TOPIC OF THE WEEK (TWEEK)
Bribery myths and reality:
Why doesn’t the United States do business with Africa?
Renee Horne – Washington DC 18 April 2011
One has often heard the stories that if you want to do business in Africa, you will need some hard cash to bribe your way to a lucrative contract. Indeed the corrupt acts of bribe takers and givers have caused the loss to the African continent of close to $150bn US dollars per year, representing a quarter of Africa’s GDP and increases the cost of goods by as much as 20%. This, while African leaders insist that stamping out corruption is about political will and such statements may sit well on the election trail, but is this a reality? What does it take to do business in 21st century Africa; do you need to know the political well-connected, who will in turn ask you for a bribe? From Nigeria to South Africa, the stories are endless, African politicians are often accepting bribes. “It’s about bribing foreign officials like companies going into foreign markets and being approached by foreign officials and who will say I can expedite your paper work; I would lean favourably on the decision about bidding on the next mining permits whatever it is but make it worth my while”. That’s the word from Chester Crocker, an American Diplomat, who served as Assistant Secretary of State for African Affairs from 1981-1989 in the Reagan Administration. Crocker is the architect of the US policy of ‘Constructive Engagement’ towards apartheid South Africa and is credited with setting the terms of Namibian Independence. Crocker is now the James R. Schlesinger professor of strategic studies at Georgetown University’s Walsh School of Foreign Service. In the last instalment in the “View from Washington Series”, he shared his views exclusively with the World Entrepreneur Society (WES) about doing business in Africa where the bribe stakes are high.
Clean or not Clean
“We cannot be slipping you brown envelopes under the table”, said Crocker. So rather than slipping the envelope under the table let’s open the envelope and reveal its contents: Is Africa more corrupt than other regions? Does anything move in Africa without bribery and corruption? “I think you see that a lot in the American interest in the financial sector; telecom sector, in the agro business sector that’s beginning to grow more from the American perspective. But there are a lot of places where the economy is either too corrupt or too small to be worth the while of major American companies and those markets will be taken up by other kinds of investors and firms currently being from Taiwan, from Italy, from the United Kingdom or perhaps from India and of course from China. So that’s all right. I don’t feel that America needs to be a dominant player in the African market, but I would like to see us be able to operate in the African market and not have so much of a kind of corrupt playing field that it keeps us out”. The Transparency International report of 2010 showed that 50% of the bottom ten of the most corrupt countries were from Africa with the Middle East hot on its heels. In the report, Somalia is perceived as the most corrupt out of the 178 countries. If you look at the top of the spectrum of the least corrupt, Denmark tops the list. However, interestingly the United Kingdom (UK) scores higher as corruption clean, the United States is three places below the UK with France hot on its heels. China falls in the middle ground of the corruption clean and not so clean. Looking at BRICS, (Brazil, Russia, India, China and South Africa), South Africa tops the list of five as the cleanest. Here’s the contradiction, if you quiz US diplomats and business about why they would rather do business with Brazil, China or India who are all according to the report, more corrupt than South Africa. Crocker argues, “The interesting contrast is that some of the new arrivals in some of the African market places, I think China, Malaysia and India and the others, Russia of course, those economies are much more based on corrupt practices. I guess it’s just the way I put it, so it’s a different playing field, the legal standards are not to our liking, and the American Corporate leaders are not prepared to take the risk. The African market is not big enough to make it worth the while to take that risk. I don’t think we are giving it a miss but we got to be very selective and it’s not surprising because we are a huge economy. Our major companies are huge and to get them interested in the market you have to have a critical mass in terms of size whether you measuring it by consumers or the market cap or the stock exchange”.
Governed by Law
“I would stress that American firms are obliged to operate under the Foreign Corruption Practices Act (FCPA) which puts very severe constraints on what American firms do. An American firm that pays local agents to pay off officials will wind up in jail with its chief executive and its board of directors being in severe legal jeopardy; so it’s a way of battling corruption from our homestead”. The FCPA, states that it is unlawful for certain persons or entities to pay foreign government officials to assist in obtaining or retaining business. “These kinds of issues are not just pursued here, they are pursued in the UK and there’s an anti-bribery intervention of the OECD which is in most advanced Western Countries. So it’s not just the US”, said Crocker. Here’s the paradox, how is it that the UK or European businesses find ways to deal with Africa rather than exclude the continent from the business folder? “Sure we [the US] lose business, but don’t forget, we are a country of laws and lawyers and we are not alone”. Indeed the US or developed nations can’t talk alone on the issue of corruption in Africa, the Africans themselves have the right to reply on this issue. It is also necessary to extend the debate to explore how this affects entrepreneurs, large and small enterprises and whether other key issues are ones of image and assumptions, so join us next week for “Africa’s Right to Reply on Corruption”, from the World Entrepreneur Society’s New Series, “The African Business Voice”.