providing additional layers of verification and monitoring. SML installs ultrasonic flow meters at depots to record the volumes of petroleum products lifted at loading gantries.
These real-time measurements are reconciled with the Orders, allowing for cross-referencing with the volumes recorded by the NPA and GRA. This integration ensures that the data on the ERDMS corresponds to the actual volumes expected to be traded, thereby enhancing the accuracy of tax assessments and minimising discrepancies.
Furthermore, SML’s involvement extends beyond mere data collection. By implementing automatic tank gauging systems, SML provides a more precise measurement of petroleum products in storage tanks, replacing traditional manual methods. This advancement reduces human error and potential manipulation, ensuring that the recorded volumes are accurate and reliable. Additionally, SML’s AI-powered risk management system offers 24-hour remote surveillance, identifying anomalies and potential risks in real-time, which further strengthens the integrity of the data.
The Impact of SML on Revenue Leakages
Since SML’s systems were implemented, there has been a dramatic reduction in revenue leakages. According to performance reports, the data gap between NPA and GRA volumes significantly reduced from 3.2 billion liters between January 2019 and April 2020 to 260 million liters from May 2020 to August 2021. This represents a 92% reduction in discrepancies, showcasing the positive impact of SML’s technological interventions in the petroleum sector.
In terms of revenue, SML’s efforts have contributed to a substantial increase in tax collection. For example, between May and December 2020, SML’s real-time monitoring systems led to the identification of 1.75 billion liters of excess volumes, generating an additional GH₵2.5 billion in tax revenue. The cumulative increase in taxable petroleum products has continued to rise annually, with 3.8 billion liters generating GH₵5.5 billion in revenue in 2024 alone.
Clearing Misconceptions: The Role of SML in the Petroleum Sector
The documentary by Manasseh Azure raised concerns regarding SML’s involvement in the petroleum sector, particularly regarding its financial remuneration and its value-added services. Critics have argued that SML’s services are redundant, given the existing systems and the GRA’s ability to independently monitor the sector.
However, it is crucial to note that SML was not brought in to replace existing regulatory functions but to supplement them with advanced technological solutions. The GRA and NPA already had systems in place for tracking petroleum liftings, but these systems were not integrated, lacked real-time data capabilities, and were prone to human error. SML’s interventions provided the necessary technological infrastructure to bridge these gaps, enhancing the efficiency of the existing systems and improving overall revenue collection.
Furthermore, the claims of excessive payments made by the government to SML are grounded in the performance-based nature of their contract. SML’s compensation is tied to the revenue it helps generate, making their payments directly proportional to their impact. The risk-reward contract model ensures that SML only gets paid if they help increase government revenue. This ensures that both parties are aligned in their objectives to curb revenue leakage.
Conclusion: The Path Forward
While the debate around SML’s role and its financial arrangements continues, it is undeniable that their technological innovations have played a pivotal role in improving tax compliance in Ghana’s petroleum sector. The use of real-time monitoring systems, ultrasonic flow meters, and data reconciliation tools has significantly reduced tax evasion and underreporting, leading to increased revenue collection for the government.
As Ghana continues to strive for fiscal self-reliance and improved revenue mobilization, the role of technology-driven solutions like those provided by SML will become increasingly crucial. Ensuring transparency, reducing leakages, and improving compliance will remain key priorities for the government, and partnerships with companies like SML, which provide innovative and cost-effective solutions, are essential for achieving these goals.
For Ghana to continue making strides in its economic growth, it must embrace technology not only as a tool for improving revenue collection but also as a long-term strategy for ensuring fiscal sustainability.
Written by: Dr. Eric Boachie Yiadom
Senior Lecturer/Financial Economist
Banking and Finance Department
University of Professional Studies, Accra
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