Kenya’s government-to-government (G-to-G) oil importation scheme, introduced to stabilize fuel prices and mitigate forex fluctuations, is under scrutiny after an audit revealed inefficiencies and irregular payouts amounting to Sh8 billion. Auditor General Nancy Gathungu’s report raises concerns over hidden costs that were ultimately passed on to consumers, highlighting transparency and sustainability issues in the program.
According to the audit, Kenyan motorists paid approximately Sh4 billion in irregular demurrage charges fees imposed when oil shipments are delayed at port. Under the previous open tender system (OTS), these charges would have been significantly lower or non-existent. Additionally, a Sh1 billion “legal fee” was included in pump prices, yet the beneficiaries of these funds remain undisclosed.
The report indicates that these hidden charges were applied during the July-August and August-September 2023 pricing cycles. Further, the Treasury directed the recovery of Sh2.5 billion through fuel prices between November 2023 and April 2024 to cover shortfall financing. However, the Energy and Petroleum Regulatory Authority (EPRA), the body responsible for approving such cost adjustments, was reportedly not consulted.
A key issue flagged by Gathungu is the failure of oil marketing companies to adhere to the stipulated five-day settlement period under the Open Tender System (OTS). These payment delays contributed to the shortfall, which was then transferred to consumers through pump prices. “The oil marketing companies failed to meet the five-day settlement payment period stipulated in the OTS terms and conditions,” the audit notes.
President William Ruto’s administration adopted the G-to-G importation model in March 2023, replacing the OTS, which allowed multiple oil marketers to bid competitively for petroleum imports. The new system was intended to ensure a stable fuel supply and protect the local currency from forex pressures. However, the recent audit suggests that the policy shift has led to increased costs for consumers and a lack of accountability in the pricing mechanism.
Gathungu’s report also questions the legitimacy of the payments made under the G-to-G scheme. It notes that there is no documentation justifying the irregular charges, including supplier claims, demurrage committee minutes, or approvals for the payments.
Critics argue that while the government has defended the program, it may lead to market inefficiencies, a lack of competition, and potential manipulation of fuel prices. As the debate over Kenya’s energy policy continues, the findings of the Auditor General’s report are likely to fuel further scrutiny of the government’s approach to fuel importation.
