Sunday, February 04, 2007

Analyzing Corruption in Africa: In Response to Drima

Hello, I come to write today as a result of a most beautiful exchange between a fellow Africa blogger ( Drima-The Sudanese Thinker) and myself. If you are interested in reading the exchange you can find it in the comment section [here]. My rationale for actually following up the discussion with a full post is two-fold.

  1. Drima's open and frankness opened my eyes, not necessarily to the reality of corruption in Africa, but more so to the difficulties of honest people (like Drima) trying with much trepidation to avoid it.
  2. Also, in overhearing countless other conversations by other Africa bloggers, the topic of corruption often times dominates the floor. Sometimes my personality makes it difficult for me to focus on anything, but the positive. As such, I made a very conscious decision when I started this blog to stay away from topics that may detract from the message of promoting Africa as a serious and legitimate investment destination. However, in not addressing this issue, I have ignored a lesson that life has taught me. That when it comes to tough issues, sometimes the best way to approach them is "head on". Drima, thank you for waking me up on the issue.
Before, continuing let me say this, no one in life is perfect. Anyone can fall prone to lapses in judgement. So please, let us not use this post as a way to harshly judge others. I say this because corruption is such a sensitive issue.

My thoughts on corruption, as it pertains to doing business in Africa, are that one should strive to do open and honest business. Rather than summarize my response to Drima, to keep this post a little more concise, please refer to the original post. Now, that you know my thoughts on corruption let us look at a few facts, figures, & observations:

  1. According to the World Bank, at a UN conference, the world wide cost of corruption is $1.5 trillion USD.
  2. Nigeria's President, Mr. Olusegun Obasanjo, said that corruption costs African countries an estimated 25% of it's combined national incomes.
  3. Corruption costs African economies up to $148billion USD per year.
  4. Corruption scares away investors
  5. Development efforts of a nation are thwarted by corruption.
  6. Large numbers in Africa perceive their elected officials to be corrupt.
These are a few arguments that I came across, in favor of corruption:
  • For every government official offering favors for money, there are at least one to two corporations willing to pay.
  • Some in the business community see this as the only way to secure government contracts.
  • Without bribing it takes too long to start a business in Africa.

Additional related resources:
Well, everyone, I promised in the beginning of this post to keep it short. In closing let me say that I hope that anyone wishing to do business in any part of Africa can do so without engaging in corrupt practices. Also, here is an interesting article that summarizes one of my other viewpoints on the whole issue. It says despite the fact that there are problems, many African countries have shown some progress in fighting corruption. However, the perception of African corruption lags greatly behind these improvements and this is to the detriment of foreign investment. Please take a peek.

Thank you again, Drima! You are very insightful.

Of course, I love your comments. But, if you can't comment at this particular time- but would like to let us know that you were here; please sign and View my guestbook

9 comments:

imnakoya said...

Interesting...as you are well aware Benin there is corruption everywhere, and there are different types for that matter. Secondly, nobody is genetically programmed to be corrupt - it's a secondary effect.

Any entrepreneur will face instances of corruption at some points in time, and the ability to handle this menace without incurring serious cost (financial, emotional or ethical) is one attribute all entrepreneurs must possess in my opinion.

Lastly, for Africa to shed the weight of corruption and move out of obscurity, social entrepreneurs must find ways to control sensitive segments of the public sector as they expand their activities in the private sector.

Dibussi said...

Hi Benin,

I enjoyed your exchanges with Drima about corruption. I think that one key element is missing in the debate, i.e., the institutional component of corruption in Africa. Have you ever thought about this question? “Do African political systems and institutions promote or curtail corruption?”.

While corruption is a universal phenomenon, it is no secret that in Africa, more than elsewhere, there is an enabling environment which allows corruption to permeate the continent's social fabric.

The challenge for African countries is to figure out how to create a new socio-political environment that effectively tackles corruption head-on with viable and effective institutions, policies, laws, etc. Corruption is therefore not a stand-alone issue, but is intertwined with the nature of African political systems - political systems which survive partly because they turn a blind eye to the corrupt practices of the elite. The trickle-down effect is rampant corruption at every level of the state and country.

In this context, it is unfair and even unrealistic to place the burden of bribing or not bribing on the individual entrepreneur. In most cases, he or she is dealing with forces far more powerful and pervasive than what he or she can realistically handle.

Change the system, change the socio-political dynamics, make accountability a reality, and the entrepreneur will no longer be put in a situation where he has to bribe a clerk just to obtain a simple business form which is supposed to be free. In this regard, I believe in Martin Luther King's maxim that "you cannot legislate morality but you can regulate behavior"...

To paraphrase the Clintonian mantra of the early nineties, “It is institutions stupid!”

Dibussi

Benin "Mwangi" said...

Imnakoya:

Thank you for your insights. I share your views. No one region or group of people has a monopoly on corruption. Corruption is everywhere. I think as Dibussi has said, mainly corruption is found where there is either a break down or weakened condition of the social or politcal or economic systems that would otherwise provide rigid and efficient responses to certain economic stimuli.

In other words, in countries where for instance war has touched the government institutions and mechanisms that were once in place during times of stability could be found to be somewhat rusty. Business people who wouldn't ordinarily have time to wait for things to shape up might be willing to offer something small in return for someone in authority to speed things up. Likewise, on the supply side the person of authority who may be a high ranking government official know that the systems are very shaky, but where would the money come from or the time or expertise to come in and rebuild the system from the ground up, while social services are still going unfufilled? This is where corruption has come in to fill the void. Because this authoritative figure might have authority, but this person doesn't have the time or ability to speed everyone's cases up, so the people that are not able to pay are weeded out, while the people who are able to pay are helped. It mirrors the supply and demand found in modern economics books, in many ways....

My hypothesis is that three types of nations are vulnerable to corruption:
*countries that have experienced recent calamities, whereby the collective consciousness of the people has been harmed (such as war.
*Countries that are in a period of economic flux, whereby the nation is transforming it's economy from one form of subsistance to another. Like going from a socialist society to a capitalist society, for instance.
*Countries in which the moral and social foundations are built around the culture or idea that "the end result justifies the means to getting there". Perhaps the Enron corruption and scandal might fall into this category.

So as Imnakoya pointed out, it is not an ethnic or even a geographic issue. Also, this may be a bit off of the path from the discussion of corruption, but since it is on the table, it may be good to point out two things:
*all humans can trace their ancestry to Sub Saharan Africa.
*most biologists and anthropologists have concluded that race is not a scientific phenomenom, it is rather a social construct.

The two points directly above were made because often times in conversations about social issues such as corruption, one can hears many arguments that revolve around ethnicity-this to me is very devisive and fallable.

Back to the three types of nations which are vulnerable to corruption, as Dibussi has mentioned corruption is a mere symptom of one or more much larger issues. That being said, I suppose that corruption could be seen as an institution.

This is where a scientist and idealist or maybe a theologian would meet come to part views. Me being the idealist that I am, in the face of so much adversity, even when the adversity is bigger than oneself (as one could argue is the case with corruption) my own inclination or dispostion (I would hope) is that my faith in something which is even larger than that which is before me would allow me not not falter in the face of such an obstacle. Hey, don't tell me....just kidding.... if you are thinking that that is fantasy and this is reality I hear you. But for some reason that has always been my disposition, my inclination has always been to go for the underdog. It probably comes from having such an interesting and at times very challenging childhood. But then again..maybe it comes from other convictions...

What does all of this long-winded discussion mean to an entrepreneur simply tryingg to chosse between what his or her heart says is right versus what society says is right?

Well, until we are put in this type of situation, we may never know...

Let me also say that no one was wrong...the points made were each very real and very vaild...In fact, I loved the discussion and the heart and the sincerity behind it as well...Anyone else who maybe reading, you are welcome to offer your take.

Drima @ The Sudanese Thinker said...

"In this context, it is unfair and even unrealistic to place the burden of bribing or not bribing on the individual entrepreneur. In most cases, he or she is dealing with forces far more powerful and pervasive than what he or she can realistically handle."

Dibussi, I'm leaning towards an agreement. The truth is that in order to set up a company in Sudan, I'll have to bribe someone in one way or another. There's no way of avoiding that. My fear is that later on, instead of helping change the system, the system changes you. That's the real challenge. However as I said, logically I accept and perfectly agree with what you said but maybe I still need it to sink emotionally. I can be a little stubborn sometimes =)

Btw, well established ethical businessmen in Sudan avoid bribes by offering gifts in such a way that it's hard to say if they're bribes or not. For example, I'm not sure if you've heard of Osama Dawood, a Sudanese tycoon. A few years ago, he bought brand new Mitsubishi Lancers for most of the police departments in Khartoum so they can replace the old messed up patrol cars!

Benin, I plan to start reading up a lot of books about corruption in America for example during Al Capone's days in Chicago. I think a lot of lessons can be learnt from that.

Peace =)

James said...

I am not sure corruption is every where provides much comfort or is a strategy to open up more business in Africa. As a black American, we know, we cannot do the same as white boys. We have insurance scams, CEO greed,ie Enron, but business goes on. In Africa the perception of forced payments or hiring an agent to do the pay offs, porvide a white company the excuse based on fear and ethics, There is a dual standard. In America, it is called white collar crime, a few bad apples, in Africa, wide spread corruption is the perception

Benin "Mwangi" said...

James:

You make quite an interesting point. You know, one of the things that I find so striking about Carol Pineau's message and evidence is that in a way it turns those types of notions upside down. She interviews quite a few entrepreneurs in regions of Africa where one might expect it difficult to do business do to various social issues. In fact, there seems to be a correlation between this type of message and the message that Ervin "Magic" Johnson promotes.

Here, my message is that despite what some may think about Africa, there are people doing exceptionally good business there-both home grown entrepreneurs and entrepreneurs from abroad. They do this despite the various social issues that exist there. And if you think about it Africa's numbers (population, population growth rate, middle class growth, and stock market growth) substaniate the case for doing business there. Now in Magic Johhnson's (who by the way is on the way to billionaire status) example America's board rooms have learned that there is good and profitable business to be done in America's inner cities. Before his example corporations were running from America's inner cities. They probably saw them as poverty stricken, violence ridden, and oh, not to mention they didn't understand how to market to predominatly African American consumers. Now, he is taking "Wall Street" to "MLK Street" and as a reszult over 10,000 new jobs have been created!

Back to the double standard that exists, I know where you are coming from. The bottm line is that like you have said in your prior comment-education and going the extra mile must be something that is adhered to, which is something that my parents tried to engrain withus my siblings and my self. Liikewise, this is something that I strongly try to build within my daughter.

My good sir-James, it is always an enlightening moment when you are here. Please do come back and do it again by the way I really love those black history posts that you did on your blog. Maybe you could give me a few ideas....

Black River Eagle said...

Your coming up to speed in the blogosphere nicely Benin, pulling in some of the hardest-working bloggers from the Africa sector. Excellent writing and the dialogues are most interesting.

I ran across a story about a young African-American entrepreneur yesterday that may be very interested in what you and others are trying to do re: building interest in direct foreign investments in Africa and increasing trade with the continent. His name is Ephren W. Taylor II and he is the youngest black CEO of a publicly-traded corporation in America. Equity investments and finance is his specialty I believe.

Check out his interview on CNBC and follow the link to his new blog over at The Black Informant.

http://blackinformant.com/

http://blackinformant.com/2007/02/04/24-year-old-ceo-new-black-history-being-made

Remember guys, you heard it from the Black River Eagle first! I gotta fly now. Ciao.

Anonymous said...

My thought on corruption is that where ever there is business there is going to be corruption. We have just as much of that here in the USA. As long as people continue in invest there time and efforts in Africa the more this will come out in the open. This kind of thing is not going to stop me are my company, www.africaathomeci.com from doing business with my brothers and sisters in Africa.

Benin "Mwangi" said...

BRE:

Thank you for the kind words, I'll have to look into Ephren. Recently, there have been a lot of good articles popping up about African Americans doing some really good business in Africa. Another such gentleman, who it just so happens seems to parallel Ephren is called Thomas Mims of Emerging Africa Ltd. which is a stock and investment research clearing house which aims to help foreign investors make more informed investment decisions as it pertains to investing in Africa's various stock market exchange....I think people should know about this, so needless to say the remaining portion of February will be a very busy one for me.

Mr. Nubian (anonymous):

Good to see you here, Partner. My sentinents 110% You know what you could have said more about your business, I would love for people to know about you. Don't worry we will figure something out.

Anyone wishing to do online imports of curios, cloth, art, and etc. from a wide assortment of African countries please visit my friends site- africa at home. I am really proud of this young gentleman from Texas and am sure one day in the future his name will grace the Black History posters accross America!

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