04 Aug 2016
Human and economic development in Nigeria and Tanzania have each been constrained by systemic corruption. In 2015, each country elected a president who campaigned on an anti-corruption manifesto. How successful have they been in fighting corruption – and why should businesses care anyway? Vivian Jones, Senior Associate in the global Fraud & Investigations Group of Eversheds, examines the two presidents’ styles and achievements to date.
Nigeria and Tanzania are not overly similar: Nigeria’s population and natural resources base are far greater than Tanzania, while Tanzania has a lucrative tourist trade. For many decades, Tanzania was a “soft” socialist country, whilst Nigeria endured a series of authoritarian “strong men” who often had no discernable ideology whatsoever.
But Nigeria and Tanzania are alike in one respect: both have suffered chronic corruption in the decades since decolonisation. In 2015, two candidates who campaigned on anti-corruption platforms won mostly (but not entirely) fair elections in those countries to become President: Muhammadu Buhari in Nigeria and John Pombe Magufuli in Tanzania. Both men were political insiders with a reputation for being uncompromising: Buhari ran Nigeria as a military dictator for two years in the 1980s, while Magafuli earned the nickname “the Bulldozer” in his two decade career as a minister with the ruling party. In essence, the candidates portrayed themselves as being too pig-headed to be bought off by vested interests.
The deleterious impact of corruption on ordinary citizens is now incontrovertible: in 2015, Tanzania and Nigeria were ranked 151st and 152nd by the UN Human Development Index (which uses life expectancy, education and income as proxies for quality of life). The same countries were ranked 117th and 136th on Transparency International Corruption Perceptions Index (which compares citizens’ perceptions of government corruption). These low scores are not coincidental: there is a strong positive correlation between citizens’ human development and the degree of state corruption in the country in which they live, and a convincing academic literature explains how corruption aggravates human misery. Businesses are increasingly taking on board the influence of corruption on human rights. In Tanzania and Nigeria, the stakes are particularly high: when funds for clean water and public security are embezzled by corrupt public officials, it is quite likely that innocent children will die from water-borne disease and murdered by extremists.
The negative effect of corruption on business is frequently overlooked. A narrative borne of cynicism that corruption benefits the private sector runs through both traditional and social media; an academic literature that focused on the ability of bribe-payers to evade “inefficient” bureaucracy even suggested that corruption could be good for efficiency. Both those positions are wrong. In the short term, bribe-paying companies don’t streamline their business processes by paying bribes – they get sucked into complex expensive negotiations with unreliable bribe-takers. (The bribe-taker’s logic is simple: “if a company paid me a bribe in the past, they’ll probably pay again, and they can hardly report me to anyone without incriminating themselves”). In the long term, business rejects corruption by going on “capital strike”, where it withholds investment in the economy. Corruption leads to lower returns on investment and higher costs for business – and fewer jobs and higher costs for ordinary people.
In that light, the election of Magafuli and Buhari as anti-corruption zealots should have been good news for both ordinary people and international investors alike. How has that played out in practice?
In Tanzania, Magafuli grabbed the attention of bureaucrats and the public with a series of dramatic and popular initiatives: he banned foreign travel for government officials, dismissed thousands of “no-show” workers, and spent Independence Day clearing rubbish on the streets of Dar Es Salaam. These events demonstrated Magafuli’s determination but some analysts and businesspeople remain concerned that there is no clear and articulated plan that explains how Magafuli intends to take on the structural reforms necessary to reduce corruption, poverty and inefficiency in Tanzania. MP Zitto Kabwe argues that what is needed is “strong institutions, not strong men”. In practice, Eversheds understands that a number of government agencies, parastatals and corporations have gone into executive shock: they are deferring routine investment and procurement until “things become clearer” – but the risk is that there is no point at which that uncertainty is resolved.
In Nigeria, meanwhile, Buhari suffered the same fate as Joko Widodo in Indonesia in 2014: having vowed to appoint only honest ministers, there were few nominees that stood up to scrutiny. In the event, it took Buhari five months to appoint a cabinet. Neither did Buhari quickly articulate a clear plan for increasing foreign investment outside the energy sector or addressing a perennial currency crisis. These delays and a lack of clear vision in the early part of his term resulted in some Nigerians nicknaming Buhari “Baba Go Slow” – roughly, “Uncle Traffic Jam”. Buhari was further embarrassed by scandals over “budget padding” and the allocation of state land to foreign companies that illustrate how entrenched problematic conduct is. Markets have not been impressed by Buhari’s leadership so far: the Naira crashed against the USD after floatation, and foreign direct investments into Nigeria fell 54% between Q1 2015 and Q1 2016. Despite these short-term failures, Buhari has made unglamorous institutional changes that hack away at the corruption culture in government and lay the groundwork for improvement: he has increased co-operation with foreign states to recover the proceeds of corruption laundered overseas; he has audited payrolls using data matching; he has dismissed the top tier of the Nigerian National Petroleum Corp (a Colossus in the Nigerian economy) and appointed managers from outside the company.
It is too early to say that Tanzania or Nigeria’s corruption profile for international investors has improved in an appreciable way. As many internal counsel will know from experience, creating an anti-corruption culture – whether in a corporation or a country – is not simply a question of personality and sporadic initiatives. It is a slow process of change that requires consistent effort by multiple stakeholders over a number of years. Buhari himself seems to be conscious of this: when asked what he thought of his new nickname, he replied, “they call me Baba Go Slow, but I will go slow and steady”.
Viv Jones is a Senior Associate in the Fraud & Investigations group at at leading global law firm, Eversheds. He specialises in advising clients on how to identify and mitigate legal and ethical risks around fraud, bribery and corruption, with a particular emphasis on developing markets.
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