The Kenya Pipeline Company (KPC) board should be commended for resolving to get to the bottom of alarming losses of petroleum products during transportation. Indeed, analysts may be forgiven for arguing that this issue has gone on for too long.
Failure to tackle this issue head-on, until last week, had raised fears that there might have been even bigger losses in other areas in which the top brass might have ignored for reasons best known to them. The hope that the entire government law-enforcement machinery will be brought to investigate the shenanigans at the company with a view to bringing those found culpable to justice is based on five main reasons.
First, although the oil marketers are compensated for the losses suffered, the general – not just the petroleum products – consumer ends up footing the entire bill as the pilfered products form part of the final price paid at the pump. It is no secret that the cost of petroleum products is one of the major drivers of inflation. And inflation is one of the key drivers of unequal distribution of wealth as it robs the poor the little they have and hands it over to the rich.
The tragedy is that this greed by a few individuals translates into massive impoverishment of many Kenyans almost half of whom are living below the poverty level.
Second, the ‘’engineered’’ losses also impact negatively on the balance sheets of oil majors because the stolen oil products are sold in the same market. This gives dealers in the “lost” oil an unfair advantage because they can, and usually do, sell the products at below the market price.
Third, continued losses lead to increased pressure on Kenya Revenue Authority (KRA) to find new tax sources to plug the hole left by these profiteers who do not pay the requisite taxes. The result is a general increase in taxes especially the easy to collect ones of Value Added Tax (VAT) and Customs and Excise. This, inevitably, leads to a general increase in prices of goods and services and pushes up inflation.
Fourth, the motoring consumer gets hit by a double blow. He not only pays a higher pump price but his vehicle ends up costing more in repairs as the embezzled petroleum products usually get adulterated. The proliferation of adulterated oil has also had a negative effect on oil exports to neighboring countries most of whom have reduced the volume of the products they import from Kenya.
The adulteration of oil has thus done a good job of denting Kenya’s image as a trustworthy partner. The fact that unscrupulous oil traders in these countries may be involved in the same shady activities does not reduce Kenya’s need to clean its own stable.
Fifth and perhaps the greatest impetus for cleaning up KPC may lie in the fact that failure to do so could lead the country into the list of nations whose citizens gain little from their oil discoveries and exploitation. Instead, the number of the poor rises as they flock into the oil wells and urban centres in desperate search for non-existing jobs. One does not need to look far to see the effect of allowing the carpet-baggers and outright thieves to control a national resource such as oil. Nigeria and Angola top the list in Africa while Venezuela takes the cake in South America.
The level of poverty which usually plays out in the lack of basic necessities in these countries is made worse by the extravagant life-styles of those who have fingers in the pie. This sorry state of affairs fuels political instability that often leads to wide-spread violence.
This explains why analysts often conclude that oil discoveries are more of a curse on ordinary people than a blessing. Surely, only Kenya’s enemies would wish such a future for its people.
But to keep the dragon of excessive greed at bay, the government needs to encourage KPC management to carry out a forensic audit of all its operations and root out all corrupt and below the standard practices.
The good news for the company is that its chief executive officer is relatively new and has not had time to be tainted. [email protected]