THE COST OF CORRUPTION FOR INFRASTRUCTURE DEVELOPMENT IN AFRICA By Eng' M' R' Meghji P'E', FASCE, FI

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THE COST OF CORRUPTION FOR INFRASTRUCTURE
DEVELOPMENTIN AFRICABy Eng. M. R.
Meghji(P.E., FASCE, FICE)President
Institution of Engineers Tanzania (2001
2003)Exco FIDIC (1999 2003)
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The Background Of Corruption In Africa
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Reasons for Corruption

• Corruption is perceived as a public sector
  problem, however corruption volumes in private
  sector may be even greater not only in giving
  but in TAKING.
• Corruption in developing countries is often
  believed to arise from the clash or conflict
  between traditional values and the imported norms
  that accompany modernization and socio-political
  development.
• Bureaucratic corruption is seen by some
  researchers, then as an unavoidable outcome of
  modernization and development (Alam 1989, Bayley
  1966).
• Bureaucratic corruption provides civil servants
  with the opportunity to raise their compensation
  above what the law prescribes (Mbauku 1992, Gould
  1980).
• Through the practice of corruption, private
  entrepreneurs are able to capture and maintain
  monopoly positions in the economy. (Mbaku 1992,
  Gould 1980).

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Reasons for Corruption

• Conflict of standards creates corruption
• (Low salaries but very high standards set by
  some public institutions)
• Governments specifically in Non-democratic
  Authoritative countries encourage corruption by
  legalizing commissions, agency fees etc.
• Moral degeneration creates corruption as Bribes /
  Kickbacks become norm encouraged at times by
  standards set by political / institutional /
  religious leaders.
• Severe market competition encourages corruption
  in public / private sectors as private companies
  try to survive by ANY means.
• Low salaries in public / private sector also
  fuels petty corruption, however GRANDE corruption
  is a function of PERSONAL GREED and total loss of
  PERSONAL MORAL STANDARDS.

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FORMS OF CORRUPTION IN AFRICA
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Forms of Corruption in Africa

• Outright Theft
• Embezzlement of Funds or other appropriation of
  state property
• Nepotism and the granting of favors (e.g.
  Procurement of Infrastructure Contracts)
• Abuse of Public Authority.

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Forms of Corruption in Infrastructure Development
in Africa

• Sectors
• - Construction
• - Telecommunications
• - Installations
• - Sale of Public Utilities (Privatization)
• - Purchase of New Technologies (No
• market comparison)

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Forms of Corruption in Infrastructure Development
in Africa

• Procurement Stage
• - Sole source award
• - Biased Terms of Reference / Bid Conditions
• - Distorted Evaluation Criteria
• - Victimization of some firms Disqualification
• - Insider information on projects

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Forms of Corruption in Infrastructure Development
in Africa
Procurement Stage - Client Assistance in
Preparation of Proposals / Bids - Limited time
for Preparation of Proposals / Bids - Cartel
among tenderers (Chinese) - Donor / Financier
interference - Foreign Government lobby and
tied favours - Glocalisation and indigenous
preferences
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Forms of Corruption in Infrastructure Development
in Africa

• Implementation Stage
• Revision of scope / price during Negotiations
• Tough negotiations to disqualify non-preferred
  firm.
• Collusion Client / Consultant / Contractor
• Overprized bills of quantities
• Less quantities
• Lower specifications
• Front loading the Contract

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Forms of Corruption in Infrastructure Development
in Africa

• Implementation Stage
• Variation Orders
• Extension of Time
• Theft and Insurance Claims
• Client Interference
• Political Interference
• Blackmail techniques / intimidation forced
• sub contracting
• Adjudication and Arbitration

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THE COST OF CORRUPTION
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• Africas Infrastructure is growing at a very fast
  pace
• Estimated on average at between 5 9 per annum
  (Although the actual value may be low).
• Construction is perceived to be one of the most
  corrupt sectors, as awards of tenders changes in
  specifications, variation orders etc. can be
  facilitated easily.

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• Corruption cannot be measured with any certainty
  as the deals are secretive and occult.
• However, it is estimated that corruption in
  African economy is anything between 150 250
  billion per annum.
• This roughly represents 25 of Africas GDP
• It is estimated that between 15 - 20 of this
  ends up in Foreign banks.

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• African Development Bank (AFDB) indicates that
  corruption leads to a loss of approximately 50
  of Tax revenue, which in some instances is a
  greater amount than the countrys total foreign
  debt.
• AFDB estimates that approximately 3 of the
  income of lower households is spent on
  corruption.
• Relatively, this amount can be compared to twice
  the annual GDP of Ghana, Kenya and Uganda.

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• Most of the corruption in Africa centers around
  construction projects and military procurement
  (both relate to Engineering and Technology).
• It is estimated that approximately 50-70 of the
  above corruption is centered around
  infrastructure (construction projects).
• It is estimated that up to 30bn dollars in aid
  for Africa ends in foreign bank accounts
  annually.
• The Corruption Perception Index for 2003
  indicates that most African countries are
  perceived to be corrupt only Botswana ranging an
  average of 5 out of 10

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Five of the top ten most corrupt countries are in
Africa
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Infrastructure Problems in Africa
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Roads

• Only 17 of Africas roads are paved in
  comparison to South Asias 42 and Latin
  Americas 25. Is this a result of Corruption?
• The return on investment from road maintenance is
  estimated to be almost twice as high as that from
  new construction.
• Timely expenditure of 12 billion on road
  maintenance in Africa would have saved 45
  billion in reconstruction.
• The extra costs of poor maintenance in Africa
  amount to about 1.2 billion annually.

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Lack of Investment

• The United States of America, the European Union
  and Japan, have been the main FDI sources.
• The African continent has been receiving the
  lowest share of global FDI inflows over time.
• According to Bjorvatn (2000 1), the whole of
  Africa receives less FDI than Singapore

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Tanzanias Warioba Report
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The Warioba Report

• Tanzania is probably unique in the World, as it
  initiated a probe team to compile and report
  corrupt acts in all sectors of Economy except
  Military Procurement.
• The Report named after the Judge who chaired the
  committee is widely known as the Warioba Report.

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The Warioba Report

• Effective measurements and prevention methods
  were hence applied based on the reports
  findings.
• These methods included several long term
  objectives as well immediate policies such as the
  removal of corrupt elements in several leadership
  positions.

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The Warioba Report

• The reports conclusions indicated that at both
  the petty level (involving traffic police
  bribes) and the grand type (involving public
  tenders) existed at a rampant and widespread
  level.
• The report found that corruption was most severe
  within the police and judiciary systems, but the
  volume involved was the highest in the
  construction industry

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The Warioba Report

• Tanzanias National Anti-Corruption Strategy
  executive summary reported that corruption in the
  country can be traced to the 1980s (approximately
  20 years after the countrys independence).
• Due to rapid development and substantial growth
  in almost all sectors, the countrys corruption
  index soared to new heights.

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Tanzanias Strategy Matrices
1
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Positive Outcome of The Warioba Report

• Public procurement Act was enacted.
• Transparency and Accountability has been
  enhanced.
• Most tenders are publicly advertised.
• An appeal authority has been set up for P.P.A

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Negative Effects of The Warioba Report

• Bureaucracy increased to unbelievable levels
• All decisions become committee decisions
• Procurement was totally centralized and resulted
  in delays, losses and in some cases loss of
  confidence.
• Donor projects got delayed even for a minor
  decision.
• Corruption cases taken to court resulted in
  Acquittal leading to public loss of faith.

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Negative Effects of The Warioba Report

• Corruption became sophisticated.
• Now the procurement process is to be
  decentralized (reversed).
• Costs in infrastructure are still rising.
• Genuine procedures got interpreted as corruption.
• Length of procurement has increased even for the
  simplest of projects.

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CORRUPTION CASES IN AFRICA
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Some Major Corruption Cases Include

• The Lesotho Highlands Water Project.
• The Turkwell Dam project, Kenya.
• The Nigeria Haliburton Tax filing case.
• The Goldenberg Airport Scandal, Kenya

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SOLUTIONS
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BIMS

• Business Integrity Management System.
• Created by FIDIC as a supplement to ISO series
  for Consulting Engineers.
• Involves various checks and balances, similar to
  ISO procedures.

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What can Institutions like ASCE do to help?
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ASCE Codes Standards

• The American Society of Civil Engineers can
• Promote and integrate its code of ethics/code of
  practice to various engineering societies within
  Africa.
• Provide or create specific codes and practice
  methods to institutions throughout the continent.

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ASCE Codes Standards

• Create specialized seminars / workshops to
  educate on new practices and codes of conduct,
  specially on Ethics, morality, professionalism
  and corruption.
• Create a proud professional.
• Every Engineer to take an oath in writing for
  non-corrupt practice similar to medical
  profession.

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• In Africa we have two killers
• - AIDS
• - CORRUPTION
• AIDS CORRUPTION

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• Both require moral strong will power
• Both cannot be cured or totally prevented
• Both have taken a toll on Africa
• AIDS can be slowly reduced by Raising Awareness,
  Education and Preaching

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• Corruption can also be reduced by Raising
  Awareness, Education, and Preaching Moral
  Standards
• We the professional society have a duty to
  Educate and Preach.
• We cannot stop or be discouraged.
• ASCE and other professional bodies have to lead.

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• Assist (your)
• Society (to)
• Corruption
• Eradication