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This resource is hosted by the Nelson Mandela Centre of Memory, but was compiled and authored by Padraig O’Malley. It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.

Corruption blocks development

GENERAL OLUSEGUN OBASANJO is presently serving a 15-year prison term, having been jailed by the Nigerian Abacha military dictatorship. Reports that he had been sentenced in secret evoked an international outcry. Obasanjo was the first ever African military ruler to abandon power voluntarily when he stepped down in 1979, handing over power to a civilian, democratically elected government. General Obasanjo has visited South Africa frequently, and the following are extensive extracts from a paper he delivered, shortly before his imprisonment, while in South Africa in his capacity as an Advisory Council member of the anti-corruption NGO, Transparency International.

By coincidence, this week's Newsweek carries as its cover story the theme of today's Round Table discussion: Corruption. Or "How bribes, pay-offs and crooked officials are blocking economic growth". And the same issue of Newsweek writes favourably on the efforts of Transparency International as a response to the phenomenon.

As Newsweek notes, "the last two decades have seen astonishing glob-al economic growth. Without determined action, the worm of corruption may yet poison that apple". For some of us, our countries have failed to share at all in that 'astonishing growth", due almost entirely to the cupidity of our leaders.

My own country, Nigeria, is a lamentable example of such cupidity, and of the dangers and effects of corruption. A precise model of everything that must be avoided in our countries - even while some of us, at least, are crying out for remedial action at home.

Horrific though the picture Newsweek paints may be, it really only begins to tell the story. Corruption may be defined simply as the misuse of public power for private profit, and it is now a world-wide phenomenon. Some think that one side-effect of international sanctions against SA has been to shield the country, at least in part, from the impact of international "grand corruption". However, from all we now know, that is an illusion. The impression we have gained from all our discussions here is that corruption was part and parcel of the system of apartheid. It was unbridled in such areas as oil purchases and the arms trade, and it was rampant in local government, with untold millions of rand having disappeared without trace in the administration of the homelands. Whatever the past, the gateways are now open wide, and it would he folly for any of us to think that the practitioners of grand corruption are oblivious to the opportunities which SA must now seem to present. Corruption is colour-blind. Only serious and concerted and sustained efforts can keep the danger at bay.

But what is "grand corruption"? In a word, it is not "petty corruption": the five rand which a customs officer may demand, or the "drink" that an immigration official may ask for. Rather, it is the huge kickbacks that officials are offered, or which they may demand - generally of salesmen from the North and usually in developing countries - in ex-change for favourable decisionswhich often have incalculable bearing on their country's future development. Without doubt, these enormous kickbacks, and they can be truly enormous, are such as to strike at the heart of the development process itself.

A recent study of the problem by George Moody-Stuart, a recently retired senior executive in an international corporation, suggests that when it comes to bribes, the arithmetic is simple, although the amounts will vary from country to country:

     5 percent of $200,000 wi11 be of interest to a senior official below the top rank;

     5 percent of $2 million is the top official's area;

     5 percent of $20 million is real money for a minister and key staff;

     5 percent of $200 million justifies the serious attention of the head of state.

He adds that "five percent used to be typical, but recently figures like 10 to 15 percent are often heard." And the end result? A recent report from Swiss banking sources estimates that the amount being held in Swiss banks on behalf of African leaders alone is in excess of US$20 billion.

Corruption damages development

Corruption damages social and economic development in a variety of ways. The implementation of a process of sustainable development is contingent upon the presence of several features. First, it demands prudent, rational and far-sighted decision-making. Second, it requires the best use being made of available resources. Third, it needs a principled leadership which enjoys the understanding and support of the people.

Corruption strikes at all three elements. First, decisions are taken that are irrational, short-sighted and motivated by greed, not need. Second, resources are squandered as projects are approved not on the basis of suitability, but on the returns which they may yield to decision-makers. Third, a corrupt administration quickly loses the confidence of its people, who are then gripped by cynicism and rendered immune to exhortations by the leadership. The recurring question becomes one of "What's in it for me?", rather than "What is best for the country and its people?"

The end result is an impoverishment of the already underdeveloped. The developing world is literally littered with white elephant projects, projects which were begun and abandoned, or completed but which never functioned. And each, more often than not, is the result of grand corruption. Bridges collapse in South Korea, as one did recently, killing 30 people, and all because officials seem to have been bribed to pass sub-standard materials. Whole communities die, as they have in my own country, when corruptly purchased expired drugs prove useless in countering subsequent epidemics.

Yet these are among the few instances where there are obvious victims. More often than not, things are less clear. If a member of my family is arrested unjustly and his or her human rights are abused, I can shout to the skies and the world will know. You simply cannot remove a member of my family without his or her disappearance being noticed. By contrast, corruption is more insidious. It takes place silently and in secret, usually between only two people, each of whom has a vested interest in maintaining secrecy. There is no obvious victim to complain. But, in fact, whole communities, in some instances whole nations, are impoverished by this process.

How it works

So how is it done? The methods we know of are many and varied. At the most crude level, huge sums of money may move between Swiss bank accounts, as the corruptor and the corruptee exploit one of the most obvious vehicles of corruption.

In other cases a "donation" of a large amount to a particular "charity" may be suggested. This all looks good on the books of the international company, as it appears to help endow, let us say, a new hospital. But the charity will he a phantom. Then there are the donations to "party funds". Of course, there is a legitimate place for political donations, when these are made openly and transparently, and are in support of accountable democracy, rather than the calculated buying of influence with one or other party. Sadly, in many developing countries, political donations are just another avenue for elites to milk the system at the expense of the poor.

More insidious is the way in which scholarships to foreign universities are used. They can either be a direct bribe, a direct quid pro quo. Or, still more insidiously, the child of an official is offered a scholarship apparently with no strings attached. Later the official finds him or herself with the choice of complying with the company's illegal demands, or having his or her child return home abruptly with their education incomplete. Of course, this is all done subtly, there is no direct threat. The local company representative will merely say, with great sorrow, that the company will no longer be able to sustain its scholarship programme if it misses out on a particular large order. Some of this we know, but we also know that there are many methods that we as yet do not know about.

Precisely what is clone is also notnecessarily known in detail to the companies benefiting from the corruption. Although, to be truthful, many would sooner not know! The most usual method is for them to appoint a local agent. When a deal is up for grabs, he will be given a commission if he can land the contract. These commissions are out of line with the services the agent actually provides, and includes a substantial amount that will enable him to bribe the necessary officials. Of course, he does not report back precisely on what he has clone with the money, and the company would sooner not know.

What do the public officials clo in return? This, too, can vary. They can leak bids of other companies. They can distort the assessments of the various bids. They can have a comfortable arrangement whereby a company puts in a low bid, secure in the knowledge that after the contracts are signed, the specifications will he changed and the whole question of remuneration and price renegotiated. We can all point to examples where this sort of conduct has led to the cost of major projects escalating through the roof.

How is it possible?

What makes this possible? First, there is the situation in the North, in the industrialised countries where the source of much of this grand corruption lies. This is because grand corruption is the handmaiden of big money, and especially where hard foreign exchange is concerned. Not only is the foreign exchange convertible, but it is most readily hidden from any local investigation. I am not here blaming the North. We do that all too often, and usually as a way of blaming someone else for problems which are largely of our own making. There are individuals on both sides of the North-South di-vide who initiate and encourage corrupt practices in international business transactions.

But the end result is a contradiction. On the one hand, there are excellent "good governance" programmes being run by the developmental agencies of countries in the North, but their good work is undermined when export trade departments are prepared to live with such bribery. Ilow can we say this? Simply because bribes paid abroad are allowed as tax deductions and most countries in the North refuse to treat bribing of foreign officials as a criminal act. Some European countries are known to allow tax deductions for bribes, according to a sliding scale - depending on where the company is doing business, a set percentage of any deal can be claimed in this way without any need to produce receipts or any other form of evidence of actual payment!

As a footnote, one of us recently asked a Scandinavian businessman what his company does when bribes are, in fact, not necessary in a particular deal. The answer? "We claim it anyway," he said, "and then move the savings into a Swiss bank account in our personal names."

Senior company executives generally defend themselves in one of three ways: by saying that corruption in the third world is simply a "fact fo life"; or by suggesting that bribes are no more than a contribution to the economy of a developing country by bringing income levels of senior people up to reasonable levels; or by claiming, not infrequently in the face of proof to the contrary, that their companies have adequate internal procedures to ensure that their employees and agents do not breach the laws of the countries where they are doing business. I challenge each and every one of these assertions.

I am not suggesting that governments in the North are necessarily happy with the present situation. Some are certainly not. Many are actively supporting what we are trying to do, and would like to be part of the solution, not part of the problem. They are trapped in a Catch-22 situation. Corruption levels are rising inexorably and unsustainably, and yet if a country moves unilaterally - as the US has clone with its Foreign Corrupt Practices Act - it runs the very real risk of giving a competitive edge to companies in other countries. As one British industrialist put it: The issue, quite siply, is jobs...we wouldn't dream of following the US legislation."

Part of the culture?

Another factor in the North is a widespread myth that corruption in some way is a "part of the culture" of the South, that we "do things differently there". Personally, I shudder at how elements of African culture are taken out of context and distorted as a way of rationalising other-wise despicable behaviour. In the African concept of appreciation and hospitality, the gift is usually a to-ken. It is not demanded. The value is in the spirit, rather than the material worth. It is done in the open and never in secret.

Quite bluntly, it is simply a self-serving justification of reprehensible conduct for businessmen of the North, such as Tiny Rowland, to claim that only by lavishly entertaining African leaders and educating their children can anyone do business on this continent. I believe I am well placed to speak with some degree of authority on this matter. I am, after all, a Chief in my own right. I am also a former African head of state. Yet I am perfectly prepared to travel modestly both in the air and when on the ground. And I have always been prepared to deal with proposals on their merits - and only on their merits. But I do not believe that I am an exception.

It is further said that in the South there are high social expectations in society placed on leaders. That society has a way of corrupting the public office holder because of the excessive demands and expectations that are placed on the individual. It is said that because of the Africans' concept of the "big chief" (and to leaders in similar positions elsewhere in the world), the public office holder is expected to have an infinite supply of resources to dish out to all and sundry, if only to assist his kith and kin escape the bonds of poverty. Such an argument is, 1 believe, merely an escape route taken by corrupt officials and corrupt company agents alike.

I should add as a footnote that corruption in international business transactions is by no means a phenomenon which is confined to North-South transactions. It is endemic, too, in North-North trade. It is just that in this latter context there is usually an infrastructure which severely limits the room for the corrupt to manoeuvre, and in which the likelihood of detection is greatly increased.

What went wrong?

How, I often ask myself, did the South and especially Africa - get into such a predicament? These practices are not the exclusive preserve of the African leader. The average African is not by nature more corrupt than the European or anyone else. But others have institutions, laws, conventions and practices which effectively discourage and punish corrupters and corruptees. Effective sanctions - moral, social, political and legal - are an essential part of the antidote against corruption. In this, South Africa has an edge over the rest of the continent, but no room for complacency. Part of the antidote is eternal vigilance.

The corrupt practices I have referred to seem to have found a particular breeding ground in Africa for a number of reasons. Firstly, at independence many of our leaders inherited a colonial state built and previously made to function merely on the philosophy of praetorianism. Its relation to the society was extractive, cavalier and alienated.

What was required at independence was for our leaders to radicalise these institutions by democratising access to them, popularising them through openness and transparency, and returning the locus of power to the people. Our leaders did not do this. They almost all went on with business as usual. With the enormity of state power at their disposal, and with little or nothing in the way of restraining structures to counter them, or bring them back to the paths of sanity, they erred, derailed and became corrupt and undemocratic.

Against a background such as this, you can imagine how intensely interested I am in much of what is being done to avoid these pitfalls in the new South Africa.

But to return to my thesis, thestate became, in most cases, the context for primitive accumulation, and political parties became private armies organised to fight electoral warfare in the quest to conquer the state and political power. Civil society, which could have checked the state, was weak, rudimentary and largely ineffective. The international community, which could have intervened, was embroiled in the prosecution of the Cold War. As a consequence, violations of human rights, pillaging of state resources, and all forms of undemocratic government practices and actions could be rationalised within the rubric either of stopping or advancing socialism.

There are commendable provisions in your new South African Constitution for openness and transparency, which require implementation and actualisation by government agencies, and support and monitoring by active, dynamic, responsible and constructive but critical indepedent civil society organisations.

It is my firm conviction that whatever happens here in SA will dictate the future development of our entire continent. In the expectation that you will succeed in your endeavours as you build the new, democratic, non-racial, non-sexist, transparent and accountable SA, I can see your positive influence for good flowing north to the Mediterranean, and so can see a much more optimistic future for Africa as a whole. The alternative is one which we simply cannot contemplate and which we must not allow to happen.

This resource is hosted by the Nelson Mandela Centre of Memory, but was compiled and authored by Padraig O’Malley. Return to the Nelson Mandela Centre of Memory site.