Vice President of IMANI Africa, Bright Simons, has revealed that the government paid Strategic Mobilisation Limited (SML) $4 million annually to verify prices of imported goods when the same service could have been obtained for as little as $5,000.
External Price Verification involves validating the prices for goods, services, or assets by leveraging globally recognised standard databases.
The recently released KPMG audit report on the contract between the Ghana Revenue Authority (GRA) and SML highlighted several discrepancies and inefficiencies in the pricing structure of these services.
In assessing the fairness of SML’s pricing, KPMG compared the contract with leading practice firms offering similar services in other jurisdictions. Their observations include:
- Comparators typically operate a subscription model with fees structured annually or monthly, rather than a fixed percentage of the overall transaction value per month (0.07% of the monthly CIF value).
- The fee paid under External Price Verification from November 1, 2019, to December 31, 2023, totaled GHC 131,589,863.41 (US$ 15,952,367.59), averaging GHC 2,631,797.27 (US$ 319,047.35) per month.
SML’s variable pricing structure and the inclusion of data collection significantly influenced the service’s cost. KPMG recommended that GRA consider alternative options, such as subscribing directly to databases, which may offer more favorable terms.
Alternatively, renegotiating the payment terms with SML to ensure the pricing structure is equitable and reflects the value received from the Transaction Value Assessment System (TVAS) was also suggested.
GRA is advised to conduct a thorough cost-benefit analysis to determine the most economically viable and efficient approach to external price verification, ensuring fiscal responsibility and maintaining the integrity of the pricing validation process.
SML’s role in external price verification required them to provide an external pricing database and conduct market research to assist the GRA in accessing current prices of imported goods. SML claimed to have granted access to TVAS and stationed two staff members at the Customs Technical Services Bureau (CTSB) in January 2020.
However, due to COVID-19, these staff members were withdrawn in April 2020. Concerns were raised regarding the reliability of SML’s pricing information, which was perceived as inflated or deflated by CTSB.
In May 2020, GRA implemented the Integrated Customs Management System (ICUMS), which includes external price verification capabilities. This created a duplication of the services provided by SML. From April 1, 2019, to December 31, 2019, and April 2020 to January 2, 2024, there was no evidence of external price verification services being offered or utilized by SML and GRA, respectively.
On May 23, 2023, SML provided TVAS system training for CTSB officials and delivered computers in December 2023 to aid GRA’s external price verification activities.
Based on KPMG’s analysis, SML partially delivered on the service requirements, and GRA may not have obtained all the expected benefits from the service. The audit report underscores the need for the government to review and optimize its contracts to ensure value for money and effective service delivery.