Transparency International recently published its 2016 Corruption Perception Index. According to TI’s website, the 2016 results ‘highlight the connection between corruption and inequality, which feed off each other to create a vicious circle between corruption, unequal distribution of power in society, and unequal distribution of wealth’. José Ugaz, the Chair of Transparency International went further to bemoan shocking levels of corruption in poor countries, adding that ‘In too many countries, people are deprived of their most basic needs and go to bed hungry every night because of corruption, while the powerful and corrupt enjoy lavish lifestyles with impunity.’
According to the 2016 index, 9 of the top 10 least corrupt countries in the world are in Europe. Switzerland, a world-renowned tax haven and a destination of billions of illicitly acquired money from the ‘most corrupt’ countries, sits comfortably on position 5 as one of the least corrupt countries in the world. Britain, another tax haven whose mining companies are ransacking poor countries by disemboweling them of their natural capital, is a surprise 10th. Of course, the report warns ‘the higher-ranked countries are not immune to closed-door deals, conflicts of interest, illicit finance, and patchy law enforcement that can distort public policy and exacerbate corruption at home and abroad’
We wish to give an African perspective on corruption in public institutions in response to TIs corruption perception index. Our view is that in a globalized world it is essential for TI to critically examine the pros and cons of corruption according to both internal and external factors. We are afraid the ratings dwell much on internal institutions of nations which pale into insignificance when we bring into the equation external factors.
The index majors on the minor and minors on the major. It focuses much on corruption within public institutions of states and negates the global context in which corruption is on the rise. The index completely fails to come down heavily on organized crime involving TNCs headquartered in the ‘least corrupt countries’ but sent out into the world to licitly and illicitly harvest the wealth of the nations for a privileged few. To a great extent, it is corruption at the global scale that weaken public institutions in poor countries which have to bend rules to facilitate deals, especially in the extractive sector, on behalf of the powerful TNCs. Therefore, the ‘perceptions’ that informed this index are based on symptoms of a far much deeper and complex global economic architecture which makes it legal for rich countries to plunder poor countries and do this in both licit and illicit ways. Despite seemingly having knowledge of ‘closed-door deals, conflicts of interest, illicit finance’ by rich countries, TI chose to downplay this component in its ratings.
US President Donald Trump has already drafted a diabolic executive order to hat would extinguish regulatory controls designed to prevent US companies from trading in “conflict minerals” that are sourced from war torn Democratic Republic of Congo. Section 1502 of the Dodd Frank Act is a supply chain due diligence disclosure rule which requires US firms to prove to regulators that they are not involved in conflict minerals. However Trump’s draft executive order claims the law is threatening the national security interests of the United States, adding that the regulations have ‘caused harm to some parties in the Democratic Republic of the Congo and have thereby contributed to instability in the region.’ Nevertheless the suspension of this law is simply a bold statement by Trump that he is ready to import blood-soaked minerals as long as they advance United States national interests. These policies of rich countries towards poor and weak countries need to be analyzed and factored into the corruption perception index.
A recent report by Oxfam noted that the world’s eight richest billionaires control the same wealth between them as the poorest half of the globe’s population. None of the eight is based in poor countries. Some of the world’s richest individuals are in the electronics industry which acquires its minerals from some of the poorest or, in the words of TI, most corrupt countries. The connectedness of poverty in poor countries and affluence in the rich countries cannot be ignored given the wealth of evidence which points to a global web of underhand deals that are robbing the poor nations for the benefit of the wealthy and powerful. Of all the richest dictators in Africa none banked their loot in their own countries. A good example is Muammar Gaddafi, who according to Celebrity Net Worth, had a secret net worth of US$200 billion. In the months surrounding his death, nearly $70billion in cash was seized in foreign bank accounts and real estate. According to dailymail.co.uk, nine years later on 25 February, 2011, Britain’s Treasury traced Gaddafi’s assets in Britain after he allegedly worked for years with Swiss banks to launder international banking transactions[1]. In November 2011, The Sunday Times identified property worth £1 billion in the UK that Gaddafi owned. Gaddafi, was not alone in this global corruption syndicate that still exist today, names like, Sani Abacha, Mobutu Sese Seko, Charles Taylor, Yahya Jammeh, Teodoro Obiang Nguema Mbasongo and Jose Eduardo Dos Santos just to mention a few, have all robbed their poor countries of tens of billions of dollars which they stashed in foreign accounts in some ‘least corrupt countries’ such as Switzerland, Belgium and Britain
Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics recently published a report which concluded that the flow of money from rich countries to poor countries is insignificant when compared to the flow that runs in the other direction. In 2012 they observed that developing countries received a total of $1.3tn, including all aid, investment, and income from rich countries whilst they donated to rich countries $3.3tn through debt repayments, and both recorded and unrecorded capital flight which can be further subdivided into various categories. These include trade misinvoicing, tax avoidance and same invoice faking, according to Jason Heckel, an anthropologist at London School of Economic and author of The Divide: A new history of global inequality.
Needless to say, TI’s corruption perception index fails to critically analyze the global architecture of corruption which is increasing inequality and bad governance in poor countries. Corruption is now a highly sophisticated industry involving governments, Presidents, and big transnational companies. Financial deregulation and the establishment of over 60 tax havens around the globe makes it easy for individuals and business entities to transfer proceeds of corruption willy-nilly. Heckel argues that some of the most prominent tax havens in Europe are Luxembourg and Belgium whilst the US boast of Delaware and Manhattan. ‘But by far the biggest network of tax havens is centered on the City of London, which controls secrecy jurisdictions throughout the British Crown Dependencies and Overseas Territories’, Concluded Heckel.
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It is also essential to point out that majority of transnational corporations that have large projects in poor countries operate offshore accounts, as the Panama papers revealed, to rob poor countries of revenue. To add to that there are what Patrick Bond termed ‘licit financial flows’ which he defined as ‘legal profits and dividends sent home to TNC headquarters after FDI begins to pay off.’ Bond argues these are hard to pin down though there is overwhelming evidence that TNCs loot through licit financial flows.
From the global South, we also need to question the effectiveness of anti-corruption bodies such as Extractive Industries Transparency Initiative (EITI) in combating corruption in the extractive sector. A 2011 investigation by Khadija Sharife unearthed a massive scandal involving copper mining companies in Zambia, then an EITI candidate, and Swiss middleman. The companies remitted $463 million to the government of Zambia and EITI reports noted discrepancies of $63 million. However, half of Zambia’s copper destined for Switzerland never reached its intended destinations, according to Sharife.
‘Moreover, the pricing structure for Swiss copper – remarkably similar to Zambia’s exported copper – was six times higher than the funds Zambia received, facilitating a potential loss of some $11.4bn…This is especially interesting when taking into account that Zambia’s entire GDP for 2008 was $14.3bn’ added Sharife. It becomes extremely disingenuous to rate Zambia and Switzerland on the corruption perception index without connecting how public institutions in both countries are extremely weak as to allow Zambia to lose so much revenue and for Switzerland to benefit so much from the proceeds of corruption.
Licit and Illicit financial flows are weakening the capacity of governments in poor countries to meet the basic service delivery needs of their populations. This is a major driver of corruption as public officials engage in petty crimes to supplement their meagre earnings. Therefore, the underlying cause of corruption in poor countries can be attributed to an intricate global corruption syndicate that involves powerful government officials, TNCs and to some extent multilateral financial institutions such as IMF and World Bank who interest rates are punitive and designed to ensure poor countries remain in debt.
The High level panel on Illicit Financial Flows, Tax Justice Network Africa and Africa Progress Panel, just to mention a few, all concur that the new scramble for Africa by rich countries through TNCs is at the heart of poverty and inequality on the continent. Kar and Cartwright-Smith in 2010 estimated that Africa lost in excess of $1 trillion in illicit financial flows over the past 50 years. In 2015 the Mbeki-led High Level Panel on Illicit Financial Flows in Africa argued that Africa was losing at least $50 billion annually to IFFs, adding that ‘the amount lost annually by Africa through IFFs is therefore likely to exceed $50 billion by a significant amount’ if other forms of IFFs such as proceeds of bribery and trafficking of drugs, people and firearms were factored in.
It is essential to note that corruption has a supply and a demand side. Pointing accusing fingers at poor countries for being the most corrupt without blaming rich countries for looting poor countries dry is as nefarious as stoning a woman for engaging in illicit sex, as is still happening in some parts of the world today, and fail to account for the man caught in the act with the woman. It takes two to tango.
The report by Transparency International deals a cruel blow to the new awakening among civil society in Western Europe and North America who have come to acknowledge, howbeit belatedly, that poverty in the global south is inextricably interlinked to the illegal plunder of natural resources in these regions by the rich countries. In some countries TNCs have captured governments and use their financial muscle to bypass laws and regulations, compromise public officials through bribes and gifts and set governments against their own people. How many times have we heard of African governments using the police and army to fight unarmed citizens on behalf of Chinese, Australian, European, Canadian or Russian companies? The massacre of over 200 artisanal miners by Zimbabwean troops in November 2008 to pave way for opaque diamond mining activities by Chinese, Lebanese and South African corporations comes to mind. Then there was the 2012 Marikana horror show when the South Africa Police fired live ammunition to suppress industrial action by Lonmin workers, killing 43 workers on the spot. It is essential to mention that illegal plunder of Africa’s wealth is immensely contributing to human rights violations and prolonged dictatorships on the continent leading to widening inequality. It is also common knowledge that some of the most unstable countries on the African continent are endowed with rich natural resources whose extraction and consumption is largely for the benefit of people outside the continent. We are persuaded to argue that if Africa was less on minerals and oil it would be better governed and developing very fast. It is the abundance of natural resources – minerals, timber and oil which has ironically contributed to poverty and carnage on the continent.
If only minerals could speak, they would talk of the massacre of villagers, blatant exploitation of workers, bribes and ‘gifts’ to the local leadership, forced displacement of whole communities, land & water grabbing, desecration of cultural heritage sites, women’s unpaid labor, inequality and new poverty and in some instances full scale wars. There are gruesome stories behind minerals coming out of Africa. The woman in Zimbabwe’s Marange diamond fields and the woman who received a colorful diamond ring in New York have different relationships to the very same diamond. To another it represents displacement, death, rape and poverty but to the other it is a symbol of enduring love and power.
Whilst the rich countries have put in place domestic measures to fight corruption on home soil, these policies do not extend to their TNCs operating in developing countries. It is a matter of plunder by “any means necessary”. To them it does not matter whether the cat is black or white as long as it catches mice. We cannot talk about corruption in DRC and ignore the iniquities of TNCs.
Poverty in Africa creates a breeding ground for bad politics and corruption. People who have no idea of governance manipulate tribal alliances, joblessness and poverty to capture resources and charge rents to TNCs. Consequently kakistocratic governments have emerged on the continent with no interest whatsoever, to bridge the inequality gap and weed out corruption. We have always wondered, who has sinned, the one who has committed the act of sin or the one who has caused the act. In Chinese they say, “Laws are useless when humans are pure, unenforceable when humans are corrupt”.
The Authors are with the Centre for Natural Resource Governance (CNRG). A Zimbabwean registered civil society organization whose mission is to promote alternative sustainable livelihoods to mining.
Email: [email protected] Website: www.cnrgzim.org Twitter: @CNRG_ZIM
