TELITA SNYCKERS: While the country goes up in smoke, let’s not forget dirty diesel
As it turns out, there are some very big question marks over what’s been happening at Sars in its fight against illicit fuel
While the recent focus on illicit cigarettes was, and continues to be, important, as the country goes up in veritable smoke, let’s not forget about some of the other little foxes in the vineyard.
Illicit fuel is a scourge the world over, and it isn’t just a smuggling game. There has historically also been another way to cheat: the price difference between diesel fuel and paraffin has led to retailers mixing paraffin with diesel, or simply selling paraffin as diesel. It doesn’t just constitute tax evasion, it’s also terrible for engines. As a result, years ago the SA Revenue Service (Sars) announced it would start testing for paraffin spiking in underground tanks, transport tankers and the odd truck.
In its report to parliament in 2018, Sars tabled its two primary concerns in respect of the illicit economy: tobacco and fuel. At the time, its illicit economy unit was reportedly dealing with 58 cases, which included the arrest of two officers for some or other dirty fuel business.
Turns out, though, that there are some very big question marks over what’s been happening at Sars in its fight against illicit fuel.
Marker dyes added to kerosene and paraffin
Adulterated diesel isn’t easy to identify, because it looks and smells like regular diesel. As a result, from 1999 fuel companies in SA were required to start adding a marker dye to kerosene and illuminating paraffin. If these were subsequently illegally mixed with diesel, the marker dye would show up in the adulterated diesel. Testing would be done by Sars’s excise officers, using test kits that would provide immediate verification in the field whether the diesel had been adulterated, for the purpose of which, in 2001, Sars unveiled 10 new road fuel testing unit vehicles.
To run this operation requires at least three recurring expenses: acquiring the marker dye to be added in bulk to kerosene and paraffin; the testing kits which are necessary to detect traces of the marker dye in diesel; and running the vehicles.
Where’s the tender?
Initially, Sars was using a dye from Mortrace. In 2006, Sars replaced Mortrace as a service provider with Authentix. Here’s where the story gets curious: trawling through all of Sars’s historical tenders – published on its website – there doesn’t appear to be a tender, either for the initial contract awarded to Mortrace, or for the subsequent contract awarded to Authentix. And in the 14 years since launching the initiative, there doesn’t appear to have been any new tenders to extend, revise or renew the terms of the contract.
Technologies (and frauds aimed at thwarting them) are constantly evolving, and so solutions like this tend to be continuously adjusted. But there is no indication that the solution introduced in the 1990s has ever been reviewed, or updated with newer technologies.
There may perhaps be some explanation for the missing tender. Except we have no way of knowing, because Sars never replied to my queries about this.
Largely because of the mystery of the missing tender, we don’t actually know who is paying for all this, or to whom.
Somebody clearly has to be paying for both the marker dye, and the testing kits Sars would need to detect adulterated diesel in the field.
Tracer dye cost appears to have been pegged at 0.01c per litre since 2006. The SA Petroleum Industry Association (Sapia) notes in its financials that it has been paying a steady R1m a year for the dye – also not moving an inch since its introduction 14 years ago.
As for the testing kits, Authentix’s website offers them for R2,400 per kit.
None of the costs are reflected anywhere in Sars’s published budgets or financial reports.
Is Sars still buying the test kits? If so, how is Sars funding them, and where are they accounted for? And who is Sapia making payments to?
It’s not just the missing tender that’s curious. Customs rules around the marking of fuel are simply sloppy. Since the introduction of the marker dyes, there hasn’t been a single mention of Sars’s activities on this front, or successes it has achieved (if any.)
The Sars form on which officers are supposed to report their inspection findings – published on the Sars website – still uses the Sars logo from the 1990s, and still refers to Mortrace, which hasn’t been used since 2006. What procedures do officers follow when testing samples, considering that the operational procedures still refer to the defunct Mortrace? What impact does this have on establishing legal liability? The declarations submitted to Sars by the fuel industry tracks volumes of fuel but not volumes of tracer dye acquired or used, making it impossible to reconcile the two volumes.
There are really only two possibilities: either Sars is still actively testing for adulterated fuel, and just not adequately accounting for this in its reports, with some question marks over the tender processes along the way; or it’s not testing any more, in which case you have to wonder why the fuel companies are still paying for the tracer dye, and just how Sars is actually clamping down on adulterated fuel.
Somebody appears to be asleep at the wheel. If Sars really does want to position itself as an agency that is trusted and admired, perhaps it could start by shedding some light on this mystery.
*Snyckers is an independent illicit trade expert. Key clients include the International Monetary Fund, after she previously worked as an executive at Sars, a compliance manager with the tax agency in Singapore and a director with niche consulting firm Sovereign Border Solutions. She has a master’s degree in constitutional law and fundamental rights, and has had work assignments in over 25 countries. Her exposé on the role of Big Tobacco in fuelling illicit trade – Dirty Tobacco – was released in May 2020.
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