Find us on Google+

Friday, 30 October 2009

Reflections on corruption

In the last three years of the Zambian Economist we have touched on a number of important areas. It occurred to me that for some of the more contentious issues, certain areas remain unexplored (or recorded). As such I thought it might be useful to review some of these topics on a monthly basis and see if we can plug some of the remaining gaps. This post focuses on the a key unrecorded gap on corruption – existing posts and previous exchanges on corruption, including our “corruption wars” series, can be found here.

A key feature that stands out in many discussions of corruption, especially in the mainstream Zambian media, is the tendency to treat corruption as homogeneous (or uniform). Very little distinction is often made between different forms of corruption, with commentators unconsciously veering from one typology to the next without much clarity. It is common to find commentator say “corruption is on the increase”, with full expectation that all readers fully grasp what is meant. It is true that in some instances, particularly on this website, attempts are made to distinguish between outcomes of corruption e.g. distinguishing between corruption that is hurtful to society in general and that which hits the poor most. However, in nearly all discussions on this site, the variety of corruption has not received much focus.

The failure to distinguish between forms naturally impact on the quality of the debates and the effectiveness of proposed solutions. Until we have a full view of the many forms of corruption and their associated impacts on society, we are not going to be clear in our retelling of history or indeed where the focus of policy interventions should be. It remains my fundamental belief that part of the reason why the fight against corruption has been ineffective is poor understanding in both government and the public on the nature of corruption, and therefore how best to tackle it.

The Laws of Zambia (ACC Act No 42 of 1996) defines corruption as “the soliciting, accepting, giving or offering of a gratification by way of a bribe or other personal temptation or inducement, or the misuse of abuse of a public office for private advantage or benefit”. This is a wide ranging definition, which suggests several vices that could feasibly qualify as corruption.

The most obvious form of corruption in Zambia is bribery. Bribes are usually offered to allow a smooth transaction to take place. Politicians are often derided for suggesting that tackling corruption must start with each and every Zambian. What they usually mean is that in many sphere of life most Zambians pay one bribe after the other. If Zambians could start saying NO to paying or accepting bribes that would eliminate bribe. Not a very helpful approach because it turns the issue of bribe into a moral question whose answers go beyond conventional policy tools. It is true though that one cannot get anything done in Zambia rapidly without some form of underhand payment. Private bribes are always difficult to gauge, and indeed there’s much debate over whether they matter at all. However, there’s a lot of statistics on bribing public officials. In the 2007 World Bank Enterprise Surveys, nearly 15% businesses expected to make informal payments to public officials, while 28% expected to make gifts to secure government contracts.

The natural question of course is whether bribes are damaging to our economy. The empirical evidence is somewhat mixed. What we can say with some confidence is that the idea that bribery is beneficial is misguided. While bribes in a very narrow sense can be seen as a lubricator that may speed things up and help entrepreneurs get on with wealth creation in specific instances, in a broader sense, these must be considered as an obstacle to development. This is mainly because the cumbersome procedures that bribes are supposed to help overcome are usually created and maintained precisely because of their corruption potential and substantial real resources may be devoted to contesting the associated rents. This leads to pure waste and misallocation of scarce resources.

The implication appears to be that the best way to tackle the culture of bribery is remove the “opportunity” to bribe. At the practical level it means that if we want to stop our police officers from being corrupt, we must move rapidly to eliminate the many pointless road blocks that permeate our society. Similarly, we must remove excessive legislation that provides opportunities for businesses to bribe. A lot of empirical evidence demonstrates a strong relationship between graft and various measures of excessive regulation e.g. the number of days to open a business. It’s well known of course that one of the things that encourages informality and keeps small firms from developing is excessive legislation. The only way for them to keep doing business is through illegal activities because the route to formality is peddled with higher taxes and other excessive requirements.

A key challenge of tackling bribery of course is detection. The same cannot be said for the other evil of corruption – public theft. The general public may not know which official has greasy fingers until they are caught, but they can sense when public money has been stolen. The most popular form of this vice is the so called “grand corruption”. The Task Force on Corruption was predicated to investigate the alleged grand theft committed by the Chiluba Administration. The “grand” in the end has not quite fitted the original billing as the main suspect Second Republican President Frederick Chiluba was subsequently been acquitted of more serious criminal charges. What remains on the table is a civil case involving $40m, which is also under challenge. Many ordinary Zambians appear to have “believed”, rightly or wrongly, that billions of dollars had been stolen but thus far nothing has been proven. It is left to the historians to assess what truly transpired. In recent months the theft charges have shifted to “administrative robbery”. The recent Ministry of Health “Kapoka scandal”, ZAWA, RDA, Legal Aid Board and many other cases have highlighted significant levels of administrative theft perpetuated by supposedly loyal civil servants.

These public theft cases have been met with significant uproar from ordinary members of the public, much more so than the “systematic bribery” which perhaps occurs at a much larger scale on a daily basis. As we have noted this may be due to poor detection, but it might also be attributed to issues of injustice. Zambians may be willing to accept / pay bribes because it is embedded in our culture, but public theft appears to run counter to the principle of natural justice. It explicitly violates access to things which are inherently our right. By stealing, the official is robbing money away from the poor in a most explicit way than bribery does. It is this feature that causes much consternation within our society.

It should be noted of course that at the surface there appears little correlation between public theft and economic development. Therefore, we must dig deeper and focus on those elements of public theft which are most damaging. This is likely to be capital flight. Where money has been stolen and siphoned out of the country, we have significant cause to worry. Donors also have significant cause for worry because much of the money shipped abroad appears to directly correlate with higher aid payments. The upshot of all this is that in addition to measures that government can take to improve governance, a concerted approach requires deeper engagement by donors and foreign partners in helping recover lost funds.

Sometimes of course money stolen from public funds is not simply whisked abroad, it is used to ferment other forms of corruption – a good example of this is political corruption. Since the dawn of multi-party politics Zambia has witnessed an unprecedented rise in political corruption. Increased electoral competition has given many social actors especially chiefs unparalleled opportunities to emerge as "kingmakers". Securing support from such “kingmakers” does not come cheap. It often involves paying significant sums of money, investment in chiefs’ places, new vehicles and other things designed to capture their support.

During the 2008 presidential bye-elections, Chief Mwene Kahare of the Nkoya people was rounded up with other chiefs, and found himself in a not so expensive lodge, he was quick to express utter disappointment at the then MMD presidential aspirant Rupiah Banda: "Those who are always flying, the MMD, had to dump us in those lodges in Kaoma and we were even starving....In the morning, it was just an order from the District Commissioner's office that 'you take them back'. I feel that was very disappointing". It appears the price of political support was not cheap, and not just for chiefs. Mr Banda achieved fame in Katete not co-opting chiefs but for alleged “food based corruption”. The then Vice President found himself under severe condemnation when pictures surfaced showing him distributing food to recipients under an effective "cash based programme", during his campaign trail.

The Katete incident is probably the high point of exposing alleged political corruption. In general, buying the electorate either through chiefs or directly has not achieved the same prominence of disgust as other corrupt vices. This may be attributed to several reasons. First, the seasonal aspect of political corruption means that it is not continuous but occurs when an election is called. Secondly, the shackled state of the Government media means that we don’t hear as much coverage as we would like. Thirdly, there’s a poor understanding of the extent and scope of political corruption. Fourthly, the lack of enforcement mechanisms to bring it to bear makes for a rather despondent subject. Finally, related to the first and fourth points is that political corruption may not necessary lead to rampant “economic” negatives. If one considers “food based corruption”, it’s quite obvious that in the short term the voter gains food. Indeed the optimal solution might be to allow all parties to dish out food as they please! In the long term of course this would clearly undermine governance either through an “arms race effect” (race to the most corrupt deviation) or through hoarding of supplies by the party in government in order to give it away at a latter stage. The real problem of course is that in so far as this form of corruption distorts individual voting patterns, it undermines electoral institutions and ensures that poor leaders remain in power.

A key determinant of successful electioneering is campaign finance which is usually sourced from multinational companies that lobby policy changes. In its purest form lobbying is perfectly legal as it simply seeks influence legislators to see the merit of a given policy proposal. To some extent we all lobby politicians all the time. The problem is the specific form of lobbying which allows people with particular interests who represent a minority to gain special access to government, and through monetary contributions and favors, develop controversial relationships with government. This constitutes a form of back door corruption, which unfortunately in Zambia is very prevalent.

One of the interesting questions we face as a nation as we chart our way forward is the extent to which the supposed reduction in public theft during the Mwanawasa years (not fully supported by real evidence beyond a few high profile cases and public utterances), has simply been substituted by more lobbying from foreign dominated firms. There's certainly influence peddling going on in our country by many multinational firms, as recently presented in a new paper, which has shown that lobbying has affected industrial competition and ultimately productivity. Add to that the fiasco of the government failure to effectively implement a fiscal regime for the mining industry, in face of very strong arm twisting (and subsequent abolition of the windfall tax). Mining has always been a sphere of much lobbying at much expense to our poor people. The report For Whom The Windfalls? catalogues the clouds that hangs over the now abolished Development Agreements (DAs), which to date has not been lifted through a credible public inquiry.

DAs sympathisers would of course say that the problem was not lobbying, but poor mismanagement on the part of government. The argument is that often public officials suffer from significant asymmetric information which puts them at a disadvantage when negotiating a deal. I am reminded of Edith Nawakwi’s plea of such ignorance in justifying the sale of mines at giveaway prices “We were told by advisers, who included the International Monetary Fund and the World Bank, that not in my lifetime would the price of copper change. They put production models on the table and told us that there was no copper in Nchanga mine, Mufulira was supposed to have five years life left and all the production models that could be employed were showing that, for the next 20 years, Zambian copper would not make a profit. [Conversely, if we privatised] we would be able to access debt relief, and this was a huge carrot in front of us - like waving medicine in front of a dying woman. We had no option [but to go ahead]”. No one seriously believes Ms Nawakwi’s poor attempt to shift the blame on the IMF / World Bank, but it does illustrate that often workers are only too ready to plead incompetence rather than the more serious charges of conniving with foreign forces to defraud Zambia.

In recent months, similar challenges have emerged for external observers or law enforcement agencies in being able to distinguish between corruption and pure mismanagement. Earlier this year the Auditor General “revealed that the Zambian mission in Brussels [in 2007] spent over K1 billion on school fees, but the payments were not supported by invoices and receipts”. This clearly is a case of not following proper management practices, but it may also be the case that such practices are deliberate in order to justify theft of public funds.

A more celebrated case relates the famous purchase of hearses, which were allegedly bought at an inflated price of $29,000 per hearse when the actual price was only a third of the amount quoted. The late Minister Benny Temashimba after much pressure from political opponents declared : "I believe that there were irregularities in the transaction and if it is proved that the price of the hearses was not inflated and that the terms of conditions were adhered to, I will resign as minister on principle". The case has gone quiet and the public still awaits to understand whether this is a simple oversight / ignorance by Local Government civil servants or a more elaborate plan to defraud the State of Zambia,

Financial reward is not the only motivation for corrupt activities, other considerations usually come into play. One such vice is nepotism, the favouritism granted to relatives or friends, without regard to their merit (“tribalism” probably falls within the scope).

Town clerks are not headline makers, but Livingstone Town’s George Kalenga hit news headlines in 2007 when in a letter to all heads of departments at the council, warned : “I have observed for quite sometime now that the phenomenon of employing relations in this council, especially those falling in the category of ‘casual’ is on the increase….This sort of scenario is to a greater extent contributing to the poor performance by the said category of employees who are supposed to carry out specific duties because of our personal attachment to them”. What followed was an intense debate on the scourge of nepotism.

However, until recent times “nepotism” was rarely discussed in the press. Everyone of course knew it was there but it was not a factor of political dialogue.This is perhaps surprising because it is arguably the most prevalent form of corruption in our society. A fact which is unsurprising given the traditional nature of our society where family relations often dictate economic and social arrangements in our villages. One perhaps can go even further to say that the prevalent nature of nepotism may well be a function of undeveloped impersonal forms of exchange. The market has not fully taken hold at every level of our society and thus instead of competing on merit in every sphere, we are tied to relying on family members, etc.

In the broader scheme of things, Mr Kalenga’s sentiments appears to coincide with a growing realisation in the Third Republic that the destruction of the “One Zambia, One Nation” motto under the Chiluba Administration, was giving way to an undercurrent of growing regionalism which appears to have culminated in the emergence of the so called “family tree” under President Mwanawasa. The late President achieved some positive things during his tenure, but undoubtedly many will also remember his legacy, rightly or wrongly, as nepotistic. Interestingly, when quizzed publicly over his nepotistic tendencies, President Mwanawasa’s rehearsed rhetorical response was: “do you guys expect me to appoint or help my enemies?” No, Mr President, but we do expect you to appoint people on merit. Since his death Mwanawasa’s allies, such as George Mpombo and Amos Mapulenga, have moved swiftly to “clarify” this image.

Whatever the truth behind Mwanawasa’s appointments, it is clear that nepotism is prevalent in our society. In many ways it may be worse than other forms of corruption because it substantially weakens lines of authority and promotes incompetent people over those who are better qualified, inevitably turning the institutions of government into personal toys. More worryingly, it does not just misallocate resources but it also inevitably discriminates against capable individuals, in favour of less competent family or tribal relations. Unfortunately, its ‘quiet’ nature also makes it much more challenging to tackle. This must change if we are to make substantial headway.

So what are we to conclude? I think as one reflects between the many vices of corruption, it becomes readily clear that as a nation we face significant challenges in eliminating corruption. We should be upfront that corruption will always be here. Nepotism will always exist, so will public theft and other banes. The question is one of scale. In our reading of history and the quest to develop mechanisms for combating this social evil it is vital that we deepen our understanding of the complex issues involved. Blanket assessment of corruption makes headlines, but it does not help move the country forward.

3 comments:

  1. I am reminded of Edith Nawakwi’s plea of such ignorance in justifying the sale of mines at giveaway prices “We were told by advisers, who included the International Monetary Fund and the World Bank, that not in my lifetime would the price of copper change. They put production models on the table and told us that there was no copper in Nchanga mine, Mufulira was supposed to have five years life left and all the production models that could be employed were showing that, for the next 20 years, Zambian copper would not make a profit. [Conversely, if we privatised] we would be able to access debt relief, and this was a huge carrot in front of us - like waving medicine in front of a dying woman. We had no option [but to go ahead]”. No one seriously believes Ms Nawakwi’s poor attempt to shift the blame on the IMF / World Bank, but it does illustrate that often workers are only too ready to plead incompetence rather than the more serious charges of conniving with foreign forces to defraud Zambia.

    It is still hard to tell what was going on. No one looks good in this saga, but it is clear that the IMF was doing and saying anything in order to further the cause of privatisation and the destruction of government.

    The most glaring thing is that it is almost impossible to predict market prices - most traders are doing extremely well if they can just follow them, let alone predict where they are going to be one year from now.

    The IMF claimed they could predict copper price within Edith Nawakwi's lifetime, which would be many decades out. This is an impossibility.

    I wish someone had said to the IMF - 'Well ok, you say prices are not going to change, and are not going to change for decades, and you stand by that. So put in a windfall tax of 100% of profits, just in case they do'.

    And if they had said 'Oh no, we can't do that, we won't stand for that', then you would at least have known they were full of whatever. And if they had said yes, it would have made this entire discussion irrelevant, because Zambia would have collected billions from the mines.

    So was it corruption? Was it Edith Nawakwi being pressured by Frederick Chiluba himself - which wouldbe plausible, with him being President?

    Anyway, there is a great book on corruption, that I would recomment everyone to read:

    Syndromes of Corruption, by Michael Johnston, from Cambridge University Press. Johnston is a political science professor at Colgate University.

    He distinguishes 4 types of corruption, coinciding with the stage of development of the economy:

    Influence Markets - developed economies, where parliaments and capital cities are actively lobbied by major corporations to get better deals on contracts and legislation; he used the examples of the USA, Germany and Japan for illustration.

    Elite Kartels - Where power resides not with a party or corporations, but a small clique of highly connected individuals and their businesses/business empires; examples used are Italy, South Korea and Botswana.

    Oligarchs and Clans - Where power resides with either a few individuals or families. Examples used are Russia, the Philippines and Mexico.

    Official Moguls - Where power resides with a single, powerful indidual or a small number of rival individuals. Examples used are China, Kenya and Indonesia.

    Available at Amazon.com.

    ReplyDelete
  2. '...Edith Nawakwi’s plea of such ignorance in justifying the sale of mines at giveaway prices..'
    The catch is pride and self esteem.

    I am still not convinced it is solely economic problems haunting us. So much from the colonial era and elements of the eastern socialist ideals seem to be at play here.

    Rather than an economic remedy( which will still play its role anyway)would the study of the Japanese model redefine our values?

    ReplyDelete
  3. Pat,

    I am still not convinced it is solely economic problems haunting us. So much from the colonial era and elements of the eastern socialist ideals seem to be at play here.

    Not socialist, laissez faire capitlist. Socialism put all children in school, the IMF created tens of thousands of streetchildren, with their school fees.

    Look at the disasters brought by privatisation.

    Rather than an economic remedy( which will still play its role anyway)would the study of the Japanese model redefine our values

    Well traditional Japanese society has values of communalism and collaboration.

    However, the study of Japan's Keiretsu or large state supported family conglomerations would be interesting to draw lessons from.

    ReplyDelete

All contributors should follow the basic principles of a productive dialogue: communicate their perspective, ask, comment, respond,and share information and knowledge, but do all this with a positive approach.

This is a friendly website. However, if you feel compelled to comment 'anonymously', you are strongly encouraged to state your location / adopt a unique nick name so that other commentators/readers do not confuse your comments with other individuals also commenting anonymously.