This is an archived USAID document retained on this web site as a matter of public record.

Testimony of Carol A. Peasley

Before the House International Relations Committee Subcommittee on Africa
Washington, D.C., May 20, 1998
U.S. Agency for International Development

Anti-Corruption Efforts in Africa

Introduction

Good Afternoon. Mr. Chairman, I would like to begin by thanking the Committee for this invitation to testify on efforts to promote improved governance in Africa. Good governance and the fight against corruption are important for African development and to our national interests on the continent. We in the United States and others in the donor community care about the issue. But even more important, Africans themselves are in the forefront of the effort to improve governance, increase transparency and accountability, and fight corruption. USAID strongly supports these African-led efforts both through our overseas programs and our coordination with the donor community.

With the Subcommittee's concurrence, I plan to address several issues relevant to decreasing corruption in Africa, including how USAID programs address this problem in concert with our African and donor partners. While challenges to good governance remain, we see great opportunities to work with Africans committed to addressing these challenges and to usher in a new era of political and economic development for the continent.

Our optimism about Africa was reinforced during the President's recent trip where he saw numerous examples of how Africa is in transition to a new, more prosperous 21st century. Across the continent, significant progress has been made on economic reforms in a growing number of countries: fiscal deficits and inflation rates are lower; exchange rate reforms have been undertaken; and progress has occurred on trade liberalization and on improving the investment climate. These reform efforts have resulted in an upward trend in average growth rates for Africa as a whole since the early 1990s.

On the political side, Africa has made major progress toward expanding and consolidating democracy during this decade. The widespread increases in freedom of speech and the media, freedom of association and assembly, competitive national and local elections, and the growth of civil society have given more Africans greater freedom and stability in their lives than at any time in the recent past.

Finally, support for the critical role of education in Africa's development is evident through the commitment of governments to increasing enrollments and budgetary allocations to ensure access. Most notably, in Uganda the government has declared free primary education for all, while in Ghana, the government maintained the highest budgetary allocation (almost 40%) to education in Sub-Saharan Africa.

All of these elements contribute to an environment which promotes sustainable development and good governance, and facilitates the fight against corruption. In this context, the President has articulated a new, more holistic approach for U.S. development assistance to Africa that connects development to trade, food security and debt relief to economic reform, education to democracy, and conflict resolution to justice, peacekeeping and regional cooperation. Development aid will continue to remain important, and it will also become the means by which Africans will succeed in building important trade linkages with the United States and others. The sustainability of such gains will depend on simultaneous progress in transparency, accountability and good governance practices.

Through USAID's Africa Trade and Investment Initiative proposed by the Clinton Administration as part of the Partnership for Economic Growth and Opportunity in Africa, we will encourage economic policy reform in Africa with a focus on improving commercial opportunities to expand Africa's trade and investment links with the United States and other trading partners.

In addition to activities under the Initiative, USAID plans to provide more than $35 million in the next two years (as compared to roughly $13.2 million in fiscal year 95/96) to support a number of activities to improve governance in Africa. I will speak more specifically about the nature of our programs in Africa in a moment, but I would first like to provide you with some background information about the state of corruption in Africa, and African efforts to address it.

Overview of Corruption in Africa

Corruption is a worldwide phenomenon which appears in many forms, and exists in differing degrees from country to country. It can often result from the abuse of official position for private gain, but can equally well be fostered and encouraged by external actors seeking special privilege. It is most fundamentally a governance issue.

Corruption occurs when there is opportunity and when the potential rewards are considered to be worth the risk of discovery and punishment. In Africa, opportunity is provided through the overcentralized governments that are highly involved in the economy in combination with the low salaries paid to civil servants. The risk of discovery is low as a result of the weak institutional safeguards and ineffective legal mechanisms to address corruption. In this context, the line between acceptable networking and exchanges, and corrupt practices becomes blurred.

Corrupt practices range from petty corruption in which bribes are required before normal bureaucratic procedures are accomplished, to large scale corruption in which large sums of money are paid in return for preferential treatment or access. Widespread corruption is a symptom that the state is functioning poorly, with the result that these ineffective states invariably experience poor economic growth and often political instability. In a corrupt state, those who pay and receive bribes often expropriate a nation's limited wealth, leaving little for its poorest citizens. As a result, even countries well endowed with natural resources may fail to develop in a way that benefits ordinary citizens (as in Zaire under Mobutu and it continues in Nigeria today). In Africa, corruption prevents many countries from addressing their most serious development challenges; deters foreign and domestic investment; undermines confidence in public institutions; and exacerbates budgetary problems by depriving governments of significant customs and tax revenues.

In Africa, corruption exacts a higher toll than in other regions of the world because the economies of many African countries can least afford the economic consequences of corruption. Therefore corruption in Africa is not only a governance issue, but a developmental one as well. Systemic corruption in Africa typically occurs in the management of public companies, in public markets, in fiscal administration, in customs and in the justice system. There is also widespread petty corruption in the civil service, which most directly affects the public through the need to pay for services that are supposed to be free of charge. As noted, the problem is often fostered and encouraged by non-Africans seeking special status or privilege.

Although there is evidence of corruption throughout Africa, there is also evidence that it is less extensive than in other regions of the world. The World Economic Forum's 1998 Global Competitiveness Report finds that corruption is a problem of greater magnitude in Central America and in the former Soviet Union than in Africa. While this does not diminish in any way our concerns about combatting corruption in Africa, it provides a useful contextual background to better understand the scope of what we are dealing with in this region.

It should also be noted that there is tremendous diversity within Africa in the types and levels of corruption that are present. There is undoubtedly at least some level of corruption in all countries; in a few, such as Nigeria and Kenya, it is larger scale and more systematic. The Global Competitiveness Report shows that Botswana rates as the country in Africa with the lowest levels of bribery, which is comparable to many of the OECD countries.

African Initiatives to Address Corruption

African governments are well aware of the toll that corruption takes on their political and economic systems. They are working with each other to address these problems through multinational meetings focusing on governance and corruption, to identify joint strategies and areas of cooperation. Within the past eighteen months there have been important conferences on corruption in Addis Ababa and Maputo, and another is scheduled for Accra in June. These conferences have provided a forum for African leaders to develop innovative strategies to fight corruption, to exchange information with other countries from around the world, and to inform the international community about the steps that they need to take to reduce corruption.

One of the most important of these conferences was the Global Coalition for Africa meeting in Maputo this past November. The conference brought together donors and African leaders to discuss the corruption issue. The dialogue was candid and produced a consensus on how to cooperate to combat corruption, including: introducing anti-bribery clauses in public procurement contracts; implementation of strong punitive measures for those guilty of giving or taking bribes; and working with donors to insure stiff penalties for companies found guilty of corrupt practices.

There have also been important initiatives to combat corruption in a number of countries. To name a few :

• In Namibia, the Government is developing a comprehensive ethics and anti-corruption legislation and policy. This will result in a national discussion document that will form the basis of a nationwide public consultation process with draft legislation targeted for 1999.



• In Botswana, the Directorate on Corruption and Economic Crime (DCEC) is a model for anti-corruption institutions with over 4,200 corruption cases reported to it since its inception in 1994. Of reported cases, one quarter have had completed investigations, resulting in nearly 200 cases prosecuted.



• In Uganda, the constitution established an Office of the Inspector General, which has a broad mandate and specific powers to address corruption and is required to submit periodic reports to parliament. This and other measures targeted at corruption are reinforced by coordinated economic and governance reform efforts, such as elimination of government monopolies, privatization of parastatals, removal of price controls, and the depersonalization of government functions to eliminate incentives for corruption by government officials.



• In an effort to target corruption in procurement, Benin, Mali, Malawi, Ethiopia, Tanzania and Uganda have all notified the World Bank that all their procurement contracts will carry an anti-corruption clause.



• An innovative, cross-sectoral workshop to promote more sustainable management of Central Africa's natural resources was held in Limbe, Cameroon. Transparency International organized the workshop in collaboration with the Cameroon-headquartered African Forestry Action Network, a consortium of West and Central African Non-Governmental Organizations with interests in the forestry sector, and the Central Africa office of the World Conservation Union. This workshop was specifically designed to combat corruption in the forestry sector in central Africa by building the capacity of NGO watchdog groups to work collaboratively.

There are numerous other examples of African initiatives to fight corruption. But these countries also recognize that eliminating corruption requires more than just isolated actions. It requires a consistent and unambiguous effort by governments in cooperation with civil society, the business sector, and the international community.

USAID Anti-Corruption Programming - Making a Difference

The United States has many reasons for wanting to promote greater transparency and accountability in African countries. By supporting such efforts, African countries become better partners for United States' trade and investment support. Also, one of the United States' key foreign policy interests is the promotion of democratic development in Africa and the world, and by supporting programs to combat corruption, African governments gain greater legitimacy and are better able to promote political stability and economic development. Finally, these countries become better development partners and countries where long-term sustainable development can be achieved.

Corruption is caused by many factors, and as a result USAID has attempted to take a broad perspectives in our efforts to promote greater transparency and accountability. This ranges from our work on economic reform, such as reducing the opportunities for corrupt behavior; to our work on democracy building, such as strengthening civil society, the media and the rule of law; to our work on good governance; such as supporting the creation of anti-corruption commissions and strengthening audit authorities. Looking at these sectors individually:

Economic Reform

In the Economic Reform sector, our programs have focused on reducing governments' direct control of the economy through:

• Support for deregulation to reduce the opportunities for corruption such as the sale of scarce commodities or import permits. We have promoted deregulation in a number of countries including Guinea-Bissau, Ghana, and Uganda.



• USAID's Africa Trade and Investment Policy Program (ATRIP) will work in countries that are seen as best reformers to encourage further deregulation of the economy, and implement uniform rules and standards that will mitigate corrupt practices. Specifically, the initiative will provide technical assistance to help African governments liberalize trade and improve the investment environment for the private sector, support relationships between U.S. and African firms through a variety of business associations and networks, and support private sector and trade-related activities under USAID's Initiative for Southern Africa (ISA), including assistance to the Southern African Development Community (SADC). Examples of activities include:
  
  
  • the simplification of company registration requirements
  • reforms of land-use permits
  • simplification of import/export customs procedures
  • imposition of uniform tax laws
  • establishment of alternative dispute resolution mechanisms for resolving commercial and contract disputes.

Strengthening Democracy:

USAID programs work in two areas to improve transparency and accountability in democratic societies; the rule of law and civil society.

• In the area of rule of law, USAID promotes legal reform as a means to develop necessary legal frameworks for conducting public and private affairs. For example, many laws in African countries date back to the colonial era and are no longer relevant to these emerging economies. USAID provides assistance to help revamp existing legal statutes and promulgate new legal codes more widely to facilitate trade and investment in Africa. We provide training for judges and court administrators to prevent tampering with records and reduce delays in hearing cases. In the commercial sector, we provide new options, such as Alternative Dispute Resolution to resolve conflicts and encourage investor confidence. In addition, support is provided to business associations and Chambers of Commerce which monitor accountability and transparency in government and the private sector.



• USAID assists the efforts of civil society to engage in the fight against corruption. Without support and oversight from an engaged and informed citizenry, including the business community, sustainable reforms in this area are not possible. Through Transparency International, an international NGO, USAID is helping to establish local chapters throughout the continent and to hold integrity workshops in Benin, Ghana, and Mozambique in which government officials, civil society representatives, journalists and business leaders jointly develop strategies for fighting corruption. In addition, USAID has supported civil society organizations in anti-corruption campaigns in Senegal, Niger, and Madagascar. Not only this, but a key part of ATRIP is to encourage the development of national and regional African business associations that can lobby for regulatory reforms. These associations, in partnership with U.S. firms and associations, will help to achieve legal and policy changes that will create a more attractive environment for foreign and domestic investment. These civil society organizations perform a critical watchdog function, monitoring the activities of the government, and publicizing corruption within the government and private sector. This threat of exposure creates a further disincentive for corrupt practices in the bureaucracy.

Governance

• In governance, USAID programs seek to strengthen transparency and accountability in government through technical training and assistance to audit institutions in many countries such as Tanzania, Benin and Madagascar. We have provided training and support to a variety of institutions charged with combatting corruption, and assisted the establishment of commissions to investigate corruption. In South Africa, we have also supported work on ethics legislation.

Protecting our Investment

USAID recognizes the need to protect our development investments in Africa and we have a number of mechanisms to do so:

• The majority of our assistance is provided through direct contracts and grants which are awarded competitively.



• USAID is responsible for the awards of contracts and disbursement of funds, which gives us the ability to monitor and control the funds, and to withhold disbursements should it become necessary.



• Our Office of the Inspector General oversees the audit process and is available to investigate any allegations of fraud or abuse.

In addition, we believe that our programs to fight corruption and increase transparency and accountability ultimately help us to protect our investments by improving the environments in which we work. Finally, we do not work directly with governments in African countries about which we have concerns (such as Nigeria and Kenya), providing our assistance instead primarily through NGOs to ensure that we can monitor the assistance.

Reducing Corruption requires a multi-donor effort

Donor coordination is critical in all development activities; it is especially so for governance and anti-corruption activities. We do this at the country level and in broader international fora. For example:

The United States worked closely with the other donors in the OECD's to negotiate an historic pact that criminalizes the bribery of foreign government officials. OECD members signed the convention December 17, 1997 in Paris. The convention requires countries to seize or confiscate bribes and bribe proceeds, or property of similar value, or apply monetary sanctions of comparable effect. Participating governments also pledged to work together to provide legal assistance relating to investigations and proceedings within the scope of the convention and to make bribery of foreign public officials an extraditable offense.

The United States has also been a key advocate of effective mechanisms to reduce corruption in Africa, working on the "supply side" to encourage major industrialized countries to criminalize the bribery of foreign public officials in international business transactions; and on the "demand side" through multilateral organizations like the Economic Commission for Africa, the Organization of African Unity, and the Global Coalition for Africa and with support from NGO's such as Transparency International, to increase knowledge about the negative effects of corruption. In addition, we are promoting the adoption of a continent-wide convention on corruption in Africa, following the example of the Organization of American States' Inter-American Convention Against Corruption.

We support the efforts of the Bretton Woods Institutions to take the lead in this area and use their significant leverage to attack the economic roots of corruption. The IMF and the World Bank promote transparent, market-oriented policies that reduce opportunities for corruption. Support is provided to institutional strengthening activities which improve controls and reduce incentives for corrupt behavior such as: civil service reform; strengthening public procurement systems; and modernization of public sector accounting. We also support stronger mechanisms to address corruption and economic governance in IMF and World Bank loans.

Finally, through the Consultative Group mechanism, the United States maintains a dialogue with other bilateral donors and African host countries on issues of importance to development including corruption. Where necessary, the group provides a forum for frank discussion of the issues related to transparency and accountability, and enables the donors to engage host country governments in this process. It has resulted in stronger anti-corruption efforts in a number of countries.

Conclusions

As USAID continues working with host countries to build more transparent and accountable governments, we also continue to re-evaluate the capacity of host countries to deal with their own governance issues and challenges. Corruption is a critical issue which requires diligent attention by African governments and donor partners to forestall its debilitating impact. Though much remains to be done, we believe that there is evidence of progress in many countries and that there is a commitment both by African governments and the international community to make improved governance a priority. USAID will continue to work with other donors, and with our African partners, as well as with multilateral and regional organizations, to ensure that the successes achieved thus far are sustained and expanded.

Thank you.

This is an archived USAID document retained on this web site as a matter of public record.

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