Growth in the Ghana Oil Company Limited (GOIL) has taken a nosedive in the first six months of the year as fuel smuggling continues to take a heavy toll on the general operations of companies in the downstream petroleum sector.
The challenges manifested in a decline in products distributed and was pronounced in the diesel distribution business, where the smuggling menace is gaining enormous currency, GOIL’s Managing Director, Mr Patrick Akpe Kwame Akorli, told the Graphic Business on July 18.
The debilitating effect of the fuel theft on the company’s fortunes means that plans to grow its gross sales by eight per cent this year will no longer materialise.
“We projected to grow at eight per cent this year, but because of the fuel smuggling and other challenges, we are not seeing that growth,” he said in an interview and added that the situation called for increased stakeholder efforts to help combat the menace.
“If we allow these people (the perpetrators) to continue, they will become more confident and that will cost the state and the companies even more,” he said.
The gross revenue of GOIL and its wholly owned subsidiary, Goenergy, ended last year at GH¢4.1 billion, partly making it possible for the company to declare and subsequently pay a dividend of 25 pesewas per share. This brought total dividend for 2016 to GH¢9.8 million.
At a growth rate of eight per cent for 2017, GOIL’s gross revenue could have totalled GH¢4.43 billion by December. That would have been translated into increased payment of dividend, taxes and other statutory contributions to the national kitty.
However, with the fuel smuggling menace still in place, Mr Akorli said it would be difficult to realise such aspirations as sales continued to fall short of expectations.
“As we speak now, the sales are not as we anticipated and it is all because the illegal trade is persisting,” he said.
GOIL’s misfortunes, resulting from the illegal sale of fuel, would add to the woes of companies in the fuel trading business, where 10 per cent of their annual turnover, translating into some GH¢1 billion, is being lost to the criminal activity.
For some time now, the illegal importation and sale of refined petroleum products – fuel smuggling – has been eating away the profit margins of fuel traders in the country, resulting in a drop in volumes.
The Association of Oil Marketing Companies (AOMCs) put the loss at 230,000 metric tonnes for last year.
Although captured as a decline in consumption, the 230,000 metric tonnes of refined petroleum, which represents 5.6 per cent of last year’s national consumption, is the amount of business OMCs and bulk oil distributors lost to the growing smuggling business.
Given that products from these pirates do not pass through approved routes, where taxes and other levies are collected, AOMCs estimates that the decline translates into some GH¢850 million revenue that was lost to the state in 2016 alone.
Beyond costing the state in tax revenue, the entrenchment of the fuel smuggling business means that licensed suppliers “are gradually pushed away” from business, the Chief Executive Officer of the AOMCs, Mr Kwaku Agyemang-Duah, told the paper in May this year.
Although the National Petroleum Authority (NPA) has announced some measures to deal with the situation, GOIL’s MD feared a delay in implementing those measures could embolden the fuel smugglers to step up their operations.
“We commend the authority for those measures but let us be sure that they will work,” he said.
The measures included limiting fuel export routes, tightening security at entry and exit points, as well as taxing products meant for exports but allowing the exporters to file for tax refunds.
In May this year, the AOMCs said fuel smuggling could force its members of about 102 companies to lay off some 4,000 employees. – GB