Revenue Assurance and Compliance Enforcement: The Role of SML in Ghana’s Petroleum Sector

Strategic Mobilization Limited (SML) Under Scrutiny

Recently, Strategic Mobilization Limited (SML) has faced criticism. A documentary by journalist Manasseh Azure questioned SML's effectiveness in tax revenue mobilization for the Ghana Revenue Authority (GRA).

The documentary raised doubts about SML's value to the state. It suggested that SML might be a financial burden on the government. Although SML specializes in revenue assurance services, its contract and value proposition are debated.

This article revisits tax revenue leakages in Ghana’s petroleum sector. It explores how technology can enhance revenue assurance. We aim to foster dialogue among stakeholders about these issues.

Together, we can find solutions to improve technology-driven approaches. This will help reduce tax evasion and build a sustainable economic framework for Ghana.

Historical Context of Revenue Leakages in Ghana

Over the past decade, Ghana has struggled with tax revenue mobilization. Persistent leakages have been especially problematic in the petroleum sector. Discrepancies between reported and taxable volumes were common before SML's involvement.

From January 2019 to April 2020, significant discrepancies occurred between the National Petroleum Authority (NPA) and GRA data. The gap amounted to over 3 billion liters, leading to substantial tax losses.

Issues like underreporting and fuel diversion contributed to these discrepancies. Lack of real-time data tracking allowed gaps in accurate reporting.

Impact of SML’s Technological Solutions

SML was established in 2017 as a Ghanaian-owned company. It provides revenue assurance, monitoring, and audit services. Its partnership with GRA introduced a real-time monitoring system for petroleum liftings.

Before SML's intervention, manual checks led to frequent underreporting issues. The Electronic Metering Management System (EMMS) transformed tracking of fuel products significantly.

SML also installed ultrasonic flow meters at depots nationwide for accurate monitoring. Data from these meters is sent directly to GRA, ensuring accountability for every liter lifted.

Additionally, the Enterprise Relational Database Management System (ERDMS) tracks petroleum transactions comprehensively. It ensures all transactions are documented properly without any lapses.

SML complements ERDMS by adding verification layers through ultrasonic flow meters at loading gantries. This integration enhances accuracy in tax assessments and minimizes discrepancies further.

Reduction of Revenue Leakages Since SML’s Implementation

Since implementing SML’s systems, revenue leakages have dramatically decreased. Reports show that discrepancies fell from over 3 billion liters to around 260 million liters within two years—a reduction of 92%.

In terms of revenue generation, SML's efforts have been significant as well. Between May and December 2020 alone, they identified excess volumes generating an additional GH₵2.5 billion in taxes.

The cumulative increase continues annually; by 2024 alone, it generated GH₵5.5 billion from taxable products.

Clearing Misconceptions About SML’s Role

Manasseh Azure's documentary raised concerns about SML’s role and payments received from the government. Critics argue that existing systems make SML redundant since GRA can monitor independently.

However, it's important to note that SML supplements existing regulatory functions with advanced technology solutions rather than replacing them entirely.

While GRA had systems for tracking liftings before, they lacked integration and real-time capabilities prone to human error—issues that SML addresses effectively through its innovations.

Claims regarding excessive payments stem from their performance-based contract model with the government—payments depend on increased revenues generated by their interventions.

Conclusion: The Path Forward

Despite ongoing debates about SML’s role and financial arrangements, their technological innovations have improved tax compliance significantly in Ghana’s petroleum sector.

Real-time monitoring systems and ultrasonic flow meters have reduced evasion rates substantially while increasing government revenues overall.

As Ghana aims for fiscal self-reliance and better revenue mobilization strategies moving forward, technology-driven solutions like those provided by SML will be crucial.

Embracing technology is essential not just for improving collection but also for ensuring long-term fiscal sustainability as part of economic growth strategies.

*Written by: Dr. Eric Boachie Yiadom*
Senior Lecturer/Financial Economist
Banking and Finance Department
University of Professional Studies, Accra