AG report exposes over K483m embezzled in petroleum sector

OVER K483 million was embezzled in the procurement of petroleum products between January 2019 to December 2022, a special report issued by the office of the Auditor General has revealed.

These financial anomalies are equivalent to US$1, 396, 111,768.

Overpayments towards suppliers of petroleum products as well as failure to pay them are some of the notable findings of the report released yesterday by the acting Auditor-General, Dr Ron Mwambwa.

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

Included in the amount were interest charges and risk premium in amounts totalling US$452, 152, 462.16 due to delayed payments and this represented 50.3 percent of the outstanding amount.

The report also cited the loss incurred from the sale of petroleum products.

The report also 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 gross abuse 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, Dr Mwambwa, suggested that the Ministry of Energy should submit procurement plans of petroleum products to the Zambia Public Procurement Authority.

This, Dr 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’s Procurement Committee and the Attorney General before final award of contracts to successful bidders to mitigate loss of public funds through onerous/ ambiguous contract clauses, among others.”