We've been measuring theft all wrong, African experts say — what it has to do with leaked 'Panama Papers'

Continent should shift from popular perception indices, to also look at corruption in the private sector - and help develop plans to fight it

ADDIS ABABA: In the 2000s, Rio Tinto, currently the world’s second biggest mining company, hit pay dirt: it realised that an iron ore project it had been sizing up in south-eastern Guinea would make it the biggest player in iron ore for decades.

In 2008, the British-Australian multinational put a number on it; some 2.25 billion tonnes worth $20 billion, and set about preparing to develop the Simandou project, the world’s biggest undeveloped iron ore deposit.

But one day it  woke up to find that half its rights had been taken away during the night and handed to BSG Resources, which has links to an Israeli billionaire, who sold them on to Brazilian mining giant Vale. The resulting legal battle drew in the FBI and went all the way to the echelons of the iron-fist presidency of Lansana Conte, with one of his wives and a mining minister being implicated.

In November a US court dismissed Rio Tinto’s claim of its rights having been stolen from it,  but only on a technicality. By then new president Alpha Conte had restored control of the mine to Rio.

Ask any African if their government is corrupt and the answer is usually nailed-on. A raft of internationally-issued indices further reinforce the perception of all pervasive graft, from Transparency International to the World Bank and newcomers such as Mo Ibrahim’s Index of African Governance.

These indices, compiled through surveys and views of both local and outside observers, have in recent years taken on a larger than life persona in public discussions, informing policy decisions in both African and international capitals on how to allocate or use resources.

Limits of ‘name and shame’

But this is missing the point, according to a new report. Its author, the Addis Ababa-headquartered UN Economic Commission for Africa (UNECA), says current perception-based “name and shame” measures of corruption are flawed “and fail to provide a credible assessment of the dimensions of the problem of corruption in Africa”.

“…As such [they] do not provide useful policy insights and practical recommendations to inform policy and institutional reform to help African countries to stem corruption,” it says in the Africa Governance Report.

The ECA is urging the cautious use of such homogenous methods and instead urging a shift towards “case-specific” approaches that “are fact-based and built on more objective quantitative criteria.”

During the report’s launch in the Ethiopian capital, Transparency International, the Berlin-Based anti-graft watchdog, conceded that its much-watched Corruption Perception Index was not developed with policy use in mind as currently deployed but is largely meant to raise awareness.

The ECA, which advises African governments on economic development, says the focus on individual perception among others overlooks a fundamental cause of corruption for many people: the deliberate exclusion, current or historical, of particular social groups from effective participation in society.

Current definitions of graft also rely on often questionable data and place too much emphasis on public office, neglecting corrupt tendencies prevalent in the private and non-State sectors.

“It is arguable that the greatest challenge to Africa’s structural transformation agenda is not corruption of the sort that has come to light in corporate and public-sector scandals,” the Executive Secretary of the ECA Carlos Lopes says in the report.

These scandals can be tackled with improved supervision and more stringent enforcement of governance rules, he says.

At a different level

The problem instead is on an entirely different level, the report says—“the inability of management in both public and private sectors to act effectively and enhance programme delivery and optimise results.”

“In my view, African countries and partners should move away from pure perception-based measures of corruption and focus on alternative approaches, which are fact-based and built on more objective quantitative criteria and include the international dimensions of corruption,” Lopes said.

Essentially, African governments should direct their wider effort towards improving country-specific governance systems, as perceptions tend to change far more rapidly than actual corruption does.

In a week when a massive vault of documents about offshore firms, dubbed the Panama Papers, has leaked, the ECA says that current approaches to measuring corruption “completely ignore the international dimension of corruption in Africa.

Increased levels of graft on the continent are attributed to weak institutions that allow public officers the space to pilfer, poor civil service pay, and the blind eye turned to corruptors by western countries.

The ECA says that tackling corruption in Africa should thus also sharply increase its focus on the international financial system and strengthen the ability of states to stand in the way of illicit financial flows “which are instrumental to the more vicious and damaging occurrences of corruption”.

A number of prominent Africans have been revealed to have used offshore companies following the leak of data from Panama-based law firm Mossack Fonseca, described as the biggest yet in history.

While there are many honest uses for offshore vehicles, and which are entirely legal, several people have pointed out that they also have their dubious uses.

Illicit financial flows from commercial activities “have several purposes, including hiding wealth, evading or aggressively avoiding tax, and dodging customs duties and domestic levies,” the ECA says.

“The Panama papers vindicate our focus over the last year to denounce coverage of corruption in Africa through perceptions. Both our report on illicit financial flows and the just released report on corruption insist that the international dimension is overlooked,” Lopes told M&G Africa.

“Until now, the ones from afar passing judgment singling out Africa could get away with it. No more.”

The ECA-AU-backed High-Level Panel on Illicit Financial Flows found that Africa loses more than $50 billion annually through such flows, or a fifth of the money the continent requires to simultaneously halve poverty and inequality.  

Campaign group ActionAid says the rules that allow tax “dodging” are determined almost exclusively by rich and powerful nations and deprive poor countries of at least $100 billion in revenue annually.

“ActionAid is calling on Africa ministers of finance, planning and economic development [currently meeting in Addis Ababa] to implement policies that will curtail tax dodging in Africa.”+

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