How cargo tracking firms cost KRA billions

Transit cargo tracking service providers have been manipulating their systems to allow a multibillion-shilling cargo dumping cartel to thrive in a tax evasion scam busted by the Kenya Revenue Authority (KRA) investigators.

From sealing cargo trucks from Mombasa and keeping them off the radar to terminating trips barely one hour into the journey to the borders, the tracking service providers have been the weakest link in the fight against cargo dumping, the evil that they were recruited to help tame more than a decade ago.

An audit by KRA has revealed that in the trackers’ systems, some trucks took just 42 minutes to cover the close to 1,000 kilometres between Mombasa and Malaba border.

Others are ‘still on transit’ since the year began while a few destined for Burundi and South Sudan have been completing the trips in Nairobi, Luanda and Eldoret, all in the effort to confuse KRA and evade taxes through dumping.

The audit, which covered alcohol, milk and fuel products, is at the centre of a fierce falling-out between KRA and six system vendors, who are being accused of facilitating the loss of more than Sh2 billion in taxes.

COURT CASE

According to KRA, the vendors are fully in-charge of the data and use their access rights to determine what can be viewed from Times Tower and what is concealed, greatly tampering with data integrity.

“Each vendor operates a separate platform, which is hosted at a location inaccessible to KRA, leaving the data not only vulnerable to adulteration but also out of reach for audit trails. Further, the vendors have super user rights and can easily manipulate KRA officer accounts, re-set the passwords, end the trip details, manipulate data and even alerts. As a result, many fraudulent cases cannot be investigated effectively,” KRA sleuths wrote in the confidential audit seen by Sunday Nation.

The dumping game is so lucrative that attempts by KRA to introduce an alternative tracking system has been vehemently challenged in and out of court.

The trackers are said to be planning to seek the intervention of parliament after KRA narrowed down to the use of the Regional Electronic Cargo Tracking System (RECTS), also used by the neighbouring countries to replace their Electronic Cargo Tracking System (ECTS).

The vendors charge an average of Sh130,000 per year to track the fuel tankers, thrice the cost KRA will be asking to have the RECTS installed on the trucks, but some traders are said to be happy to pay the huge amount demanded by the private vendors in what is suspected to be driven by the attraction of the dumping business made easy by the private vendors.

SEEKING EFFICIENCY

They are opposed to the implementation of RECTS, saying it will kick them out of business and that KRA does not need to introduce a parallel system when they already have one in place.

They also believe KRA has no capacity to run such a tracking operation given the manpower it has, an argument KRA dismisses as ridiculous.

“KRA does not need to invest heavily in a parallel system, it should engage existing solution providers to address whatever concerns they may have. KRA should acknowledge ECTS providers have immense on the ground experience and capacity in tracking cargo in Kenya — their efforts over the last five years are evident in the reduction of dumping of goods in Kenya,” the truckers wrote in a memo to KRA through their association.

The taxman argues that the initiative, apart from seeking to reduce incidents of cargo dumping, was a directive by the East Africa Community (EAC) Heads of States during the 11th Northern Corridor Integration Projects Summit held at Safari Park Hotel Nairobi on October 17, 2015.

KRA also hopes to benefit by having a real-time cargo visibility, owning the data and enhancing cargo security to boost revenue collection by having its own system rather than rely on the vendors, which is said to be allowing diversion of transit goods into the local market, stealing of transit goods and adulteration of fuel among other vices.

TRACKING TRICKS

The audit that brought about the latest fallout between KRA and the tracking firms also revealed that some trucks had been given very wide geofencing, to the extent that one would not be able to point out exactly where they were apart from just telling the general area.

“For some, some geofences cover a whole town, which are not part of the gazetted routes and hence no alerts are raised in case of diversion, leaving the cargo vulnerable to dumping without any alert. Others cannot even tell which direction a vehicle is moving, leaving critical loopholes for dumping,” KRA found in the audit covering 2018/2019.

In the KRA end of the system, the unscrupulous vendors only chose what alerts are visible with critical ones like breaking of the seals and exceeded transit times kept off the channel to facilitate the dirty deals along the route.

The vendors also deactivated the tracking in many cases before the cargo reached the borders, while others triggered alerts but the lorries could not be located in real time, meaning the system could be showing a vehicle is in Karen but in reality it could be past Nakuru, according to the audit conducted by KRA.

In one of the incidents that uncovered the tracking tricks employed by vendors, a truck transporting tea from Uganda to Mombasa was hijacked on February 9.

DELAYED ARRIVAL

KRA rapid response unit found the truck parked more than 50 kilometres in the opposite direction and with some of the seals broken without raising any alerts in the tracking system.

“Of particular interest is the issue of ECTS tracking. Why no alert was raised by the system despite three violations (seal tamper, deviation from the geo-geofences route and turn back) occurring,” KRA investigators wrote. Sh5.3 million in taxes had been evaded from the incident.

The tracking system run by one vendor showed more than 10 lorries ferrying fuel - which had left Mombasa as early as January 2 - still en route to Malaba by beginning of April - including a truck with trailer ZE7629, which left Gate 18 of the Mombasa Port on the evening of January 2.

Some trucks took just 42 minutes to get to the border from the Mombasa Port. Another truck took just 51 minutes to complete the usually 16-hour journey of almost 1,000 kilometres.

This is almost the time it takes for some flights to reach Nairobi from Mombasa. Even more ridiculous, on the afternoon of March 10, a truck left the Grain Bulk deport in Shimanzi at midday with a containerised cargo, and by the time the truck reached Miritini at 4pm, the journey had ben ended.

One of the shortest dumping game plans. The system vendors who had lost a petition in 2017 when they opposed KRA’s attempt to pilot a trucking system has also put KRA at war with some 1,200 truck owners, also being accused of being part of the dumping cartel.