Foreign firms linked to bribery, graft claims hurting Africa’s image

Saturday March 14 2015

Electoral commission officials arrange ballot boxes at a tallying station in Nairobi during the last constitutional referendum. A UK court recently heard that top officials of the then Interim Independent Electoral Commission received bribes to award the tender for the printing of ballot papers to the UK company, Smith & Ouzman. PHOTO | FILE

The recent revelations of corruption and bribery involving multinational corporations (MNCs) operating in Kenya have exposed foreign companies, normally viewed in the region as role models of business professionalism in Africa, to harsh criticism.

First it was what is now popularly referred to as “the chicken gate scandal,” exposed by the UK’s Serious Fraud Office, involving the printing firm Smith and Ouzman, which a UK court found guilty of bribing public officials in Kenya, Ghana, Somaliland and Mauritania.

The company is said to have dished out $680,000 to civil servants in the four countries between 2008 and 2010 as inducement to win tenders to print ballot papers, voter identification cards, examination materials and plastic envelopes.

Next was American tyre company, Goodyear, which was also found guilty of paying Ksh136 million ($1.5 million), through its local subsidiary Treadsetters, in bribes in connection with the sale of tyres to various state corporations in Kenya.

Among the state corporations said to have received bribes are the Kenya Ports Authority, the Armed Forces Canteen Organisation, the Nzoia Sugar Company, the Kenya Air Force, Ministry of Roads, Ministry of Defence, East African Portland Cement and Telkom Kenya.

“During that period, Treadsetters also made approximately $14,457 in improper payments to local government officials in Kenya, including city council employees, police and building inspectors,” the US’s Securities and Exchange Commission said.


READ: Spotlight on Portland Cement in tyre bribery scandal

A study on corruption in Nigeria conducted in 2012, notes that multinationals are the biggest perpetrators, using a sophisticated network of national companies and corporate structure to facilitate corrupt practices in developing countries.

According to the study by three Nigerian researchers (Julius Otusanya, Sarah Lauwo and Babatunde Adeyeye), multinational corporations use bribery and inducement in Africa to secure competitive advantages.

Such behaviour, the study adds, is mostly driven by executives, who want to please their directors, given the fact that many CEOs remunerations are influenced by the level of profits and return to capital.

In Kenya’s case, the US and UK were quick to act because they are signatories of the 1998 Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention.

The objective of the convention is to fight corruption in international business transactions among OECD countries and five non members. It is a legally binding document, whose implementation is systematically monitored.

“The two cases in Kenya are not the first on the continent and will definitely not be the last. As long as competition in international business remains stiff, corruption involving multinational corporations and greedy public officials in Africa will continue,” said economist John Chege, who monitors East African affairs.

READ: How British printing firm bribed African govt officials to get tenders

Mr Chege said MNCs prefer doing business with African governments since the deals are so lucrative, involving projects worth millions if not billions of dollars.

“That is why some MNCs will do anything to win tenders including bribing powerful public officials who they know are capable of tilting the process in their favour,” he added.

However, economists believe it is not only the MNCs whose international image suffers when all the underhand dealings are exposed, but also the African country in question.

“One can now understand why Kenya’s foreign direct investment as a percentage of our economy, has remained low compared with our neighbours,” said Kwame Owino, the chief executive, Institute of Economic Affairs.

The United Nations Conference on Trade and Development report for 2013, showed Uganda topped the region in attracting FDI, followed closely by Tanzania.

The landlocked country’s FDI jumped by 92.51 per cent to $1.721 billion from $894 million in 2011, while Tanzania attracted $1.706 billion in 2012, a 38.81 per cent increase from the previous year’s $1.229 billion.

Kenya’s FDIs, on the other hand, dropped by 27.04 per cent to $259 million from $355 million. Rwanda’s rose by 50.94 per cent to $160 million last year from $106 million, while Burundi attracted $1 million, a 66.67 per cent decrease from $3 million in 2011.

Mr Kwame said that the two cases show that Kenya’s investigative agencies and the courts have been unable to effectively tackle the problem.

“We will not be able to build Kenya by constructing infrastructure alone; we must also fight corruption. How sure are we that some of the tenders issued for mega projects will not be questioned in future,” he asked.

The latest Transparency International Corruption Perception Index ranks Kenya poorly compared with its neighbours. Kenya is ranked at 145, below Rwanda (55), Tanzania (119) and Uganda (142).

Prof Gituro Wainaina, the director general of the country’s economic blueprint, Vision 2030, concurred with Mr Owino’s sentiments, saying that there is a close link between fighting corruption and economic growth.

“Countries that effectively tackle corruption normally achieve higher economic growth in the long run. The Asian tigers, namely Singapore, Malaysia and Taiwan are now enjoying higher economic growth rates and are also more developed than African countries because of their zero tolerance for corruption. We must borrow a leaf from them,” Prof Wainaina said.

Kenneth Kaniu, chief investment officer at Stanlib, said there is a risk some MNCs could decide to stay away from participating in tenders, denying the country a better bargain.

“Given the bad publicity, some professionally run MNCs could develop the view that the tendering process in Kenya is never free and fair. It is a view we must avoid,” said Mr Kaniu.