This week the Bush administration nominated Robert Zoellick to succeed outgoing World Bank president Paul Wolfowitz. Stephanie Wolters asked South African Finance Minister Trevor Manuel about the controversial nomination process and the fight against corruption in Africa.
Do you think the current system, by which the United States appoints the head of the World Bank and Europe the head of the International Monetary Fund, is working?
I must preface these remarks by stating clearly that I’m not available for any position at the bank and fund and therefore feel free to make these comments.
We as South Africa have said before that there has to be a fairer system for the appointment of the president of the World Bank and managing director of the IMF, and we stand by the position as articulated in the G20 communiqué: ‘— that the selection of senior management of the IMF and World Bank should be based on merit and ensure broad representation of all member countriesâ€.
This is not the first time we are submitting a view like this. We are also mindful of other very useful views set out, for example, by Kermal Devis in his book A Better Globalisation: Legitimacy, Governance and Reform, which proposes some refinement of the process, like allowing for the creation of a panel that will look at geographic representation and a host of other suggestions I believe should be in the public discourse.
What do you think would change about the Bretton Woods Institutions if they were headed by individuals from the developing world?
The World Bank is a complex and at times unwieldy organisation that has an incredible array of good quality professionals, a huge staff and different sets of arrangements with various countries. The organisation’s structure is based on shareholding, which was formulated in 1944 during World War II. The US holds 18% of the shareholding and while there has been some variation to the shareholding structure, the US, as the biggest shareholder, still has veto power and this brings in the unwieldiness. We are arguing that the presidency of the World Bank should not be determined merely by citizenry. We are also saying that there has to be a process that addresses the organisation in its entirety. During his presidency of the World Bank James Wolfensohn introduced what was called the ‘Comprehensive Development Framework†in a genuine effort to drive change in the institution. He faced a huge stand-up row and came up against a staff that was against this process. An individual can make a difference but you have to have a lot of fight in the belly.
How do you rate the impact of foreign development aid to Africa?
Development aid is critical for African and other poorer countries, as many such countries lack the revenue to reduce poverty and attain [Millennium Development] Goals. Many poor countries are highly indebted, and the little revenue that they raise is swallowed up by their interest burden. So aid is critical for basic funding of education and health services. Aid also has to be complemented by concessional loans for basic infrastructure, so that poor countries can improve their economic growth potential and create jobs. So aid is critical for development, and hence our call for countries to significantly increase their contributions to both the [International Development Association] and African Development Fund this year.
It is also important to appreciate the value of debt relief to development. Highly indebted countries spend too much of their limited revenues on debt service costs. Debt relief, therefore, retains revenues in the recipient countries and affords such countries a real opportunity to tackle poverty.
Do you think that withholding development aid from countries that do not meet anti-corruption, governance and transparency standards is tantamount to punishing the poor?
Yes, we need to be careful that we do not punish the poor by withholding funds. Fighting corruption is a complex issue, and always involves two parties — the giver and the receiver. We must be even-handed when dealing with corruption. We must ensure that all countries also take criminal and other sanctions against companies and individuals that promote corruption. A one-sided focus on corruption will not deal with this problem. We should also look at putting in place incentives and mechanisms to promote accountability, and not by-pass such mechanisms when it is politically convenient. Mechanisms like the Extractive Industries Transparency Initiative require both companies and governments to act transparently, and can go quite far in preventing corruption.
Do you think high levels of corruption in the public and private sectors in Africa are factors in low levels of human development, such as poor education and health services and high unemployment?
There is no doubt that corruption in any continent or country, be it Iraq or the Americas or in Africa, impacts most negatively on the poor, and leads to lower levels of human development. We can only fight corruption if we not only insist on more transparency and better governance systems, but also ensure that legislatures, boards of companies, civil society, and so on actively exercise their own role in holding office-bearers like myself and company directors accountable to them.
Other institutions, like the media, the accounting and auditing professions, and so on also have important roles to play in this respect. The harder challenge facing poor developing countries like those in Africa is how do they develop such governance and accountability systems when they lack chartered accountants and auditors, or they do not have strong and independent media and other relevant institutions. Even putting in place transparent systems requires lots of capacity, and developed countries can play a big role in assisting developing countries in building such systems.
How would you go about fighting corruption in Africa?
The best and most sustainable way to fight corruption is to first and foremost improve the economic growth potential of African countries, through the development of basic economic and transport infrastructure, and to promote trade between African countries and with all other countries out of Africa.
In this respect, we need the WTO talks to succeed as a development round, but we too can do more to remove tariff and all other barriers on trade between African countries. Most African countries also need to develop their tax and revenue systems, and reduce their dependence on trade taxes. So the most important step in fighting corruption is firstly to ensure that there is growth and development on our continent.
In the context of aid, we need to pay attention to the ‘Aid for Trade†process led by Pascal Lamy, president of the [World Trade Organisation]. We are saying if you want a poor country to get out of poverty you must get it to trade differently. You want them to add value in the way that they trade and you need to make sure that there is investment in areas such as infrastructure. Part of this strategy is to promote regional integration as a means to developing trade and infrastructure between African countries.
Secondly, we need to build the public sector, and put in place transparent systems, including in budgeting and governance systems. Each country should publish how much it has received and what the funds will be used for to ensure transparency, accountability and that the money does not get redirected elsewhere. [This would be] similar to the Public Finance Management Act (PFMA) here in South Africa, [where] departments must account for the money allocated to them in terms of section 32, and we publish it on a monthly or quarterly basis.
Corruption has taken on such strong dimensions in different countries and, in dealing with it, we have to be upfront and put as much of the spotlight on the issue as we possibly can. In relation to the World Bank, we must be clear about what it is. It is a bank, not a donor — it lends money, it does not give money to countries. What it must do with countries that it lends money to, is ensure that the money is spent on the intended projects and does not find its way into the personal bank accounts of government officials. The World Bank should state publicly how much a particular country has borrowed from it and what the money will be spent on. It is not only the responsibility of the World Bank, other organisations such as the African Union, United Nations and NGOs must have a role to play. It should also be part of the African Peer Review Mechanism. If countries request budget support and indicate the areas of assistance they require there must be a reporting mechanism, like the Auditor General, to track spending and progress.
In relation to the private sector, the same rules must apply: publish what you pay and governments must publish what they receive. If a company pays a government official a certain amount of money it should make this public. This is how we begin to fight corruption at all levels in society.