A fortnight of fuel policy turmoil raises fresh governance questions

At the end of a drama-fuelled fortnight, let’s see if we have the basic facts right. 

In the week after Easter, we were told a high-controversy consignment of imported, and super-expensive “bad fuel” would have added around Sh40 to pump prices, presumably without subsidies. 

Then, last week, our less expensive Government-to-Government (G-to-G) “good fuel” prices rose by up to Sh40 for diesel, then dropped by Sh10, after subsidies and tax cuts that do not look sustainable even in the short term. Please make this make sense because the math simply doesn’t math! 

Naturally, the full story is more complex, but let’s treat this as a starting point.  Especially given our low-trust society, which is growing increasingly tired of officials who prefer the high-calorie effort of obfuscation and deceit to the lower-energy efficiency of transparency and accountability.

In our current tragi-comedy, let’s summarise a past fortnight from hell for the ruling Kenya Kwanza administration. The “bad fuel” week flowed from an Easter drama of late-night arrests of senior officials, who then resigned while in police custody, before being released on bond as investigations continue. 

We were told about the manipulation of fuel stock data in order to procure emergency oil imports.  We were duly informed that these procurements were irregularly effected outside the G-to-G framework. Worse, we learnt that the oil being imported was “sub-standard”.  At this stage, it seemed logical that somebody had a serious case to answer.

Enter the confusion. First, we learnt that, a couple of weeks earlier, a national security meeting apparently approved some sort of alternative sourcing of oil imports on account of the war in the Middle East. 

Leaked documents showed that there was a larger group involved, directly and indirectly, in this decision-making, and both policy leaders (CSs) and accounting officers (PSs) in the relevant ministries were fully aware. So, was it the data manipulation that informed the national security decision, or the national security decision that inspired the data manipulation? Further, is G-to-G a specifically exclusive partnership arrangement, or are visitors allowed?

That’s just half the story. Because there’s the added question of whether the first batch of “sub-standard” oil imports actually entered our petroleum system. Kenya Pipeline, which runs the system’s core logistics, said yes, but a gaggle of Senators on a Mombasa field trip said no. Who are we to believe? 

Of course, if these “molecules”, as they are called, are in the system, then despite EPRA’s disclaimers, we are definitely paying for them in our pump prices by contract, right?  In all of this drama, don’t forget that we have some sort of “economic sabotage” investigation that’s going on, except that, as is par for the course with every public scam, it’s all suddenly gone quiet.

Then there was the “good fuel” week. Remember, the “bad fuel” week was premised on a fuel shortage. This latter one was based on the assertion that we have sufficient fuel stocks for now, except that we cannot quite figure out whose sufficiency figures to believe.  Let’s just say that two to four weeks of stocks mostly sitting in the pipeline is nowhere near a definition of sufficiency. 

In the pump pricing shock that Kenyans encountered this week, it is easy to forget, as said at the beginning, that we basically dodged one bullet but almost ended up taking a bigger one.  As the country prepares for possible protests on Tuesday, nothing in the official story seriously adds up.

Which brings us to the “non-government” view. The term non-government is deliberately preferred to opposition or alternative government because these people are two sides of a coin, one side of which reads “It’s our turn to eat” with the other reading “It was/will be our turn to eat”.  From this cynical perspective, our elections are basically a “heads or tails” toss of the coin, but I digress.

Predictably, the non-government view has been harsh. The “bad fuel” story was characterised as something between a shady deal gone bad and the breach of established “eating protocols”.  The “good fuel” episode was dominated by grave accusations against the country’s top leadership. Suddenly, 2022 was “good times” and today is bad, a clever reversal of 2022 campaign rhetoric.

The short way to think about this is the official side claims to be fighting cartels, but the other side suggests the official side is the actual cartel. Woe unto ordinary Kenyans trying to figure this out in the face of fuel shortages at the retail end, then high prices, then bad fuel to cap it all off.

You can be sure that there is more to come from our ongoing fuel saga. On the “bad fuel” episode, will anyone actually be charged in court, and what will they be charged with?  On the “good fuel” episode, was this week’s price hike a teaser for greater pain in May?  Remember, the latest pump prices used rising global prices, the next will use already risen, that is high, prices. Put it this way. That’s why the greater part of our fuel price stabilisation buffer was held back.

In a functioning country, one expects officials to step in front of, rather than feed, speculation. This article today is the tip of the iceberg of conjecture currently running across Kenya. We might also ask how the dominant firm in our list of nominated G-to-G oil marketing companies, with another leg in Turkana oil drilling, was reportedly involved in this emergency procurement. And that’s before we lift the corporate veil on the beneficial ownership of this and similar outfits.

But let’s instead conclude with three harsh reflections for now. First, it is striking that the two items that matter most for our cost of living – food and fuel – just happen to be the most frequent sources of scandal and scam (look also at how somebody is happily processing industrial sugar for human consumption). These are the two dominant items in our inflation basket, but hey, as they said in Nazi Germany, “there’s money to be made when there’s blood on the streets”.  Think drought and famine, or fuel shortages, as lucrative cash cows for our politicians as businesspeople.

Second, following these distortions to our cost-of-living basket, we then suffer double jeopardy in the multiplicity of taxes and levies that make fuel in Kenya more expensive than pretty much everyone in our neighbourhood, except Rwanda.  The truth of the matter is, we are unable to have a conversation about this tax and levy burden because the government cannot find an alternative source of easy and painless revenue, probably because we refuse to transform the economy itself.  Don’t forget G-to-G was never going to save us from global oil prices or local taxes and levies.

Which brings us to finally to the big picture lessons from this fuel saga in four simple questions.  First, at what point do we begin to think and act towards creating Strategic Fuel Reserves, possibly funded by, say, the Petroleum Development Levy from which we are now subsidising pump prices?  Better still, is this the moment to think about positioning Kenya and Lamu Port, like say Rotterdam or Singapore, as a Global Strategic Fuel Hub?  We surely need to actively move beyond the delusion that we are the gateway to East and Central Africa based only on Mombasa, right?

Third, when will we achieve fuel self-sufficiency through refining?  Probably never on our own, but shouldn’t we instead lead the case for refining that serves the region, especially with Uganda’s and South Sudan’s reserves, or are we already too late? The final question is the biggest one of them all: where is our long-term Energy Security Master Plan (we should ask the same about our Food Security Master Plan)?  These are questions of national ambition, not political excuses.

Please wake me up when either the government or the non-government has answers for Kenyans.