chapter  7
Foreign Business and State Corruption
Pages 15

State corruption in African countries is often viewed as a series of illegal actions by public officials and politicians, which are aimed at acquiring money and other material benefits in return for making favourable government decisions. Thus, public officers may solicit bribes from foreign business groups in exchange for preferential treatment in government decision-making. Studies on corruption in Africa show that demands for illegal payoffs have contributed to an uncertain business environment as well as being detrimental to private sector development. Research on Uganda, for instance, has shown that public sector ‘corruption has a large adverse effect on firms’ as well as imposing ‘a heavy burden’ on them by increasing the cost of business (Svensson 2001: 320). Similarly, the demands of illegal payments by African public officials and politicians have been considered inimical to foreign private investment. Thus, the chairman of the British-based East Africa Association, Alan Wood, named corruption within the state as an important deterrent to British investment in Uganda (Mugunga 2000b). These studies, however, have missed an important dimension of corruption across the African region, namely, the role of private firms, and especially of foreign companies, in contributing to public sector corruption. In fact, within Africa, there is a view, held strongly by observers, that ‘graft in public office is perpetrated by leaders in the corporate world and their agents, who canvass for multi-million shilling tenders and government contracts’ (Munaita 2001). As a Kenyan journalist puts it: it is foreign ‘corporate executives who call into public offices with briefcases, sometimes sackfuls of money’ and who are important sources of public corruption in African countries (Munaita 2001). The empirical evidence for foreign business bribery in African countries is mainly anecdotal and confined to a few journalistic accounts. There are also only a few general works on how multinational firms have paid ‘business bribes’ to win public tenders and government contracts in developing countries (MoodyStuart 1997). Yet the importance of foreign business corruption can be seen in the attempts of Western governments and international organizations to criminalize it. For example, there are international conventions and laws that make it possible to prosecute Western private companies for making illegal payments to foreign public officials. Transparency International (TI), the global, nongovernmental anti-corruption organization, has shown in its Bribe Payers

Indexes that there are high levels of bribery in developing countries by quite large numbers of multinational firms from Western countries. Moreover, the World Bank claims to have banned over one hundred mostly Western companies from participating in its projects in developing countries on account of graft in contracting. Although clearly not unaware of foreign business bribery, international aid donors have been far more concerned with pressing African governments to combat corruption within their state institutions than with addressing the role of foreign companies as promoters of public sector corruption. Donors have tended to accept the claims of foreign investors that they are obliged to make illegal payments because of the corrupt demands being made on them by grasping state officials. And, partly for this reason, donors have pushed strongly for action to be taken against state personnel demanding illegal payoffs, rather than devoting much attention to the role of foreign firms in African state corruption. A major theme of this chapter is to show through our Ugandan case material that foreign business is implicated in state corruption. We believe that there is substance to the view of African observers cited above that ‘graft in public office is perpetrated by leaders in the corporate world and their agents’. We investigate a number of cases where foreign companies competing with each other to obtain large, lucrative contracts have been involved in illicit offers and payments to government officials and politicians to win deals and contracts over competitors. Far from being innocent dupes of public sector corruption, our research shows that favour-seeking foreign firms have contributed to as well as been complicit in state corruption in Uganda. This is not to deny that senior Ugandan state personnel have demanded financial inducements from foreign companies. Although, in the words of a Kenyan journalist, ‘it is now widely accepted that the private sector is the supply side of corruption’ in African countries (Munene 2002), there is clearly also a desire on the part of some public officials and politicians to benefit from the pressures and imprecations of foreign firms. Not only the ‘supplying’ side but also the ‘demanding’ and ‘taking’ sides are intimately involved in African public sector corruption. What our case study material seeks to show, however, is that at times foreign firms may have initiated the bribe-giving process, while at other times they have shown clear willingness to enter into corrupt relations with public officials and politicians to secure major government contracts over their business rivals. In this chapter we focus on how foreign private sector bidders have colluded with senior state personnel, as well as how such collusion has contributed to many irregularities in government decision-making and also been harmful to the quality of public governance in Uganda.