In 2002, the African Union reported that Africa lost about $148 billion through corruption every year. This represented 25% of the continent’s combined GDP at the time. Nothing much has changed.
Last year, the global business advisory firm KPMG estimated that if South Africa reduced its corruption by one point, as measured by Transparency International’s corruption perception index, it could add 23 billion rand ($1.7 billion) to its GDP.
The thrust of these facts is that the lost monies could have been used to finance institutional development and reduce the constraints to doing business in Africa.
In spite of the effects of corruption on the private sector, businesses in Africa are relatively silent about the menace. Efforts to combat corruption are largely championed by civil service, non-governmental organizations and international development agencies.
A new study has linked the private sector’s silence to the inadequacy of business education in the region. It notes that business schools can play a vital role in the fight against corruption. They can do this by nurturing business students to become institutional entrepreneurs – people who will bring about institutional change – not only in Africa’s economic domain, but also in the political arena.
Schools can equip students and managers with knowledge and expertise to advocate for public accountability and good governance, as advocated by the World Economic Forum.
Why the private sector is silent
There are several reasons why private companies often remain silent about corruption. One is that some of them indulge in and benefit from corruption.
In Ghana, for example, a “create-loot-share” model of corruption persists. Politicians, public officers and businesses collude to create and profit from fraudulent acts, including inflated contracts. This is also common in Nigeria, where between 2009 and 2014, about $2 billion was salvaged from inflated contracts by the government agency set up to vet procurement.
Even multinational companies from the least corrupt countries gain from Africa’s corrupt political elite. For example, in 2011, UK’s Shell and Italy’s ENI paid $1.1 billion to Nigerian officials for access to an oilfield currently worth $500 billion. US tyre firm Goodyear paid more than $3.2 million in bribes to Angolan and Kenyan government officials in order to win supply contracts.
The pressure on companies to indulge in corruption is considerable in Africa. According to data from the World Bank, 71% of enterprises in Sierra Leone, 66.2% in Tanzania, 64% in Angola, 75.2% in Congo and 63% in Mali expect to give “gifts” to secure government contracts.
The ethical dilemma for business managers is that refusing to pay bribes can cost their companies contracts, licenses and revenues. Essentially, good companies which do not yield to extortion may lose out to bad competitors who do. Consequently, most companies yield to corruption or stay silent. Speaking up can make them targets for political witch hunts and discrimination.
A much deeper reason for the private sector’s inactivity is that managers simply lack the political skills required to shape their business environments. This deficiency arises because the link between political institutions and economic markets has not received adequate attention in business schools. So the schools are turning out managers with good knowledge of business but inadequate understanding of public governance and inability to influence public institutions.
Most people, including business managers, feel powerless when dealing with corrupt government officials. They regard official institutions as too powerful to take on and see corrupt practices, such as bribery, as unchangeable. But with good education and training, this can change.
African business schools can help
Some in Africa have already done so: three business schools introduced an anti-corruption program sanctioned by the United Nations into their classrooms.
But much more can be done. Business schools should teach business-government relations, or corporate political activity. This is crucial because many business managers don’t know how to influence their political environments even though they are affected by government policies. Students and managers may be taught ethics in schools, but ethical values are difficult to uphold in contexts where corruption is highly endemic, such as Africa.
If the fight against corruption in Africa is to succeed, business managers must learn to engage public officers differently. The ability to do this can be developed in business schools.
Students and managers need to learn about political strategies that can change the way institutions work. Techniques for ad hoc management of bribery are no longer enough. Companies can, for example, present a united front against corruption so that none can be singled out for “punishment”.
The business community could also learn to self regulate by refusing to deal with corrupt companies, as was recently reported in South Africa. Collective campaigns for public procurement transparency can also prevent politicians from using the private sector to plunder State funds. Inaction breeds corruption, as seen in Kenya’s $1 billion Anglo Leasing scandal.
African business schools are valuable in the fight against corruption. They can take bold steps to review their curricula and promote active corporate citizenship. When they see what a difference they can make, the continent may begin to shake off a major hindrance to its development.