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

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

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


1
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)
2
The Background Of Corruption In Africa
3
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).

4
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.

5
FORMS OF CORRUPTION IN AFRICA
6
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.

7
Forms of Corruption in Infrastructure Development
in Africa
  • Sectors
  • - Construction
  • - Telecommunications
  • - Installations
  • - Sale of Public Utilities (Privatization)
  • - Purchase of New Technologies (No
  • market comparison)

8
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

9
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
10
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

11
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

12
THE COST OF CORRUPTION
13
  • 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.

14
  • 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.

15
  • 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.

16
  • 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

17
(No Transcript)
18
Five of the top ten most corrupt countries are in
Africa
19
Infrastructure Problems in Africa
20
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.

21
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

22
Tanzanias Warioba Report
23
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.

24
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.

25
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

26
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.

27
Tanzanias Strategy Matrices
1
28
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

29
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.

30
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.

31
CORRUPTION CASES IN AFRICA
32
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

33
SOLUTIONS
34
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.

35
What can Institutions like ASCE do to help?
36
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.

37
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.

38
  • In Africa we have two killers
  • - AIDS
  • - CORRUPTION
  • AIDS CORRUPTION

39
  • 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

40
  • 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.

41
  • Assist (your)
  • Society (to)
  • Corruption
  • Eradication
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