United Kingdom HM Revenue and Customs (HMRC) arrested 8 men and 55,000 litres of fuel seized, as part of an investigation into Fuel Fraud United Kingdom HM Revenue and Customs (HMRC) arrested 8 men and 55,000 litres of fuel seized, as part of an investigation into Fuel Fraud

Time for Africa to do more to combat fuel fraud - Johann van Niekerk

Jun 13, 2017

The smuggling, dilution and adulteration of fuel is a pervasive and persistent threat to the energy sector in many countries around the world, raising the bar for governments and the private sector to do more.

Fuel fraud and its damaging effect on the environment and public health due to poorer quality of the remaining product is one of the major energy challenges for many African countries today. When criminals are allowedJohann van Niekerk
to run rampant their schemes divert significant revenues headed to the general and economic development funds, thereby having a deleterious effect on citizens who are denied the benefits these funds would otherwise afford.

A 2015 briefing paper by the ADB (Asian Development Bank) highlights what a bit of commitment can achieve in eradicating this scourge. A case study on Ghana, for example, indicated that mere awareness of the Ghana Petroleum Product Marking Scheme served as an effective deterrent against fuel fraud within the country. The use of an aggressive public awareness campaign and the enrolment of the major oil companies helped reduce the percentage of retail sites with significant fuel product dilution from 34% to 7% in the first 6 months of the program. This translated into significantly increased tax revenues and a more than 100% return on investment.

While fuel-marking systems have been in use since the 1950s, the ADB papers says that recent developments in marker technologies, coupled with advances in analytical capacity, now provide the technical foundation for extremely accurate and effective fuel-marking programmes. Advanced technology molecular markers and sophisticated management systems can result in timely, actionable intelligence, allowing governments to mitigate tax evasion and subsidy abuse, minimize financial losses, and raise revenues.

Modern fuel marking programs also enable higher compliance with modern environmental standards related to air quality and pollution.  The Basel, Rotterdam and Stockholm Conventions share the common objective of protecting human health and the environment from hazardous chemicals and wastes. 

The recent “Triple COPs” meeting in Geneva, the largest gathering yet of 1,300 participants from more than 170 countries of these treaties, called for more varied, specialised and innovative approaches that draw on traditional knowledge and advances in science and technology to reduce the impact of chemicals and waste on the environment, including wastes from internal combustion engines.   In particular, the Stockholm Convention, a global treaty to protect human health and the environment from persistent organic pollutants (POPs), outlines a number of best practices to ensure the effect of internal combustion engines are minimized on the environment. 

Fuel marking programs should thus not only be designed so that the chemicals used for marking are compliant with these treaties, but the execution of the program must lead to higher quality of the fuel itself for improve environmental fates.

In another developing market example, the Serbian government said fuel adulteration was resulting in an annual loss of €40 million, and industry experts estimated the actual loss to be as high as €100 million. According to the ADB, the oil companies in Serbia welcomed the introduction of the marking system, after seeing sales volume increase by 18% for diesel and 14% for gasoline—this during a time when the government expected sales to decline due to poor economic growth and catastrophic flooding throughout most of Serbia. Based on its excise tax collections from when the program started, the government expects a €60 million increase in excise tax collection as a result of fuel-marking.

There is little doubt that fuel marking programmes make a difference – and will do so in Africa in the years ahead as more countries implement the right solutions with trusted partners. Authentix, a leading global authentication and information services company that assists in combating illicit trade and managing the integrity of their global supply chains, has already protected over 1.5 trillion litres of fuel with its innovative marking programmes. These programs ensure the integrity of the entire fuel supply chain, as the safeguards needed in every phase of the process are ensured. This requires marker and analyser technologies that integrate security measures directly into the different types of fuel.

Innovation and tailored solutions are crucial and Authentix therefore employs both overt markers for consumers and covert marker that require proprietary devices to be detected by brand or government regulators. This is a robust and secure “lock & key” method for authentication where both the “lock” and the “key” must be known to replicate the solution. In addition, all these technologies are compliant with the most stringent regulations for environmental compliance and best practices within the fuel additives industries. 

The right solutions will engender the right outcomes and a well-designed fuel marking program will increase the effectiveness of governments and marginalize criminals. With current technology and program design, the solution is affordable, environmentally sound, and effective. The time for action is now, to end the assault on the environment and choke the flow of public funds to organized crime.

 

Johann van Niekerk is the managing director for Authentix, Southern & East Africa

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