Photo Credit: Lattitude Canada, Wikimedia Commons
This post is based on a blog originally published on Corporate Compliance & Ethics Africa
It is a basic economic principle that a market exists because there is the concurrence of demand and supply or someone willing to buy and someone willing to sell goods or services. Similarly as it relates to bribing public officials for business advantage or other more egregious purposes, you must have someone willing to give the bribe and the public official willing to take a bribe.
Economists and private sector players propose that in West Africa, the demand side of corruption (public sector) has cultivated and nurtured a system where the private sector is coerced to partake in corruption in order to be successful. The result is an established system involving a series of illegal operations accompanying the actual demand and receiving of bribes (“kickbacks”, “favors”), creating an atmosphere within the private sector that undermines integrity.
In natural resources rich countries like Guinea, Sierra Leone, Nigeria, Ivory Coast, Liberia, and Ghana, businesses often protect their interests by establishing strong relationships with politically influential public officials and seeking ways to buy political favors so that, among many bidders, they are the ones granted access to these resources. Therefore, it is not uncommon to find that contracts, licenses or permits in the mining, agriculture, construction, energy, housing sectors, government procurement and public services sectors are often awarded to either companies that pay the highest bribe or companies owned by politically influential figures instead of companies that are the most efficient and qualified.
The implication is that in these countries, where the most basic needs down to a toothpick are imported, companies willing to pay the highest bribe/kickback can and will ask the government to grant them monopoly status for importing certain goods and services (regardless of the quality) or exemption from paying import taxes – main tax base for most countries in this region. Other taxes such as value added tax, estate tax, social security contribution tax, income tax etc. are much harder to collect due to the largely informal infrastructure of the public financial system.
Although the public financial systems in Nigeria, Ghana, Senegal and the Ivory Coast have developed comparatively and now realize more tax revenues from businesses, most of those tax revenues are misappropriated and diverted from national treasury. Other West African countries with more informal economic structures have suffered worse, with many companies paying bribes to avoid paying taxes.
This problem is not limited to big corporations. Small businesses that make up the largest contributors to the job market spend a lot of their limited income to overcome the challenges of doing business in the region due to the poor infrastructure. In addition, they have to bribe government officials, civil servants, and even other private sector companies that may demand a bribe to do business. Often, small or retail businesses are forced to bribe city or town council officials to secure store space or to avoid unverifiable tariffs or penalties.
In a region where on average over 80% of the people struggle every day to meet the high cost of basic necessities (food, clean water, electricity, education, health care etc.), this system of corruption enabled by multiple public and private sector players, has weakened any potential for social and economic development by entrenching poverty and undermining security and stability. This is a shared problem by the private sector in every sense including the high cost of doing business owing to poor infrastructure, loss of business opportunity due to insecurity, and high crime to name a few.
Currently the private sector operates within a system that rewards bribery and cutting corners. Yet, as the supply side in the “market of corruption,” businesses play a very significant role and have the power to starve the market of the principal product – a bribe.
Lola Adekanye is an Anti-Corruption Consultant for CIPE’s Africa Programs