Kenya Kwanza’s strategy to cut fuel prices is not working, a new audit has concluded. Auditor General Nancy Gathungu said the government-to-government importation scheme is not efficient.
She has flagged about Sh8 billion, which was passed on to consumers in the arrangement during the review period.
It is emerging that motorists paid Sh4 billion in irregular demurrage charges, which they wouldn’t have incurred under the old system.
Another Sh1 billion ‘legal fee’ was charged to consumers at the pump, and whose beneficiaries were not disclosed.
As per the audit, the charges were passed to motorists in the July-August, and August-September 2023 pricing cycles.
Some Sh2.5 billion was recovered through pump prices during the November 2023 to April 2024 pricing cycles in respect of shortfall financing.
Treasury ordered the recovery in a letter of August 1, 2023, but queries are abounding after it emerged the Energy and Petroleum Regulatory Authority (EPRA) was not consulted.
Prudent costs are to be approved by the Energy and Petroleum Regulatory Authority before they are included in pump prices. It is also emerging Kenyans could have borne the costs yet the shortfall was staged by delayed payments by some oil marketers.
“The oil marketing companies failed to meet the five-day settlement payment period stipulated in the OTS terms and conditions,” Gathungu said.
President William Ruto’s administration implemented the G-to-G system with a view to mitigate foreign exchange fluctuations.
Before the March 2023 policy shift, Kenya used an open tender system, and the change was aimed at helping stabilise fuel prices.
While the government has emphasised that the deal has its benefits, critics argue that it could lead to a lack of transparency and potential inefficiencies in the oil supply chain.
There are also concerns about the long-term sustainability of the arrangement and the adverse impact on competition in the local oil market.
In what could lay credential to the fears, irregular demurrage was passed to consumers through pump prices between March 2023 and June 2024.
Gathungu has further cast doubt on the payments, saying there was no documentation to back the same.
“The charges were not supported by requisite documentation, including claims from suppliers, demurrage committee minutes approving payments, and the reasons for payment,” she said.
