Control Risks’ annual survey “International attitudes towards corruption” has revealed increasing awareness of the corruption problem, and the importance of managing it, within Africa. This in part reflects the impact of extraterritorial anti-corruption laws, particularly the US Foreign Corrupt Practices Act (FCPA) and other pieces of legislation around the world which have similarly sought to tighten the rules to prevent corruption. It also reflects the impact of globalisation as businesses in South Africa and Nigeria are influenced in their practices by counterparts or partner with businesses from environments where corruption is more routinely checked or is less of a challenge. But the findings are nonetheless striking because they demonstrate the extent to which company culture has evolved, even in the absence of changes to corruption environments where the companies operate and even where the four factors key to the successful enforcement of anti-corruption and compliance measures are not in force, which are:
- Political will on the part of the authorities to combat corruption.
- An enabling legislative framework.
- Institutional capacity to detect, investigate and prosecute cases of corruption.
- Education to promote professional ethics and compliance.
South Africa and Nigeria, the two biggest economies in Africa, provide contrasting case studies on corruption. In both countries, our survey identified an increased intolerance of corruption among companies. But in both, the problem remains a significant challenge to business, though one which manifests itself differently in each country and which is being tackled in different ways.
Where there is a will, there is a way
The election of President Muhammad Buhari earlier this year has raised hopes that for the first time there is a genuine commitment at the top of Nigeria’s government to tackle corruption. A perceived failure to address corruption was a key factor playing into the defeat of former President Goodluck Jonathan. Although Nigeria has a relatively mature legal framework for tackling corruption, a lack of political commitment to counter graft in a determined and even fashion has consistently undermined progress. Consequently, key anti-corruption bodies have not been bestowed with the resources, support or leadership needed to act as strong enforcers, while long-overdue reforms to the judiciary have been slow to take foot.
Newly-elected President Muhammad Buhari has made the fight against corruption a key priority of his administration, though he faces significant challenges in supporting the necessary institutional framework without being seen to conduct a political witch-hunt of his detractors from the former administration. Initial moves made by Buhari appear positive, with anti-corruption agencies seeing unprecedented levels of activity and numerous high-profile officials and deals now under scrutiny or facing prosecution. The recent management overhaul of the Nigeria National Petroleum Corporation (NNPC) and the National Petroleum Investment Management Services (NAPIMS) – both entities that have continuously been embroiled in repeated corruption scandals – is another encouraging sign that President Buhari may be serious about combating corruption in the oil and gas sector. Importantly, unlike previous management reshuffles which were aimed primarily at redistributing political patronage, management restructuring has focused more on streamlining and improving competence, with more private sector expertise brought into these bloated and politicised institutions.
While the invigorated anti-corruption campaign in Nigeria bodes well for increasing transparency and tackling graft over the longer term, it will also create challenges for private sector businesses – particularly those who are dealing directly with government or have depended on relationships with senior power-brokers in the former administration. While most of Nigerian companies have a formal policy in place that forbids bribes (84% of the respondents), only a minority has a board director or compliance committee that is directly accountable for anti-corruption (26% of the respondents). This lack of responsibility at senior level makes it challenging to really “live” the anti-corruption culture. Those companies which have not enforced adequate integrity standards, or have partnered with exposed politically-connected individuals to further their interests, may now find themselves caught up in domestic scandals or investigations, some of which could also lead to prosecution under international anti-corruption legislation.
Persistent challenge in South Africa
A series of scandals suggest that the scale of the corruption problem in South Africa is significant, and has cast doubt on the intent or interest of the government in tackling the problem. There is further very little likelihood of a change to the government position on tackling corruption in the near future. A report by the auditor-general on the financial year 2013-14 suggested that of a budget of ZAR1 trillion / USD100 billion, ZAR2.6 billion / USD 260 million was unauthorised expenditure and ZAR62.7 billion / USD670 million was irregular expenditure. This does not automatically translate into almost a USD1 billion having been lost to corruption, but corruption is likely behind the irregular or unauthorised use of some of these funds.
The government has made public commitments to tackling corruption but has done little to follow them up. By contrast, our survey results indicated that 65% of companies in South Africa are working actively to counter corruption and focus on being compliant with international laws. 85% of the respondents also strongly agree or agree that anti-corruption laws improve the business environment for everyone (97% in Nigeria).
Both countries have well developed anti-corruption legal instruments. The relevant pieces of legislation have extra-territorial application and quite severe sanctions for those found guilty of corruption. But there is case of a disjuncture between theory and practise as prominent politically connected individuals have consistently been let off the hook.
We do not anticipate the Nigerian or South African governments following the example of countries such as China, where the government has acted in an increasingly meaningful way to tackle corruption, including by taking action against companies and party officials who are implicated in allegations of graft. Notwithstanding public pronouncements by Nigeria and South Africa of their commitment to combat corruption, there is little evidence to date that this has been translated into concrete actions. For levels of corruption to decline, expressions of commitment have to be coupled with practical and demonstrable measures that will firstly, bring to book those involved in corruption irrespective of office or political connectedness and, secondly, instil public confidence in the anti-corruption campaign.
The Buhari administration has stated an intention to amalgamate various anti-corruption bodies and form one strong institution to tackle graft. This signals positive change but will also depend on continued political commitment to providing this body with the political support and resources needed to conduct its work in an independent and effective manner. This is no small task in the Nigerian context, where politics reaches out into all areas of life, not least on the sensitive matter of tackling corruption. Moreover, judicial reforms will be essential given the spectacularly slow pace of corruption trials, the existence of corruption within the judiciary, and the limited deterrent provided by some of the lenient sentences meted out in corruption cases.
The Economic and Financial Crimes Commission (EFCC) is Nigeria’s foremost anti-corruption agency, although a number of smaller bodies such as the Independent Corrupt Practices and other Related Offences Commission (ICPC) also exist. South Africa also has a number of dedicated anti-corruption agencies including the Special Investigating Unit (SIU), the Directorate of Priority Crimes Investigation (DPCI) and the Office of the Public Protector. So at an institutional level, there is not a shortage of agencies mandated to combat corruption.
The EFCC has been criticised for being under-funded and not being an effective anti-corruption agency; a state of affairs which is exacerbated by weak leadership and political interference in its operations. A recent study by two Nigerian academics, Nnado Efeanyi and Ugwu Chukwuma found that the “lack of societal cooperation, poor staff training, pre-bargaining and systemic disorder” affected the effectiveness of the EFCC and, if not addressed by government, “it will be difficult for the government to succeed in the fight against corruption” in that country.
South Africa’s SIU has developed a credible reputation for tackling corruption at municipal and provincial levels. The Office of the Public Protector has also shown its commitment to tackling corruption irrespective of which office it affects. However, in both cases there have been worrying signs of political meddling and inadequate funding. In the case of the DPCI, its independence from political interference is still subject to legal challenges and it too has been subject to political interference in the execution of its duties.
South Africa has now also formed an inter-departmental body named the Anti-Corruption Task Team (ACTT), and this body has, by all accounts, had significant successes in conducting investigations at a multi-disciplinary level. It remains to be seen if these investigations will result in the prosecution of senior government officials and their cohorts in the private sector. Enforcement action has been few and far between with the “small fish” being targeted.
A long way to go
While some might have hoped that the fight against corruption in African countries will soon experience a significant upturn as we have seen in China in the last 1.5 years, the reality is more complicated. While Control Risks’ survey indicates some positive trends with regard to anti-corruption actions and culture within companies, governments are still limping behind, as creating appropriate institutions is not enough. They also need to be given power to succeed. Nigerian and South African companies that are increasingly operating on a regional or global level have realised the need for compliance and one can hope that this push-factor, combined with a stronger political will, at least in Nigeria, will see tangible results in the mid-term.