Page 5 - AfrOil Week 13 2020

AfrOil COMMENTARY AfrOil
 But the stakes are not the same for these two parties, at least not with respect to petroleum products. Landlocked Uganda is completely dependent on refined fuels, as it is still several years away from bringing its own oilfields on stream. Traditionally, it has received these fuels via Kenya – that is, via the KPC’s pipeline from Mombasa to the Eldoret terminal, where tanker trucks load up before starting the journey back to Uganda.
As a result, loss of access to Eldoret represents a threat to Uganda’s fuel supplies, The Monitor noted. Other observers showed less concern, with the East African pointing out that petro- leum product distributors could turn to other delivery routes through Tanzania. Neverthe- less, it is not clear whether Ugandan companies can make new transport arrangements quickly enough to head off shortages if Busia and other border crossings are blocked again.
Lower volumes
But border crossings are not the only obstacle. Ugandan Finance Minister Matia Kasaija said last week that the coronavirus outbreak also appeared to be affecting the amount of fuel shipped from the Middle East to KPC terminals in Eldoret and Kisumu.
According to the East African, Kasaija said that the volume of petroleum products deliv- ered to Mombasa and earmarked for shipment to Uganda via the KPC system had dropped in recent weeks. As a result, Ugandan companies have had to withdraw fuel from inventory to cover demand, and the country’s reserves are dwindling, he said.
As noted above, the minister attributed these developments to the pandemic, which has had far-reaching consequences for global supply chains. He also said that Uganda’s government was trying to resolve the matter.
“We have raised the issues with the Kenyan authorities, and we are doing everything possi- ble to ensure the supply of petrol and diesel is sorted,” he said, without elaborating.
Tax claims
Meanwhile, coronavirus-related developments are not the only hazards facing Uganda’s fuel market. Petroleum product shipments from Kenya have also been held up for bureaucratic reasons.
On March 21, the East African reported that the Kenya Revenue Authority (KRA) had halted more than 200 fuel tanker trucks in KPC’s Eldoret and Kisumu terminals. In letters deliv- ered to the trucks’ owners, KRA said it would not allow the fuel shipments to continue to their intended destinations in Uganda, South Sudan, Rwanda, the Democratic Republic of Congo and Burundi unless it received overdue tax payments.
The Kenyan government agency has accused the companies involved of failing to pay a total of KES757.6mn ($7.2mn) in taxes since 2015 for petroleum products that they allegedly sold on local markets rather than shipping it across the border. The fuel companies have denied these charges, saying that they exported their cargoes as reported. But KRA has reportedly demanded that the firms provide documented proof that they paid customs duties on the full amounts in other countries.
According to the East African, the freeze did not remain in place for long, as Kenyan offi- cials did eventually let some trucks leave. But it could very well happen again. Kevin Safari, KRA’s commissioner for customs and border control, told the East African on March 21 that his agency was determined to collect all of the money it believed it was owed. “Where taxes remain outstanding, we will recover [funds] from the guarantors to the transit security bonds – that is, [from] insurance companies and banks,” he said.
This threat appears to have teeth. The East African reported that it had seen documents in which KRA had instructed a number of banks to liquidate fuel companies’ security bonds in order to facilitate payment of the tax revenues demanded. This policy could lead to substan- tial disruptions in cross-border trade, as these bonds ensure that fuel traders also have cash in the bank to cover their transit and customs costs.
Such disruptions, in turn, would only com- pound the problems that have arisen because of the coronavirus pandemic. They might not lead to immediate shortages, given that Ugan- da’s government has added restrictions on travel by public transit and private automobiles to its public health regime. But since fuel stocks are reportedly shrinking, Ugandan fuel traders and distributors might do well to start examining their options for transit through Tanzania. ™
“ in Kenya could
compound the problems that have arisen in Uganda as a result of the pandemic
Tax disputes
Kenya Pipeline Co. fuel storage depot (Image: KPC
Week 13 01•April•2020 w w w . N E W S B A S E . c o m
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