Auditor General’s report hints at anomalies in petroleum products procurement


Financial anomalies amounting to over K483 million in the procurement of petroleum products between January 2019 to December 2022 have been highlighted in a special report issued by the office of the Auditor General on Thursday.

These actions were equivalent to US$1,396,111,768
Notable findings were failure to pay suppliers of petroleum products and overpayments to these dealers.

Audit findings related to failure to pay suppliers of petroleum products in amounted to US$898,440,122 while overpayments were at US$36,373,827.

The report also cited the loss incurred from the sale of petroleum products, totalling US$197,815,520.

An examination of profitability and loss reports on commingled feedstock for the period from April 2017 to August 2021 revealed that this loss stemmed from subsidies, which entailed the selling of the products at a price that is lower than the procurement cost.

The report further cited wasteful expenditure on arbitration awards that were granted against the government, alongside legal fees and arbitration costs in amounts totalling US$40,895,182.

In addition, there was Loss of Funds due to questionable contract clauses amounting to US$34,349,962 among others.

Other irregularities were Irregular charging of Traders Margin of US$58,550,400.

A trader’s margin is paid to a trader who procures petroleum products from the refinery on behalf of the supplier.

“An examination of the price schedule revealed that the supplier included a trader’s margin cost component in the price build up and consequently was paid US$58,550,400 as trader’s margin without the approval of the Ministry contrary to the supplier’s contract which as at 31st January 2024, had not been recovered,” the report stated.

Commenting on the findings, acting Auditor-General, Ron Mwambwa, suggested that the Ministry of Energy should submit procurement plans of petroleum products to the Zambia Public Procurement Authority (ZPPA).

This, Mwambwa said, was in line with the Public Procurement Act No. 8 of 2020 to avoid uncompetitive/emergency procurements.

He also suggested that: “that the Ministry should put in place mechanisms to ensure that terms and conditions of contracts are thoroughly scrutinised by the Ministry Procurement Committee and the Attorney General before final award of contracts to successful bidders in order to mitigate loss of public funds through onerous/ambiguous contract clauses, among others.”

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