Carlos da Costa, PhD Student in Mining Engineering // Mar 6, 2015
Africa is a notoriously difficult place to do business. Many investors remain skeptical of their ability to navigate the continent’s often murky operational environments, where weak governance, regulatory failure and unstructured economies have created the conditions for corruption to thrive.
The scale of political graft (a form of political corruption, is the unscrupulous use of a politician’s authority for personal gains) has been particularly noteworthy in extractive industries. As a result, the citizens of many African countries rich in oil, gas and minerals are mired in poverty. Rather than investing resource revenues into infrastructure, health care and education, governments, often in collusion with the private sector, have diverted the proceeds into their own pockets.
Ghana, Angola and Nigeria, for example, are plagued by the resource curse. Combined they are the largest producers of oil in Africa, yet their citizens are among the world’s poorest, with over 50% of their respective populations living on less than $2 a day, according to World Bank figures.
Transparency International (TI), the Berlin-based watchdog, ranked Angola a dismal 161 out of 175 countries in its 2014 Corruption Perceptions Index. The Angolan government frequently commits itself to greater transparency, at least on paper. In 2010 it passed the Public Probity Law, which obliges all government officials to declare their wealth. This information, however, is not made public, a direct contradiction of the legislation’s title. As a result, this act has yielded few positive effects.
Transparency International has ranked Nigeria as the 27th most corrupt country in the world out of 100. The group disclosed this in its 2014 “Perception Corruption Index.” Nigeria was ranked 136 out of 175 countries surveyed in the report. Nigeria’s poor also suffer from the government’s mismanagement of the country’s oil revenues. Unlike Canada, which has used its resource wealth to develop and diversify its economy, Nigeria is still stuck in a mono-export economy. Oil accounted for approximately 95% of Nigerian exports between 1980 and 2010, according to a 2013 report by the United Nations Economic Commission on Africa. Accusations of corruption have plagued successive Nigerian governments and the Nigerian National Petroleum Company (NNPC), the state oil firm, continues to accused of stealing billions from federal accounts.
Ghanaian lawmakers reacted angrily to Transparency International’s latest Corruption Barometer Survey, which ranked Ghana’s Parliament among the most corrupt institutions in the country. In its 2014 “Perception Corruption Index,” TI has ranked Ghana as the 48th most corrupt country in the world. The country was ranked 61 out of 175 countries surveyed in the report. This latest survey, along with past ones, has drawn sharp condemnation from MPs, with some threatening to have the International Corruption Watchdog before the Privileges Committee. According to the MP, the allegations were very damning and Transparency International should produce evidence.
Transparency International has ranked the Ghanaian Legislature as the sixth most corrupt institution on a list made up of other public institutions like the Police Service, the Judiciary, and Political Parties amongst others.
One measure that mineral-rich countries can adopt is the Extractive Industries Transparency Initiative (EITI). This voluntary programme seeks to promote better use of mineral wealth through increased transparency and accountability. It encourages governments and companies to publish their revenues and payments and then submit them to independent auditing. Currently 48 countries, including 22 African nations, are implementing EITI requirements and 17 are compliant; 4 are implementing EITI, not yet compliant; and 1 possesses compliant/candidate status but is temporarily suspended according to the EITI website.
The African Development Bank endorsed the EITI in 2006, but governments and private companies still resort to inventive ways of hiding their buy-offs and kickbacks. While the initiative in itself is not sufficient to eradicate corruption in the extractive sectors, it is generating more information on revenues that was previously either not available or difficult to access.
In addition to the EITI, African governments and multinationals need to define clearly and publicly their rules of engagement. Transparent resource management with well-defined principles and neutral administration will discourage participants from rent-seeking behavior.
While corporate Africa’s reputation for clean business is unflattering, this is changing. As African companies strive to become world class, many are tightening up their governance, buttressing business codes of conduct and teaching their employees about ethics.
Government graft, often with the collaboration of private companies, is choking African economies and is a cancer that African governments need to remove. This requires fostering greater transparency in their dealings with mining, oil and gas companies; developing and enforcing stronger anti-corruption legislation; and creating economic policies that promote diversified, industrial economies and reduced dependency on resources.
Corruption is not simply about ethics. It is also about how a government is set up and managed. Critical elements in fighting the scourge include an active and engaged media and judiciary, and the use of information technology. The underlying causes of corruption (poor pay incentives, ineffective political processes, and a deep-seated acceptance of corruption) need to be expunged. Citizens should demand greater accountability and transparency from their governments.
Sources:
Compaoré, Nadège. Towards Understanding South Africa’s Differing Attitudes to the Extractive Industries Transparency Initiative and the Open Governance Partnership. Johannesburg, 2013.
EITI. Impact of EITI in Africa: Stories from the ground. Oslo, 2010.
EITI International Secretariat. EITI – Extractive Industries Transparency Initiative, Ghana. March 2015.
EITI International Secretariat. EITI – Extractive Industries Transparency Initiative, Nigeria. March 2015.
Natural Resource Governance Institute. Natural Resource Governance, Angola.
< http://www.resourcegovernance.
Natural Resource Governance Institute. Natural Resource Governance, Ghana.
< http://www.resourcegovernance.
Natural Resource Governance Institute. Natural Resource Governance, Nigeria.
< http://www.resourcegovernance.
Ocheje, P. D. (2006). The Extractive Industries Transparency Initiative (EITI): Voluntary Codes of Conduct, Poverty and Accountability in Africa. Journal of Sustainable Development in Africa, 8(3), 222-239.
The World Bank Group. Worldwide Governance Indicators (WGI) Project. Country Data Report for Ghana, 1996-2013. Washington, 2014.
Transparency International. Corruption Perceptions Index, Overview. February 2015.