By Elaine Porteous
With the cost to Africa of fraudulent practices estimated at 25 per cent of its gross domestic product, serious steps are now being taken to stop the rot. Has Africa got a grip on corrupt practices? The short answer is no, but there is evidence that the continent is working on it.
Transparency International, the global civil society organisation that seeks to lead the fight against corruption, estimates the cost to Africa (including bribery in procurement and tender fraud) is about 25 per cent of its gross domestic product. It is thought to increase the cost of goods by as much as 20 per cent.
People in all areas of business, non-governmental organisations and even within governments are now campaigning heavily to reduce the many instances of gross dishonesty that are exhibited in some trade relationships. Corruption within procurement is rife, that much is clear. It is observed in bid-rigging, collusion and conflicts of interest. The issue is not only on the side of the taker, but also the giver: as they say, it takes two to tango.
Forms of fraud
Bid-rigging takes many forms. The most common practice is where bidders collude by one agreeing not to submit a bid or bidding too high on a tender so a conspirator can win the contract. The losing bidder is then included in the deal as a sub-contractor. These rigged documents are also called ‘B’ tenders. Bid rotation, where bidders decide to take it in turns to win tenders, has the effect of carving up the market or territory so each gets a fair share of the business. These cartel members will agree on price fixing, market share, allocation of customers or territories or a combination of these to reduce competition and increase profits.
The hiring of unqualified family members into positions of influence (nepotism) and awarding government contracts to friends or relatives bypassing the tender regulations (cronyism) are also common activities. All these types of influence peddling are costing national economies millions and effectively stealing money that should be used to build hospitals or schools and relieve poverty.
In South Africa, Willie Hofmeyr, the head of an anti-corruption agency called the Special Investigating Unit (SIU) , said his department was investigating more than 900 cases of questionable contracts and conflicts of interest, valued at more than R5.26 billion ($635 million). The SIU is the only state agency solely dedicated to fighting corruption. Its chief challenge, he explained, was limited staffing and resources, which affects its ability to influence this growing problem.
Addressing the issue
The Corruption Perceptions Index, published annually by Transparency International, measures the perceived level of public-sector corruption in 183 countries and territories around the world. Many large African countries do not fare well on this measure. Figures out this month show South Africa is placed 64th and Botswana 32nd, which may go some way to explain why De Beers is relocating its operations to Gaborone. Many other southern African countries did not perform well.
In September, South Africa’s president Jacob Zuma announced a commission of inquiry into the multibillion rand Strategic Defence Procurement Package. This is the largest corruption scandal in post-apartheid South Africa. Although it is unclear precisely what is alleged, the inquiry will focus on the behaviour of purchasers in numerous contracts for military goods and services – including warships, fighter planes and navigation systems, among other items – that are worth more than R30 billion (US$4 billion) in total. The deals were awarded in 1999 to a multitude of suppliers from a variety of countries.
The month before this inquiry was announced, finance minister Pravin Gordhan told members of the board of the Institute of Internal Auditors not to be afraid to ask “tough questions” of both public and private sector organisations to root out poor procurement. Speaking at the 14th annual National Internal Audit Conference, he said what they were attempting to tackle was a “cancer of corruption”.
“As government, we want to intensify our efforts against corruption, particularly in procurement processes. The fraud and corruption that occurs in the public procurement of goods and services is directly linked to the private sector. In other ¨words, we must come down hard on the corrupted and the corrupters.”
The Southern African Development Community has published a comprehensive set of protocols covering all acts of corruption (see links), as well as preventative measures and remedies. It has, however, no real power to enforce them. Elsewhere, the governments of both Zambia and Botswana are making positive noises about reducing corrupt practices and fraud in their countries.
International anti-corruption bodies such as Global Financial Integrity, the UN Convention Against Corruption and the World Bank are mobilising supporters and becoming increasingly vocal.
Transparency International has developed the ‘Integrity Pact’, a tool aimed at preventing corruption in public contracting. It consists of a process that includes an agreement between a government department and all bidders for a public contract. It contains rights and obligations to the effect that neither side will: pay, offer, demand or accept bribes; collude with competitors to obtain the contract; or engage in such abuses while carrying out the deal.
South Africa’s numerous anti-corruption agencies and laws indicate a strong political will and commitment towards combating corruption, including through the use of hotlines and by encouraging whistle-blowing. And an interesting initiative is underway by the Institute of Security Studies. It is building a database of politicians’ assets and interests called ‘Who owns what?’. It’s still a work in progress, however, and as the SIU notes, 6,000 senior government officials failed to declare their business interests this year.
In one part of India, though, a nation with a very poor score on Transparency International’s Corruption Perception Index – worse than some countries in southern Africa – one man is seeking to change things. In the state of Bihar, chief minister Nitish Kumar is singlehandedly leading a charge against corruption and fraud. And Time magazine reports that he is drawing national attention to his achievements to date. He believes justice need not be sacrificed to achieve growth and his chief successes have been to promote transparency in local government and enforce laws aimed at reducing fraud and malpractice.
You too can be part of the solution by getting involved and showing integrity in the face of pressure. Earlier this year, at the CIPS Pan African Conference, CEO David Noble said unethical behaviour is the one area stopping Africa becoming a powerhouse. He noted that the profession has the opportunity to be a “beacon of light”‘ that represents ethics and good practice. Become part of that beacon and do not compromise your principles.
Elaine Porteous is an independent procurement specialist with a specific interest in careers and talent management. She is a business writer and editor for trade journals and industry websites. This article was first published in http://www.supplymanagement.com. Read more of her published articles at http://www.elaineporteous.co.za