Belinda Beresford, David Le Page and Mungo Soggot
Why do half the roads in Africa break up within two years? It’s a sweeping generalisation, but the answer, according to George Moody-Stuart, author of Grand Corruption, is the ubiquitous vice of graft.
Contractors pay government officials to get contracts, subcontractors pay to get to the head of the queue, inspectors pay more attention to the quality of the whisky they are offered than that of the asphalt beneath their feet.With every link in the supply chain weakened, the road built in the end is a road in name only.
It is in the hope of building better roads that 1 300 delegates gather this week in Durban for the ninth International Anti- Corruption Conference (IACC).
Sadly, corruption does pay; that’s why it’s popular. A cursory glance around the world shows how many countries feature a tiny elite that has grown rich on kickbacks, backhanders, palm greasing and introduction fees.
Among those who are funding these elites are 40% of respondents to a survey in the 1997 World Development Report who said they had encountered corruption.
The conference will tackle problems ranging from bent customs officials and international crime to the effects of corruption on the environment and the role of the media.
It is fitting that the IACC should be held this year in South Africa, new democracy on a continent with its fair share of corruption problems. Africa is by no means alone – the collapse of business morality in the former Soviet Union, and the offshoots of crony capitalism in the East have created much competition in the corruption stakes. A prime example is Pakistan, where suspicion of graft ranges from the cricket team to heads of government.
During the first five years of democracy, the African National Congress government has put corruption on the political agenda.
Since 1994, there has been little evidence of corruption at national government level. Certain notorious incidents have been entertaining and have exposed financial recklessness, but this is hardly evidence of widespread dishonesty.
There was the R14-million pumped into a questionable play to promote Aids awareness, and the multimillion-rand contract awarded to a Liberian politician, who decamped to Liberia – with toilets stripped from his Johannesburg flat – after the scandal surrounding his appointment exploded into the public domain.
At provincial level it has been a different story: there have been several instances of senior bureaucrats and politicians being implicated in impropriety. An opinion survey at the end of 1998 showed that 60% of respondents thought the government was controlling corruption “not very well/not at all well”.
One of the biggest holes in South Africa’s anti-corruption armoury is the absence of regulation of political party funding. The government has instead embraced the secrecy surrounding party funding bequeathed by the National Party. As the law stands in South Africa, there is no regulation of the amount of money that can be anonymously pumped into political parties. The parties in turn are not obliged to reveal where they get their funds.
Campaign financing is a major political hot potato in many other countries, but was hardly mentioned in the run-up to the June election.
Professor Tom Lodge, a leading political academic, says experience in other countries shows foreign funding of political parties tends to dry up when disclosure regulations are imposed.
Richard Calland, head of the Institute for Democracy in South Africa’s political information monitoring unit, points out that although the ANC is mainly to blame for the lack of reform around political party funding, opposition parties have been notably quiet about pushing for tighter disclosure and regulation.
But with all the focus on the performance of a new democratically elected government, the private sector still gets away with relatively little scrutiny. Sanctions-busting and a previous morally bankrupt regime encouraged secrecy, deviousness and even illegal activity – habits hard to break. Only now that South African companies face global competition have they been forced to comply with international standards of disclosure and accounting.
Insider trading remains endemic in South Africa. There has never been a successful prosecution for insider trading, although recent changes in the law will hopefully change this embarrassing situation.
The Financial Services Board is finally attacking the cosy world of insider trading. In August, more than 45 suspects had been interrogated, and further action is expected by the end of the year.
There are other hopeful signs. This year the Corporate Governance Awards, run by accountancy firm Deloitte & Touche, received its highest number of entries ever. The shareholders of companies that do not enter should be asking hard questions and making demands of those who purport to be the guardians of their investments.
For a long time, the theory that a little corruption is good for business circulated in certain academic circles. The idea was that where corrupt states and repressive regulations impeded business, a little graft could grease the wheels of commerce.
That theory has fallen into disrepute. The managing director of Rio Tinto’s Phalaborwa Mining Company, George Deyzel, says: “Relationships based on mutual respect, honesty and integrity can be strong enough to give assurance even in uncertain times. In South Africa we must develop a culture of integrity which will give confidence to local and international businesses to make the investments which we so desperately need to provide acceptable living standards for all our people.”
He says that an atmosphere of integrity influenced a decision to make a major investment in South Africa. “[Building this R2,2-billion mine] demonstrated the faith of our shareholders in our ability to continue long-term commitments with our employees, the local communities and the government in South Africa. No one could have confidence in such relationships if they were based on dishonesty, corruption or bad faith.”
It is often easy to forget that both parties involved in bribery and corruption are culpable. To address this, Transparency International will be releasing a new index this month, supplementing its well-known Corruption Perceptions Index. The Bribery Propensity Index will point in the opposite direction, making it clear which nations are home to corporations willing to grease palms while making money.
A possible landmark in the fight against the bribers was an agreement outlawing bribery of foreign officials which was signed by the 29 member countries of the Organisation for Economic Co-operation and Development in February. The agreement is unlikely by itself to have dramatic effects. But it will almost certainly prove an essential component in a larger strategy of binding most of the world’s major traders to a similar ethical standard. Competing multinationals are likely to pay close attention to the habits of their rivals.
Transparency International has called for the agreement to be wielded against European and North American construction companies allegedly involved in bribing the CEO of the multibillion-rand Lesotho Highlands Water Project. The issue is to be raised at the Durban conference.