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Rethinking the Fight Against Corruption


Brookings News

By Daniel Kaufmann

Fighting corruption requires a new understanding of how the global problem has evolved, for it is bigger and broader than petty bribery or crooked deals in developing countries. Merely adopting a new anti-corruption law, creating another commission, or launching another ‘campaign’ will not get the job done. We can no longer fight corruption by simply fighting corruption alone.

Corruption is a symptom of a larger disease — the failure of institutions and governance, resulting in poor management of revenues and resources and an absence of delivery of public goods and services. We must think beyond anti-corruption rhetoric and traditional tactics. We need to be more strategic and rigorous, identifying and addressing corruption’s underlying causes and examining the weaknesses in key institutions and government policies and practices. We have to focus our efforts on the broader context of governance and accountability. Only then can we see the many other shapes and forms corruption can take and address this epidemic.

Of its many guises, legal corruption is a particularly pernicious one that gets insufficient attention. Legal corruption refers to efforts by companies and individuals to shape law or policies to their advantage, often done quasi-legally, via campaign finance, lobbying or exchange of favors to politicians, regulators and other government officials. It is dealings between venal politicians and powerful financial and industrial executives. In its more extreme form, legal corruption can lead to control of entire states, through the phenomenon dubbed ‘state capture,’ and result in enormous losses for societies.

In many developing countries, legal and illegal corruption coexists, and it has become commonplace for multinational oil and mining companies to collude with elite politicians to deprive citizens of the benefits of their natural resourcesNigeria lost $35 billion over the last 10 years through corruption and mismanagement of its oil industry. The evidence suggests — and the people of these developing countries attest — growth cannot sustain where corruption thrives.

The reach of legal corruption, however, is not limited to countries with weak governments. It has also enabled Wall Street investment banks to unduly influence financial oversight institutions, bringing the U.S. and the global economy to the brink four years ago, and in recent months allowed collusion between U.K. and possibly U.S. banks to fix the global interest rate for their benefit.

This kind of corruption is a complex, multidimensional problem that needs to be confronted at every level. If we, as an international community, are going to get at its core, we need to recognize that improving governmental institutions is key. Good governance only starts with elections and higher levels of transparency. Elections cannot be effective unless they are free, fair and clean, and complemented by real freedom of expression. Transparency with impunity will not bring forth justice or make governments accountable. Broader governance reforms require serious progress in rule of law to make any real, lasting impact. Equally important is a free press. While we have seen progress towards democracy in many parts of the world, roughly two-thirds does not have a fully free media and, in some countries, the movement is backwards.

As crucial is the management of the world’s natural resources. Today, 700 million people, in about 60 countries, live in poverty though they sit atop billions of dollars in oil, gas and minerals. Such abject poverty in the midst of abundance is a call for action. The overwhelming majority of these citizens live in poorly governed countries — those that rate low in corruption control, transparency and accountability. The governance of these resources and the wealth they generate will make or break the development of these nations, and the social, economic, political and security implications will be far and wide.

The future of these resource-rich countries no longer rests mainly on foreign aid but on the extent and effective use of the country’s own resources and how they use them. For that to occur, a focused and concrete approach to improve governance and accountability is critical. Reshaping the fight against corruption into a smarter strategy that integrates the challenge of improving governance and institutions in both the public and private sphere is the way forward.

The Wheels of Corruption


News24

November29, 2012

Corruption is a lethal toxin that kills the spirit of free enterprise and public governance excellence in South Africa. It is a risk and reward game played by ruthless legal-wise people who seduce naïvely ambitious public officials and turn them into criminals.

According to an article published in the Economist in 2011, as much as 20-25% of annual state procurement expenditure in South Africa amounting to around R30 billion is wasted through overpayment and corruption. The auditor-general estimated that R26 billion is wasted or spent “irregularly” in a year. A third of government departments award contracts to officials and close family members, it was reckoned.

Many people in South Africa sacrificed for a free society and the jubilation that came with advent of democracy in 1994. Some of these people benefited handsomely from the fruits of their sacrifices and were rewarded for life, without the aid of corruption.  Some were not so fortunate though. Those who thought that free enterprise would take off without corruption and prejudice made a serious judgemental error. Their sacrifices did not transform into lifetime rewards. They became the first victims of early bouts of the plague of corruption that is now taking its toll in South Africa.

Corruption is the pursuit by dishonest people in devious partnerships and networks with the goal to acquire undue wealth and benefits for members who are prepared to partake in illicit and dodgy behaviour. Corruption is usually taken to mean dishonest or fraudulent conduct by people in positions with influence and power.

Imagine the following scenario from more than a decade ago. A senior black consultant teamed up with a white entrepreneur skilled in program management to start a legitimate program management firm to facilitate the rolling out of much needed municipal services and local economic development in poor communities. Initially the firm succeeds in winning small projects. With repeated successful delivery the scope and value of projects increase to a point where executives in contracting organizations hint that contract benefits must be shared and that firms they hold shares in must also benefit through projects. When one such a senior executive of a public enterprise, which contracted the firm to program manage its market development strategy, stopped payment on a contract to enhance the performance of a municipality, the wheels of corruption revealed itself.

The affected firm lodged a complaint over non-payment with the chief executive of the public enterprise and after an investigation he agreed to institute a process of arbitration. This was when things started to get interesting. It was established that a firm in which the senior public enterprise executive had been given a shareholding was awarded an infrastructure development contract in the same municipality. The project was connected to the scope and budget of the program management contract and payments were made from the budget set aside for the program management firm. It was when this budget ran out that the payments to the program management firm were stopped.

The legal department of the public enterprise engaged a law firm to handle the arbitration process. The arbitration costs would be for the account of the public enterprise. The firm of attorneys engaged by the public enterprise appointed a senior advocate as arbitrator who had previously handled cases for the public enterprise. At the start of the arbitration proceedings the arbitrator offered to withdraw from the case because the public enterprise had been his client in several previous cases. The directors of the aggrieved firm, wary of possible prejudice, accepted his offer. It was agreed that the process would be repeated with a new arbitrator.

The process to appoint a new arbitrator started and after several weeks a new lawyer was appointed as arbitrator by the law firm of the public enterprise. This time the directors of the aggrieved firm were required to foot the bill of the arbitrator and the fees of a lawyer to represent the aggrieved firm as required by Supreme Court rules. These extra costs and the non-payment of contract fees placed the aggrieved firm in financial dire straits.

Several weeks had passed after the hearing when the arbitrator demanded payment from the directors of the aggrieved firm before publishing his ruling. He had to be paid before he would reveal his ruling. When he released his ruling after payment, he had ruled in favour of the public enterprise. After the ruling the distraught directors of the aggrieved firm learnt that the arbitrator had his offices in the same building as the law firm that had appointed him. They then understood the intimate resonance they sensed between the arbitrator and the legal representatives of the public enterprise during the hearings.

The directors of the aggrieved firm felt shattered and decided to close down their firm because of the ruling, the unpredictability of payment by the public sector and the enterprise-unfriendly legal environment.

The set of wheels which moved the corruption to its destructive conclusion comprised of an ineffective procurement leadership structure operating without a policy that prohibits public enterprise officials from taking up shareholding in private firms that deal with the public enterprise; a greedy official with shares in a predatory firm; the owners of the predatory firm who colluded with the official; and a network of legal experts familiar with the arguments, precedent rulings, court rules, contract laws and pressures that are needed to protect the felonious officials of a contracting public enterprise from the claims of cocky entrepreneurs and the victims of corruption.

The appearance of Public Protector Thuli Madonsela who understands the dynamics and networks that drive corruption so well had become the saviour and fountain of hope for entrepreneurs. She has brought closure and redemption to many of those castigated emotionally and financially by corruption. She had become the quiet and gentle enforcer of procurement discipline and public servant ethics. The people salute her and trust that she will continue to be the enemy of corruption and the flame of governance excellence and that she will succeed in removing evil from our society. She has truly become the people’s trusted chucker-out of corruption, fraud, mal-administration and improper enrichment at the expense of the state.

Burundi: A Deepening Corruption Crisis


Africa Report  N°18521 Mar 2012

Translation from French.

EXECUTIVE SUMMARY AND RECOMMENDATIONS

Despite the establishment of anti-corruption agencies, Burundi is facing a deepening corruption crisis that threatens to jeopardise a peace that is based on development and economic growth bolstered by the state and driven by foreign investment. The “neopatrimonialist” practices of the party in office since 2005 has relegated Burundi to the lowest governance rankings, reduced its appeal to foreign investors, damaged relations with donors; and contributed to social discontent. More worrying still, neopatrimonialism is undermining the credibility of post-conflict institutions, relations between former Tutsi and new Hutu elites and cohesion within the ruling party, whose leaders are regularly involved in corruption scandals. In order to improve public governance, the Burundian authorities should “walk the talk” and take bold steps to curtail corruption. Civil society should actively pursue its watchdog role and organise mass mobilisation against corruption and donors should prioritise good governance.

Since Burundi became a republic in 1966, state capture, mostly by the Tutsi elite, was at the centre of politics, and the unfair wealth distribution fuelled conflict. While the 1993-2003 civil war has not threatened the Tutsi political and economic domination, it has increased corruption and favoured the rise of an ethnically diverse oligarchy.

When the CNDD-FDD (Conseil national pour la défense de la démocratie-Forces de défense de la démocratie) rebellion came to power in 2005, it intended not only to transfer political power from the Tutsi to the Hutu but also to improve governance. The new authorities pledged to fight corruption and created state structures to this effect. However, the first corruption scandals involving the CNDD-FDD dignitaries and state officials watered down the hope of a more equitable wealth distribution.

In addition to the politicisation of the civil service, the ruling party captured the public sector and its resources. It is coveting the private sector by trying to extend its control over the banking sector. It is also interfering in privatisation processes, thwarting efforts to improve the business climate. In such a small economy, where the state maintains a prominent role, the monopolisation of public and private resources risks derailing the peacebuilding process.

The president took the lead in the fight against corruption to improve Burundi’s declining image and address the impact of this pervasive corruption on foreign aid – which amounts to half of the state budget. He launched a “zero tolerance” campaign and designed a national strategy for good governance. However, as the core problem has not been correctly identified, this approach is doomed to fail. The solution is not to “get the talk right”, to “get the institutions right” and to “get the legal framework right”; it is to change the power relations that undermine good governance.

The national strategy for good governance includes all the necessary technical ingredients to fight corruption: improved legal framework, citizens’ access to information, independent monitoring and regulatory organisations, depoliticised civil service managers, transparent tendering processes and public servants recruitments, and reform of the natural resources sector.

What is missing is a clear political agenda. Civil society organisations should create a mass movement against corruption through the establishment of an anti-corruption forum gathering the private sector, rural organisations and universities. They should also conduct independent citizens’ surveys and assessments and scrutinise the government’s anti-corruption performance. Donors should prioritise the fight against corruption and reconsider their engagement if governance does not improve. Now that the anti-corruption agenda has become a public policy through the national strategy for good governance, it is up to civil society and donors to create the conditions for its implementation.

RECOMMENDATIONS

To create independent institutional checks and balances

To the Government and the Parliament:

1.  Establish the High Court of Justice as required by articles 233, 234, 235 and 236 of the constitution and strengthen the statutory safeguards for the independence of the judiciary, such as the revision of the composition and powers of the Superior Council of the Judiciary and the principle of tenure of judges.

2.  Review the anti-corruption law to extend the powers of the anti-corruption agencies, strengthen the control of illicit enrichment and protect informants.

To the Government:

3.  Remove the supervision authority of the executive branch over the General State Inspectorate and the regulatory agencies so that they become independent administrative authorities.

To improve governance and transparency in the public sector

To the Government:

4.  Activate the recruitment committee of the civil service ministry, integrate civil society in its composition and publicise widely the recruitment and appeal procedures.

5.  Ensure the declarations of assets and conflicts of interest are mandatory and public for all politicians and senior members of the Burundi Revenue Agency, procurement units, and privatisation and anti-cor­rup­tion institutions.

6.  Include civil society representatives in the procurement units within the ministries; limit by decree the categories of public contracts with a secret nature incompatible with any publicity or competition; and change the composition of the committee in charge of the qualification of these contracts by entrusting the chairmanship to a senior judge.

7.  Pass a law on access to administrative documents and publish on the Internet financial details of the state and public companies, such as the budget adopted and implemented by ministries and agencies, budget amend­ments, other public accounts, procurement contracts, etc.

8.  Reform the legal and institutional framework of the oil and mining sector, drawing on international good practice and civil society involvement, and join the Extractive Industries Transparency Initiative (EITI).

To create the conditions for the implementation of reforms

To Civil Society:

9.  Establish the anti-corruption forum set out in the national strategy for good governance involving companies, universities and rural and urban associations, and establish a citizen’s oversight commission to mon­i­tor public procurement practices, influence peddling, corruption in the land administration and illicit enrichment of public servants and politicians.

10.  Conduct social audits and an assessment of the “national integrity system”, the government’s anti-cor­rup­tion performance, the business climate and privatisation processes.

To the European Union:

11.  Ensure the fight against corruption features prominently in the dialogue with Burundi, prioritise governance in the eleventh European Development Fund and conduct an assessment of the aid by the European Court of Auditors.

To the other donors (African Development Bank, World Bank, Belgium, the Netherlands, Norway, Germany, France, the U.S., Japan, etc.):

12.  Support civil society efforts against corruption, including training to improve knowledge of public finance, procurement and legal control.

13.  Include social audits in development projects and suspend projects where corruption has been proved.

14.  Link budget support to the implementation of independent institutional checks and balances and to progress in terms of governance and transparency of the administration.

15.  Conduct a performance audit on donor-backed institutional checks and balances and support them only after securing guarantees of their independence and conducting a performance audit.

16.  Ask the United Nations Office on Drugs and Crime (UNODC) to publicly release its assessment of the implementation of the UN Convention against Corruption.

Access the full report here


How Corruption may Hamper Peacebuilding – the Case of South Sudan


ISS

By Shireen Mukadam, researcher

Governance and corruption division, ISS Cape Town

February 9, 2012

On January 16th South Sudan’s Parliament met to discuss the Auditor General’s announcement that $1.3 billion was unaccounted for during the 2005-2006 budget period of the then Autonomous Government of Southern Sudan under the transitional government. This comes in the midst of a flurry of anti-corruption initiatives sweeping the country in the past few months. In November last year, President Salva Kiir appointed senior judge Justice John Gatwhich Lul as chair of the national Anti-Corruption Commission. Established in 2006 and viewed by many as toothless, this body gained prosecutory powers through the 2011 Transitional Constitution. These events raise important questions about the nexus between corruption and peacebuilding. What have we learnt from African post- conflict states about how corruption affects peacebuilding efforts?

The nexus between corruption and peacebuilding is characterised by the tension between the short and long-term impacts of corruption. Some functionalists argue that certain forms of ‘illegal’ channelling of state funds may have positive consequences in the aftermath of conflict. In the short term some would argue that  this could help bring about stability, by sustaining networks of patronage and ‘buying’ spoilers to participate in the peace process. Both the need and opportunity for corrupt practices can increase following conflict, arguably as the case of Burundi shows. Certain financial ‘rewards’ also have the potential to play an incentivising role in peace negotiations. However, the difficulty in embracing this rationale arises when one considers the longer-term implications of these kinds of practices. Is stability and peace sought after, at any cost?…While this article has only scratched the surface of the corruption-peacebuilding nexus, it sheds light on the need to pay more attention to how the synergy between the anti-corruption and peacebuilding discourses can contribute towards preventing corruption, thereby enabling sustainable peace in post- conflict countries. A good start would be to consider a corruption-sensitive approach to peacebuilding…Read more.

Swaziland: Procurement plays larger role in corruption


Swazi Observer

By Winile Masinga

October 20, 2011

IT has been realised that procurement plays a larger role in corruption.
United Nations Development Programme (UNDP) Africa Policy Advisor Job Ogonda said most losses emanated from corrupt practices in procurement.
He was addressing members of the National Anti-Corruption Forum (NACF) at the Mountain Inn hotel yesterday.
He said this required extra attention. He said there was a need to monitor all sectors, be it government ministries, parastatals, the judicial system etc, because by so doing it would enable one to identify the points that opened up for corruption to take place.
He said having anti-corruption personnel in every ministry or department would be workable but it would be very costly for government.
Human resource was also highlighted as another area where corruption needs to be hastily mitigated.
Ogonda said if the recruitment was corrupt, it defeated all other processes because in the long, run service delivery would be affected.
He said the mandate of the anti-corruption forum should not be to educate the public about corruption because people already knew what corruption was.
“You need to take over the fight against corruption.”

Zimbabwe: Corporate Governance – An Antidote to Corruption


Cartoon showing statue of Andrew Jackson on a ...
Image via Wikipedia

The Herald (Harare)
Published by the government of Zimbabwe

By Gertrude R. Takawira

12 September 2011

opinion

It has rendered to naught brilliant economic reforms. Most people hate it. A few benefit from it. Yet corruption is strong enough to have replaced traditional economic ethos of capital and production. No wonder the economic crises.

Like economics there is a supply-side and demand-side for corruption. The supply-side or the giver resides in businesses. Businesses pay the bribes. The demand side or taker is predominantly government officials.

In a survey carried out by the African Capital Markets Forum in Ghana during the year 2000, it was reported that 86 percent of households saw corruption as a major problem in the public sector, whereas 59 percent of households saw corruption as a major problem in the private sector.

It was also found that many firms in Ghana made unofficial payments (44 percent) to public officials with over a quarter (27 percent) frequently or always making such payments. Unofficial payments constituted a regular feature of transactions between business firms and public service agencies. 56 percent of firms reported that service was frequently delivered once they made an unofficial payment… Why then do corporations with good corporate governance systems pay bribes? First there has to be a conducive atmosphere for the supply and demand of bribery. This can take place in broad ranges of business activities over which some government officials hold discretionary powers.

Common among these are; where firms bribe public officials to avoid or reduce tax, to secure public procurement contracts, to bypass laws and regulations, or to block the entry of potential competitors.

On the surface bribery seems to be cost-effective for businesses because bribe payment is often a fraction of the monetary value of the services rendered by the corrupt officials.

The reason to bribe becomes even more compelling when public officials hold the power to punish the firms for not paying the bribe, such as revoking business licenses. Corporates are often duped to believe that the only cost of bribery is paying the government officials… Read more.

School book procurement in SA needs stronger controls


Open book
Image via Wikipedia

Supply Management Daily

July 30,  2011 | Adam Leach

A study, conducted by NGO Transparency International (TI) found a lack of “appropriate mechanisms” to regulate the relationships between schools and vendors in the country has created a corruption risk.

Letshego Mokeki, national programme coordinator for Transparency and Integrity in Service Delivery in Africa – a TI scheme in South Africa, said in a statement: “The government needs to strengthen governance controls both at the provincial and school level and ensure that education budgets are used correctly. [It] has a duty to provide quality education for the next generation of South Africans, which is why it must take immediate steps to fight corruption.” Read more.

Report: Lessons Learned: Primary Education in Cameroon and South Africa

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