Understanding the Context: AAF reviews U.N. Report “Measuring Corruption In Africa”

Understanding the Context: AAF’s Review of the U.N. Report entitled “Measuring Corruption In Africa: The International Dimension Matters”, by the United Nations Economic Commission For Africa, March 2016


By Peter O’Brien*

Economics and politics experience fashion changes at a pace that makes clothes designers envious. And, like the designers garments, some of “today’s problems” are resurrections of yesterday’s, cast in a different context. In the present decade, the buzzword across the globe has been “corruption”. It is thrown mostly at governments, though the already voluminous yet still rapidly mounting evidence of consistently corrupt practices by international firms, whether in finance or manufacturing, indicates that the private sector is at least as adept as anyone else, maybe more so.

In its Fourth Report on African GovernanceGovernance Review UNECA, the UNECA makes the invaluable contribution of seeking to stand back a little from the frenetic international competition in constructing corruption indices, from the “naming and shaming” game that has characterized recent years, and to place the issues in Africa within the political and institutional contexts of the countries of the continent. In so doing, UNECA performs a major service. As is often the case with significant studies, the Report is careful to begin at the beginning and immediately remind us of some basic truths.

The UN Convention Against Corruption does not attempt to define what it is. Why not? Because it is too polyvalent and evolving a phenomenon to make a single definition particularly useful. These features, polyvalence and rapid evolution, of corruption are especially striking in contemporary Africa, where transformations of the economic structure, the institutional landscape, the political environment, and the technological opportunities are such that any one-dimensional, static approach is condemned to irrelevance. This understanding, in turn, emphasizes that no “one size fits all” method will be of much use either in describing the challenges facing any particular African country nor in shaping the most helpful policies to meet those challenges.

The Report stresses that our expectations of how institutions and individuals should behave are altering very fast. This implies that to talk about “what is legal” is nowadays an outmoded way of grasping reality. Everybody is aware that the law permits all kinds of behavior that society at large does not sanction. The chasm between legality and ethics is large. In Africa, as elsewhere, civil society groups are seeking to close it while private enterprises in particular are using the law as refuge. African countries must use their own cultures and mechanisms to ensure that the law/ethics dichotomy does not worsen. This observation is especially pertinent when we reflect how in practice the international community is tackling corruption today.

The overwhelming emphasis seems to be on the design and implementation of tighter legal régimes, along with the use of technology and institutional structures to make corruption more difficult and/or costly to do. This is in essence a knee jerk reaction (KJR). Each time a gap is identified, and cases are found where corruption is occurring, a new KJR happens, with tighter laws, new procedures and so on. The game gets played at a higher level of sophistication, with higher financial and other resource costs, and presumably higher rewards for successful deception. It would seem that the KJR method has been adopted in the OECD context not only because of the technologically and legally sophisticated nature of most corruption there, but also because of the near collapse of ethical standards (indelibly described almost a decade ago by the Lebanese/French author, Amin Maalouf, in his now classic “Le Dérèglement du Monde”).

Does this approach make sense in the African context (or, for that matter, in other contexts)? The answer is probably yes and no. In certain instances the investment associated with a new KJR may pay off, in others not.  Yet it may also be possible to devise clever incentives, market based or otherwise, that encourage actors in Africa to behave in non-corrupt fashion. This is not so much a question of “rewarding honesty” as of highlighting the immense social and economic advantages, the stimulus to development, that can come from shaping an environment where all start to focus on the common good, as opposed to the individual gain. In policy terms, this is the kind of challenge that African countries may in fact have a comparative advantage in meeting.

The actors in corruption chains are many and varied. They encompass private and public bodies, profit making and not for profit institutions, local and international. Hence the governance challenges reach well beyond matters confined to governments. At one and the same time as African countries and institutions need to strengthen their capabilities, doubly so given the speeds of transformation across the continent, the numerous foreign groups operating in and with Africa need to reinforce the struggle against corruption rather than add to the problems. That reinforcement can come not only through the “passive” route of not deliberately creating corruption opportunities, but through the “active” channel of helping Africa to assess better its own special vulnerabilities and then find custom- made means of tackling them. As of now, we see plenty of “method mimicry” in which African countries import institutional methods used in OECD countries, as if the same sets of issues had to be solved. Some of this is useful – but it leaves plenty of territory uncharted.indices

Foreign private and public actors can both contribute. Overseas Development Assistance (ODA) exceeds 10% of GDP in 16 countries of the continent, while the Africa wide average is still as high as 2.7%. Whether that ODA Is bilateral or multilateral, whether it is project oriented or program oriented, the scope for improvement is large. Foreign companies, either those already present or new investors, must ensure that their business practices are much superior to what they have been. Non-profit associations must clean up their act. FIFA, an organization notorious for corruption, has a bad record in Africa. On 13 May it took the unprecedented step of electing a Senegalese lady, with no prior experience in the soccer world, as its new head of global oversight. Let us hope that this positive sign is a good omen for the future.

Just as there is a powerful international dimension to corruption in Africa, so there is an important segment which is cross border corruption (CBC). Given that the continent is seeking to bring together the numerous trading blocs and regional integration schemes into a single process, regulation and control of CBC will become increasingly significant. The Report demonstrates that, from a recent data base which has identified close to 1100 cases of CBC in the world, almost 24% of such cases occur in Africa. Most such cases involve appreciable amounts of money and, in all likelihood, serious economic impacts. They are in the realms of what the Report identifies as “Grand Corruption” and/or “State Capture”. No doubt the third category of “Petty Corruption” might contribute to CBC at the level of issuing licences or similar administrative measures. Nevertheless, CBC mainly relates to big issues.

The UNECA Report does not itself propose fresh measures of corruption. It steadfastly and sensibly refuses to engage in more compilation of indices. Indeed, it is at pains to underline the growing unease with many well-known measures. For instance, it notes that the inventor of the standard Corruption Perception Index, Johan Graf Lamsdorff, sought even as far back as 2009 to persuade Transparency International that the CPI was no longer especially helpful save as a means of ranking countries with regard to public sector related corruption.

Instead, UNECA shines the light on the need to examine policy towards corruption in the context of Africa’s complex patterns of development and its place in the world economy. This method requires plenty of hard work, with specific country analysis supplemented by attention to the CBC risks and the dangers of importing corruption through ODA, FDI and several other external channels. But that hard work will surely bring its rewards. It will be part of the ongoing struggle to create an encompassing and participatory development process in which the benefits of growth are far more equitably shared than has been the case till now. That process is one which can be sustainable, and will not be subject to the vagaries of fashion.


Peter OBrien* About the author: Peter O’Brien is economics & trade advisor to Africa consulting boutique Pr1merio. With over 30 years’ international expertise in economic and financial analysis, trade negotiations, and deal making, Peter O’Brien has advised governments, NGOs, and private clients on economics, policy, and diplomacy matters. Peter has worked worked in all regions of Africa, providing advice to clients ranging from South African conglomerates to Ethiopian government ministries.  A native of Ireland, Peter is fluent in English, French, Spanish, Portuguese, Italian and German.


Caprikat, Foxwhelp & Aurora: The Tip of Africa’s ‘Panama Papers’ Iceberg?

The X, Y and Zumas of the ‘Panama Papers’ leak

By AAT & AAF author, Michael-James Currie.

During the week of 04 April 2016, headlines around the world reported on what may turn out to be one of the most significant developments in the fight to combat the use of offshore accounts for purposes of hiding proceeds derived from various forms of white-collar crime, including fraud, corruption, and tax evasion among others.

The leaked documents — from about 214,000 offshore entities, covering almost 40 years from 1977 up until the spring of 2016 — were obtained from an anonymous source by the respected German daily Süddeutsche Zeitung (“SZ”) and made public through the Washington-based International Consortium of Investigative Journalists (“ICIJ”).

The Panama Papers leak is the second major scandal in recent history, relating to leaked information on individuals’ private bank accounts, following the HSBC Switzerland scandal in 2015. In the HSBC scandal, a number of high-ranking African individuals were identified as having utilised private bank accounts by HSBC’s Switzerland branch. This information came about as a result of a whistleblower HSBC employee (at the time) who leaked confidential information relating to various individuals who allegedly utilised these Swiss accounts for purposes of money laundering and tax evasion.

Inter alia, the following African individuals were identified as a result of the HSBC information leak:

  • Rachid Mohamed Rachid, Egypt
  • Fana Hlongwane, South Africa
  • Jean-Yves Ollivier, South Africa
  • Gad Elmaleh, Morocco
  • Johnson Nduya Muthama, Kenya
  • Belhassen Trabelsi, Tunisia
  • Roger Boka, Zimbabwe
  • Patrick Bédié, Côte d’Ivoire
  • Aziza Kulsum Gulamali, Burundi
  • Abdul-Karim Dan Azoumi, CAR
  • Saïd Ali Coubèche, Djibouti

Kh ZumaThe Panama Papers have now shown, perhaps unsurprisingly, that the Zuma family is also embroiled in this scandal. This time it is President Zuma’s nephew, Khulubuse Zuma, who is identified as being authorised to represent Caprikat Ltd.  Andreas Stargard, a partner at Pr1merio Africa advisors, notes that “Caprikat is no stranger to the white-collar crime news.  Four years ago, the Financial Times ran an investigative report on this offshore entity and its connections to Dan Gertler, an entrepreneur with ties to the Congolese president.  It and other reports detailed how Caprikat (which had been incorporated only months before in 2012 in the BVI) was able to obtain oil blocks 1 & 2 of the ‘Albertine Graben’ in the Western Rift Valley bordering Uganda.”  Stargard notes that Mr. Zuma was also revealed to have ownership stakes in two other offshore companies, Foxwhelp Ltd. and Aurora Empowerment Systems Ltd:

“Taken together, Mr. Zuma’s three companies’ financial interests comprise not only the estimated 2 billion barrels of oil reserves in Lake Albert, but also several gold mines in the South African republic itself, potentially implicating direct political favours from the leadership there, as well as suspicion of any potential influence exerted by President Zuma on Congolese President Joseph Kabila to grant the oil blocks to his nephew’s company in 2012.”

The following passage in relation to Mr. Zuma was posted on The Centre For Public Integrity’s webpage:

“In late summer 2010, as published reports raised questions about the acquisition, British Virgin Islands authorities ordered Mossack Fonseca to provide background information on Zuma, which the law firm had not previously obtained. That same year, Mossack Fonseca decided to end its relationship with the companies.  Zuma and representatives of the companies have rejected allegations of wrongdoing and claimed the oil deals are ‘quite attractive’ to the DRC government.”

Mr. Zuma is, however, just one of a number of hundreds of individuals identified in the Panama Papers, which include individuals from all over the globe. While the papers will no doubt form part of broader investigations, the public outcry has already resulted in Iceland’s Prime Minister, Sigmundur Davíð Gunnlaugsson resigning on Tuesday, 05 April 2016.  John Oxenham, also with Pr1merio, observes that the Panama Papers “truly show the global scale of anti-corruption efforts: this is no longer a question of domestic or even regional enforcement, but one of worldwide dimensions.  The dealings of Mr. Zuma’s companies may simply be the tip of the iceberg.  Associates of Presidents Vladimir Putin (Russia), Nawaz Sharif (Pakistan), Mauricio Macri (Argentina), Petro Porochenko (Ukraine) and others are likewise reportedly implicated by the Papers.”  Time will tell whether there will be more casualties, as politicians around the world, including UK Prime Minister David Cameron, are called on to explain their financial links to Panama.KHZUMA2

The Panama Papers represent no doubt an important breakthrough in the global war on corruption. As David Lewis, Chairperson of Corruption Watch in South Africa said:

Well hopefully it means a number of good things because this is a big revelation and law enforcement authorities will be hard pressed to do so given the scale of the leaks or follow up I guess … looking at critically exposed persons who have been hiding large amounts of assets that vastly exceed the salaries that they earn. So it will aid law enforcement and exposure of people who use these structures to hide illicitly sourced gains. It’s a big deal.”[4]

AfricanAntifraud will keep you posted on all major developments in relation to this story.


Circles of Corruption: how does Africa stack up against the OECD?

Inside & Outside the Circles of Corruption

By Peter O’Brien, Pr1merio chief Economics & Trade advisor.

Many widely quoted assessments of corruption rank African countries poorly. These ratings are based mainly on indicators related to the ways in which business contracts, especially those involving government funds, are concluded. The suggestion is that resources are wasted due to mechanisms which award deals to groups that, in open and transparent systems, would not have qualified to obtain the contracts. While there is undoubtedly a very real problem, it’s important for Africa’s standing in the business world to understand the actual situation.

For comparison’s sake…

During the present decade, the avalanche of detailed information concerning corruption in OECD countries, and in particular Western Europe and the USA, has been enormous. A central feature of the stories uncovered has been the failure of administrative systems in those places – and a strongly associated feature has been the failure to resolve the problems. Some examples, drawn not from the financial sector (where the cases are so numerous that to describe them is now superfluous) but from industrial activities and projects, will illustrate the point.

Since mid-2015, and growing by the week, the question of environmental pollution caused by faking the results of admissions tests on diesel driven vehicles has rocked the automotive industry. What began as an investigation into Volkswagen has extended to several other global manufacturers. The investigations so far have underlined several things. First, companies themselves have broken their own ethical codes in order to secure some competitive advantage. Second, there clearly exists an unhealthy, cosy relationship between the auto firms and the entities that are supposed to test and certify vehicles as compliant with regulations. Third, the power of organized corporate lobbies has been sufficient to delay remedial action, and in the case of the EU promises to postpone it indefinitely. Fourth, industry elaborated codes of conduct rarely work. Fifth, financial penalties alone are unlikely to alter the structures of corruption.

In Germany, the finalization of the construction of the new airport for Berlin in now several years overdue. The delays, and the additional costs (reported to be above €5 million per day), have been variously attributed to weak negotiation and formulation of the initial contracts, inadequate monitoring mechanisms, collusion among constructors and suppliers, and straight kick-backs to several officials involved. In the UK, the award of government contracts to a company, G4S, to provide security services for the 2012 London Olympics, was found by parliamentary investigation to be grossly negligent. But subsequent to those findings, the same company has been given several other contracts, some of which are currently under new investigations.

Where does Africa stand?

Kofi AnnanSo where does Africa really figure in an imperfect world where corruption and fraud have since time immemorial been part of transactions wherever they take place? The response should probably be along the following lines.

To begin with, African firms, in the sense of companies created and driven by African indigenous capital, till now have very limited capacity to organize the large scale, multi-country manipulations found in the OECD. Put differently, African entities, private and public, are almost certainly far more reactors than primary actors in the game. This generalization applies equally to involvement in the scandals rocking so many of the self -created and self- perpetuating bodies purporting to govern many types of world sport. In soccer and in athletics, some African individuals and entities have hopped on to the gravy train – but the drivers are elsewhere. In other notoriously corrupt fields, such as cycling, Formula One racing or tennis, Africa has yet to play a notable role.

Given that, to date, African enterprises and institutions have not played a significant part in the monitoring and assessment operations supposed to prevent and correct abuses, there is likewise no evidence of weight to put Africa in the hot seat with respect to implementation of anti-fraud and anti-corruption in international cases.

The mention above of individual major projects in Germany and the UK, a reference that could readily be extended to more or less all OECD countries, further implies that Africa is by no means different from other places regarding the presence of  seriously deficient methods of project award and project management. The relative extent of problems is hard to judge, partly because the intensity of investigation required to discover some of the situations in the OECD is so great. In other words, it may be that the cases found in Africa are simply easier to identify.

Not so bad after all…?

What does all this mean? Certainly it does not mean either that we should weaken the effort to reduce fraud and corruption, or fail to pursue the necessary improvements in public administration, public finance management, and legal mechanisms. But it does suggest that, fortunately, the degree and sophistication of fraudulent and corrupt behavior can be contained. It has yet to reach the levels found in the OECD, and indeed most African countries and institutions do not have the wherewithal to undertake corruption on the scale observed elsewhere. Timely action now might well avoid future disasters.

A final point is the actual impact of fraud and corruption on economic performance. In the absence of many detailed enquiries, it is not easy to state with confidence if the impact is worse in African countries, or in some of them, than it is elsewhere. What does seem to be clear is that, up to the present, the bad cases in Africa have received relatively strong publicity. Since in today’s world image is everything, it might be time for some of Africa’s institutions, national, regional and continental, to devote resources to showing what Africa is doing to improve its own systems, and ensure it does not reach the position which some other regions of the world are in.


$1 billion per year lost to corruption: a Nigerian saga

A protester sports an anti-corruption T-shirt in Lagos.

$1 billion per year lost to corruption

Recently, AAF reported on the multi-faceted PR efforts of the new Buhari regime to clean up the soiled image of “corrupt Nigerian politics” — among other things, by staging photo ops with World Bank leaders, charging former government officials with bribery, and moving ahead on basic appointments.

Today, the Guardian reports that the Nigerian Minister for Information, Lai Mohammed, “kicked off a corruption awareness campaign appealing to Nigerians to join the fight,” noting that the previous regime’s embedded corruption had “enriched a small elite but left many Nigerians mired in poverty, despite the country being Africa’s top oil producer and having the continent’s biggest economy.”

AAF spoke with John Oxenham, a legal expert on anti-corruption measures with Africa advisory firm Pr1merio.  Oxenham comments:

“The Buhari administration is finally making good on its promises, it would seem, as it had thus far been slow to implement even the most basic of administrative tasks, such as appointing a proper cabinet.  As previously pointed out on your site, the visit with Ms. Lagarde and her advisors serves to enhance visibility and (hopefully) honest dedication to the anti-corruption efforts.  At Primerio, we work with several foreign private entities that express concern over doing business in Nigera, given its reputation.  While we can advise on compliance and risk-avoidance (keyword FCPA etc.), the Nigerian government’s efforts to stamp out corruption from within are helpful, as well, in developing a more robust foreign-direct-investment climate.”

That said, the Buhari camp must be careful not to create the appearance of using the “war against corruption” as a sham front for silencing the opposition under the guise of rooting out fraud.  “Employing the help of the courts — presumptively more impartial and fair than the political process — is therefore key to the government’s fight against graft in Nigeria,” says Andreas Stargard, also with Primerio.

“The estimated $1 billion per year lost to corrupt dealings over the past 7 years is staggering, especially when taking into account that these are merely the official figures — our Africa economists estimate that the actual loss to corruption amounts to an even larger share of the (significant) Nigerian GDP.”

And so the Nigerian saga continues…

Money laundering, $2bn phantom contracts, and Boko Haram

Nigeria moves on its anti-corruption promises: Former Defence Minister charged

Reuters and BBC have reported that former Nigerian Defence Minister, Bello Haliru Mohammed — a veterinarian by training who served in several ministerial positions, most recently under former President Goodluck Jonathan — has been charged with money laundering and related corruption counts.

He is no stranger to corruption allegations, as a German court named him in a 2007 bribery scandal involving communications company Siemens AG (Siemens was fined €201 million as a result).


As AAF reported earlier, just this week, the managing director of the International Monetary Fund, Christine Lagarde, welcomed Nigeria’s anti-corruption campaign which has been significantly pushed by President Buhari, who was elected in May 2015.  The Buhari administration is moving towards developing a strong independent central body to root out wide-spread corruption in one of Africa’s wealthiest countries.

The allegations against Mr. Mohammed (and his son) involve money-laundering charges and criminal breach of trust, relating to at least 300 million naira ($1.5 million) that were meant for spending on defence measures against the threat of Boko Haram spreading its terrorist agenda during the years Mr. Mohammed was Minister.

The Nigerian Economic and Financial Crimes Commission accused the Mohammed duo of colluding with former National Security Adviser Sambo Dasuki, who also served under fmr. President Jonathan and was likewise charged with money laundering and criminal breach of trust last month.  As Reuters reports, “Buhari called for Dasuki’s arrest in November, accusing him of stealing funds through phantom arms contracts …”

Andreas Stargard from Africa advisory firm Pr1merio notes that, “the recent strides in Nigerian anti-corruption efforts coincide with Ms. Lagarde’s visit, and are certainly welcomed by the anti-corruption community as well as international & domestic Nigerian businesses, who have seen their country’s vast natural resources drained — quite literally — by being diverted under corrupt government ‘oversight’ over petroleum and other valuables that make Nigeria the largest economy in sub-Saharan Africa by GDP.”

From Managing Director to President: Get rid of corruption!

IMF’s Lagarde to Nigeria’s Buhari: Country needs to strike balance, yet ensure long-term anticorruption measures

By Michael James Currie.

The managing director of the International Monetary Fund, Christine Lagarde, welcomed Nigeria’s anti-corruption campaign which has been significantly pushed by President Buhari who was elected in May 2015.

The Buhari administration is moving towards developing a strong independent central body to deal with corruption in one of Africa’s wealthiest countries. The task will not be easy as their does appear to be a degree of consensus that the Nigerian judiciary is in itself corrupt and inefficient and cannot meaningfully tackle corruption without substantial reform.

An expert on African anti-corruption measures, Andreas Stargard, with Africa advisory firm Pr1merio, notes:

“The apparent inability by the Buhari administration to make timely ministerial appointments (which were over half a year delayed) and its failure to create a dedicated anti-corruption ministry do not bode well for a solely internally-driven strategy to combat governmental misconduct.  In our view, having Ms. Lagarde and her advisors (as well as privately outsourced firms) looking closely over the shoulder of the current administration would only serve to strengthen any existing anti-corruption efforts underway in Nigeria, and we’re happy to see the meeting took place as a first step in the right direction.”

International Monetary Fund Managing Director Christine Lagarde (R) shakes hands with Nigeria’s President Muhammadu Buhari (L) as Nigeria’s Central Bank Governor Godwin Emefiele (Far Right) and Nigeria’s Vice President Yemi Osinbajo (Far L) look on after their meeting at the Presidential Villa in Abuja, Nigeria January 5, 2016. REUTERS/IMF Staff Photo/Stephen Jaffe/Handout

International Monetary Fund Managing Director Christine Lagarde (R) shakes hands with Nigeria’s President Muhammadu Buhari (L) as Nigeria’s Central Bank Governor Godwin Emefiele (Far Right) and Nigeria’s Vice President Yemi Osinbajo (Far L) look on after their meeting at the Presidential Villa in Abuja, Nigeria January 5, 2016. (c) REUTERS/IMF Staff Photo/Stephen Jaffe/Handout

A further challenge, however, in the fight against corruption is that Nigeria is on the brink of a credit crunch due to the low oil prices which brings about additional considerations that must be taken into account when developing and implementing anti-corruption policies.

One of the Buhari administration’s most dramatic moves in its fight against corruption was to issue a directive (which came into effect in September 2015) that all income generating federal institutions pay their revenues into the central bank as opposed to local banks. This would see an estimated $6.6 billion flow from local banks to the central bank.

Economists had warned that a move such as this may put pressure on the Country’s financial position in the short term given that Nigeria is facing a credit crunch and there is already minimal lending going on.

The IMF has also pointed out that Nigeria is overly reliant on oil and in order to ensure long term stability, anti-corruption measures must be coupled with a move away from relying so heavily on oil.

Nigeria’s fiscal situation must be closely monitored to evaluate the impact of Buhari’s policy changes on the economic landscape in Nigeria, however, it does appear at this stage that the anti-corruption campaign will bring about long terms benefits which outweigh short term fiscal concerns.

‘Omar Dis-Appear’: Legal Effects of Africa’s Withdrawal from the ICC

Omar Dis-Appear‘: The Potential Legal Effects of Africa’s Withdrawal from the International Criminal Court as a Result of the Omar Al-Bashir Debacle

By Rui Lopes — AAT & AAF contributing author (“The Fascinating Story of Thula Madonsela and Being Undermined“)

The mass withdrawal of the Rome Statute by African states leaves most of them with little to no discretion on whether to prosecute omaralbashir31jan11jus cogens crimes envisaged in the courts jurisdiction due to the absence of the complementarity principle, the principle on which the International Criminal Court is based. These States are therefore forced to prosecute these crimes towards the international community in all instances. However, due to the underdeveloped nature of most of these states legal systems, such mainly being the reason for many African states having become signatories to the International Criminal Court in the first place, such States will be unable to prosecute these crimes, thus breaching their obligations erga omnes owed to the international community as a whole.

The International Criminal Court

iccThe International Criminal Court (ICC) was envisaged as being the first permanent international criminal court prosecuting the most serious crimes committed towards the international community. The nature of the ICC is sourced within an international treaty namely the Rome Statute. Treaties are by many academics compared to contracts, which in order to be performable, the contracting parties must consent to the imposition of obligations and must have the requisite intention to be bound by such. In a situation where a party no longer possesses either the intention to fulfil their obligations or in turn no longer intends to be bound by the contract, such a contract cannot continue and must be terminated.

In much the same manner, Article 127(1) of the Rome Statute visualises situations where States no longer wish to remain a party to the treaty. The Article provides that States may, through a written notice to the Secretary General of the United Nations, withdraw from the Statute. Such a withdrawal shall however only take effect one year after the receipt of such notice. 

On closure examination of the Article, such holds the legal implication that the withdrawing State is bound in its entirety to the Rome Statute for one further year after providing its notification of its intention to withdraw. It has in essence added a provisio to the ‘contract’ that even where a party no longer possesses the relevant intention to be bound (animus contrahendi) or where the party no longer intends to fulfil its obligations, the contract continues to persist for a further year. This is furthermore highlighted in Article 127(2), according to which the State is not cleared of any of its obligations that arose whilst a party to the statute nor its cooperation with the ICC in connection to investigations of any proceedings which are uncompleted at the time of the withdrawal.

From a contractual perspective however it seems contra to every rule in contract law to hold that even where a party no longer possesses the relevant intention to be bound by the contract, the contracting party is still bound to the entirety of the contract and if the party refuses to comply with its obligations, the fault lies in the defaulting party which has its own set of consequences. In relation to international law, even though African States may not intend to be bound any longer by the Rome Statute, these African States may be in default if they fail to comply with the Rome Statute. Here the breaches take the form of not complying with the States obligations erga omnes.

Privity of contract, another extremely important principle of contract law, requires that only those parties to the contract are bound to the contract and that obligations may only flow to those who are parties to the contract, no one else. On an inspection of the Rome Statute, the Rome Statute in essence binds those who were never a party to the contract or those who no longer intend to be a party to the contract. This is evident from Article 13(c) of the Statute, holding that prosecutions may be instituted at the instance of the prosecutor of the ICC, irrespective of whether the State is a party to the treaty or not. The prosecutor is required to have a reasonable basis to proceed with the prosecution and be authorised to do so by the Pre-Trial Chamber of the ICC. Thus the ICC is not prevented from having jurisdiction over States, which have withdrawn from the treaty or were never a party to the treaty. In terms of the Rome Statute, privity of contract has gone completely out the window. 

There are some counter-arguments that seem to take the form that such is a requirement in international law due to the jurisdiction of crimes over which the ICC holds, namely jus cogens crimes. However I posit that since international law is a consensual system that requires the consent of State parties, much in the same manner as a contract, it seems irrational for an International Court, whose entire existence is established through a treaty, to have jurisdiction over a state that never firstly possessed or secondly no longer possesses the intention to be bound to the jurisdiction of such a court.

gaza-docket-3-638In relation to the African withdrawal of the ICC, such may have the effect of leading to a potentially large scale institution of prosecutions against many African leaders within the time of their notification to no longer be bound to the Statute, which has already been witnessed and seems to be the main source of discontent by the African Union i.e. an unorthodox targeting of Africans by the ICC, or furthermore that even where the State is effectively no longer a party to the Statute such does not prevent the International Criminal Court from exercising jurisdiction over someone especially considering where such a prosecution or requirement of arrest has been made a resolution by the Security Council of the United Nations in terms of Article 25 of the UN Charter, a resolution that binds all members of the United Nations. 

However, the central legal implication of withdrawing from the treaty arises from an analysis of Article 12(3) of the Statute. Such an Article defines the court’s jurisdiction and states that such a jurisdiction is limited to the crimes of genocide, aggression, war crimes and crimes against humanity. Notably, as previously stated, all these crimes have attained the status of jus cogens, a set of commanding international law standards which no state may deviate or depart from. These standards (jus cogens) impose obligations upon states, called obligations erga omnes. Such obligations are termed obligations erga omnes as the term erga omnes is Latin meaning ‘towards all’ and thus such obligations that arise from jus cogens standards are owed to the international community as a whole. In relation to the crimes over which the ICC has jurisdiction, the obligations erga omnes that couple these jus cogens crimes, can be found in their relative Charters. Within each of these Charters, it imposes obligations on States to prevent and punish such crimes. For example, in terms of the crime of genocide, such a crime has attained the status of jus cogens, and the obligation erga omnes that couples such can be found in the Genocide Convention which requires a state to prevent and punish such a crime of genocide. Therefore a State is bound through their obligations erga omnes, to prevent and punish all such crimes over which the ICC holds jurisdiction, failing of which the state is in breach of these obligations erga omnes.

However according to Article 17(2), the ICC functions on the complementarity principle, which states that the ICC has jurisdiction in instances where the particular state is genuinely unwilling or unable to prosecute such a crime. This effectively provides the state with a “safety net” in the sense that if the state does not want to or is unable to prosecute the crime, due to a lack of the advanced nature of their legal system, that particular state is not said to have breached any obligations erga omnes. It is for this exact reason that many African states have become parties to the Rome Statute in order to prosecute such crimes, as a result of a lack of an advanced legal system present within their countries (although this may not be true for each and every African state). Therefore the ICC has provided these African states with a platform to prosecute such crimes, thus preventing breaches of their obligations erga omnes

The implication of a state withdrawing from the Rome Statue is that such a state is left vulnerable to breaching their obligations erga omnes in terms of these crimes, namely to prevent and punish. No longer does the state have a discretion on whether to prosecute or not, due to a lack of the complementarity principle, and are in all instances bound to prosecute. The failure of a state to prosecute, irrespective of the reason, will be a breach of their obligations erga omnes.

What then would be the repercussions for African states who have breached their obligations erga omnes

Article 40 of the Draft Articles on State Responsibility contemplates serious breaches of obligations under peremptory norms of international law and the wording of such an Article has two requirements that must be fulfilled in order to be utilised, the first is that there must be a breach of international law by not complying with ones international obligations, in the current instance, where African states do not prosecute such jus cogens crimes, this would be sufficient to constitute a breach of international law by not complying with their obligations owed to the international community. Secondly, the breach is required to be serious in nature. In the current instance it is unfathomable that such a breach is not serious in nature. The non-prosecution of jus cogens crimes such as genocide, war crimes or crimes against humanity are inexcusable and may seem to suggest a condonation of such if a state seeks not to prosecute such or where a state fails to prosecute such. Furthermore what is required by the relevant article is that such a failure to comply with ones obligations erga omnes must be gross and irregular i.e. that there is intent present on the part of the state. I therefore posit that such may be seen through African states intention to withdraw from the ICC whilst knowing that their relevant legal systems are unable to handle the prosecution of such crimes. Such actions demonstrate the intention to not prosecute these crimes, as these States knew of their inability to prosecute such crimes and persisted to withdraw from the ICC and thus such can be said to constitute the gross and irregular conduct contemplated in Article 40. 

Article 41 goes on to describe the consequences of a states serious breach of peremptory norms. Such states that all States are under a positive duty to bring an end to the serious breaches contemplated in Article 40. Such an article does not however prescribe what form the duty to bring an end to such must take and will depend on the circumstances but must in any event be lawful. I posit that such may take the form of rendering assistance in terms of the prosecution of such crimes, however such an article can only be said to be applicable ex post facto the failure to prosecute (Such constituting the breach of international law). It might well be for this exact reason that it is possible for the ICC to continue to exercise jurisdiction over such states. 

The question now becomes: Can Africa ever really escape the jurisdiction of the ICC? MapOfAfrica

Since the ICC works on a complementarity principle, the principle that the court will only prosecute the crimes over which it has jurisdiction in those instances where is a state in unwilling or unable to prosecute the crimes, and since it has been established that even after a state is no longer a party to the ICC, the ICC continues to exercise jurisdiction over those states and those crimes, it seems that even when one has withdrawn from the ICC, one has not escaped the jurisdiction of the ICC, which would have been the entire purpose of withdrawing from the Rome Statute. The question for consideration is then whether it will be possible for Africa to ever escape the ICC’s jurisdiction? The answer to such lies in the complimentary principle itself, as if there was an institution which could prosecute all African crimes over which the ICC has jurisdiction, then the court would be unable to prosecute such as the complimentary principle would not enter into effect. Therefore I posit that the only way Africa can ever escape the jurisdiction of the ICC would be to establish an African Criminal Court. 

However, the possible benefits of African States ‘pulling out’ from the ICC are two fold. Firstly it provides states with the motivation required to improve their legal systems to cope with the prosecution of such crimes rather than the reliance on an international court as a “safety net”. Secondly, the possible creation of an African Criminal Court as contemplated above provides a greater legitimacy of that court in the eyes of African states and its establishment allows for a broader jurisdiction over crimes in comparison to the ICC. Despite the presence of such advantages, withdrawing from the ICC seems to be more detrimental than beneficial to these African states considering the possible breaches of their obligations erga omnes

The way forward

I therefore hold that the mass withdrawal of African states from the Rome Statute will lead to a possible multitude of eventual breaches of these States obligations erga omnes as a result of the inability of their legal systems, not necessarily all of them, to handle the prosecution of such crimes. I hope that if African states are destined on withdrawing, the African Union rapidly establishes a similar court to deal with such prosecutions in order to avoid these breaches of obligations erga omnes. A reformulation to the structure of the Rome Statute is also required as it seems to be out of touch with the basic principles of contract law through which many academics compare treaties to.

New cabinet positions announced, but no anti-corruption minister in sight

Key Nigerian ministerial positions announced, with long delay

The swearing-in of Nigeria’s new members of President Muhammadu Buhari’s cabinet took place in his villa in Abuja, notably after an almost six-month delay (hence the popular moniker for the new leader, “Baba Go Slow”).

As Andreas Stargard, a director with African anti-corruption advisors Pr1merio, points out, “[t]he ex-military strongman had thus far only announced one cabinet position, that for the Minister of Oil & Petroleum, naming none other than himself to that post.”  Mr. Stargard added that President Buhari did name a “junior” petroleum minister in yesterday’s announcement, Emmanuel Ibe Kachikwu, who is the head of the state oil firm Nigerian National Petroleum Corporation (image below).  Yet, Stargard says, this must be taken as an administrative, if not symbolic, act, observing that Buhari retained ultimate control over this — the most lucrative and strategically important — petroleum portfolio.

The new ministers are as follows, with the list notably missing any dedicated ministerial position for overseeing the #1 portfolio on which Buhari had grounded his bid for the presidency, namely anti-corruption.  As one might expect, most of his appointees were key supporters of the President’s election campaign.

1. Chris Ngige – (Anambra) – Labour and Employment
2. Kayode Fayemi- (Ekiti) – Minister of Solid Minerals
3. Rotimi Amaechi – (Rivers) – Transport Minister
4. Babatunde Fashola -(Lagos) Minister of Power, Works and Housing
5. Abdulrahman Dambazau- (Kano) Interior Minister
6. Aisha Alhassan – (Taraba) – Minister of Women Affairs
7. Ogbonaya Onu- (Ebonyi) – Minister of Science and Technology
8. Kemi Adeosun – (Ogun) – Minister of Finance
9. Abubakar Malami – (Kebbi) – Minister of Justice
10. Sen Hadi Sirika – (Katsina) State Minister of Aviation
11. Barr. Adebayo Shittu – (Oyo) – Minister of Communication
12. Suleiman Adamu – (Jigawa) Minister of Water Resources
13. Solomon Dalong – (Plateau) – Minister of Youth and Sports
14. Ibe Kachikwu – (Delta) – State Minister of Petroleum
15. Osagie Ehanire – (Edo) State Minister of Health
16. Audu Ogbeh – (Benue) Minister of Agriculture and Rural Development
17. Udo Udo Udoma – (Akwa Ibom) – Budget & National Planning
18. Lai Mohammed – (Kwara) – Minister of Information
19. Amina Mohammed – (Gombe) – Minister of Environment
20. Ibrahim Usman Jibril – (Nasarawa) – State Minister of Environment
21. Hajia Khadija Bukar Ibrahim- (Yobe) State Minister of Foreign Affairs
22. Cladius Omoleye Daramola (Ondo) – State Minister of Niger Delta
23. Prof Anthony Onwuka (Imo) State Minister of Education
24. Geoffrey Onyema (Enugu) – Minister of Foreign Affairs
25. Dan Ali (Zamfara) – Minister of Defence
26. Barr James Ocholi (Kogi) State  Minister of Labour and Employment
27. Zainab Ahmed (Kaduna) State Minister of Budget and National Planning**
28. Okechukwu Enelamah (Abia) – Minister of Industry trade and Investment
29. Muhammadu Bello (Adamawa) – Minister of FCT
30. Mustapha Baba Shehuri (Bornu) – State Minister of Power, Works and Housing
31. Aisha Abubakar (unknown) – State Minister of Industry trade and Investment
32. Heineken Lokpobiri (Bayelsa) – State Minister of Agriculture
33. Adamu Adamu (Bauchi) – Minister of Education
34. Isaac Adewole (Osun) – Minister of Health
35. Abubakar Bawa Bwari (Niger) State Minister of Solid minerals
36. Pastor Usani Uguru (Cross River) – Minister of Niger Delta

Fraud, corruption and the MTN fine

Fraud, corruption and the $5 billion MTN fine

By Michael Currie

MTN, Africa’s largest mobile network is reeling after a the Nigerian Communications Commission (NCC) fined the company USD $5.2 billion for failing to disconnect approximately 5.1 million customers from unregistered phone cards.

The NCC calculated the fine by fining MTN USD $1,001 for each unregistered SIM phone card.

While MTN are seeking to reduce this fine (due November 16th) by negotiating with the NCC, the South African Parliament has reportedly summoned MTN to appear before it to explain the fine handed down by the NCC and also to ensure that MTN is compliant with South Africa’s laws.[1]

MTN’s shared were also provisionally suspended from trading on the Johannesburg Stock Exchange, however, shares are trading freely again.

UPDATE (12 Nov. 2015): MTN’s recent chairman appointee, Phuthuma Nhleko, has indicated to media that the company would seek to reduce the fine was named executive chairman of MTN for up to six months after Sifiso Dabengwa stepped down as CEO with immediate effect on Monday.  “The planning is based on all possible outcomes and contingencies and our aim is to comply with all regulations in Nigeria,” said MTN spokesman Chris Maroleng, with experts expecting a reduction ranging from as little as 5% to as much as 75%.

While the fine imposed by MTN has received mixed reactions as many feel that the fine is harsh and disproportionate to the harm done, it does not appear the relationships between MTN and the NCC have broken down entirely as the NCC has granted MTN an extension on their licence to operate in Nigeria.

While it has been accepted that there are legitimate security reasons for ensuring that phone cards are registered, it has been suggested that the massive MTN fine was influenced by the kidnapping of a high ranking Nigerian politician, Olu Falae, a former finance minister and runner up in the 1999 presidential elections, on 21 September 2015[2].

The MTN fine saw their share price fall by up to 20% since the announcement of the fine highlighting that apart from the financial penalties highlighting, once again, the need to ensure that companies are fully compliant with the regulatory environment in which they operate.

Fraud and cybercrime

The need to ensure that all phone cards are registered is an increasingly important element to safeguarding individuals from various forms of illicit conduct.  Says John Oxenham, “Mobile phones are increasingly being used as the platform upon which to connect to the internet and on the South African continent the majority of internet access is through phones and not computers.  Unregistered SIM cards are too easily capable of being used for criminal activity, reducing the traceability of illicit telecommunications.”

This is an important consideration as cybercrime has become an increasingly pressing issue to address. A number of countries including such as Namibia are in the process of drafting new legislation specifically to deal with cybercrime. South Africa’s telecommunications has also recently set up a cybercrime hub which will promote collaboration between the public and private sector to detect, track and combat cybercrime techniques. South Africa is also on the brink of having the Protection of Personal Information Act (POPI) fully come into force. While POPI generally regulates the use, storage and dissemination of personal information, POPI imposes a higher duty of care when processing persons account numbers and a contravention of the provisions relating to the processing of account numbers is a criminal offence.

It was reported that South Africa is the third highest cybercrime hotspot in the world. Furthermore, an estimated 50% of credit card fraud occurs online[3].

Accordingly, any measure which needs to be put in place to guard against cybercrime attaches and make it easier for the relevant authorities to detect and prosecute those responsible for cyber attacks should be encouraged. Whether the MTN fine is proportional is a debate for another day, however, it will undoubtedly raise the awareness of mobile operators to ensure that they comply with all regulations particularly relating to the registration of phone cards, and that can only be of great assistance to the fight against cyber-crime. 


[1] http://www.fin24.com/Tech/Mobile/Parliament-to-summon-MTN-over-Nigeria-fine-20151104.

[2] http://www.news24.com/SouthAfrica/News/Kidnap-behind-MTNs-woes-20151031

[3] http://www.bdlive.co.za/business/2015/11/02/new-hub-to-fight-cybercrime-opens.

How a Billionaire Changed Corrupt Government: Dangote vs. Mugabe

Did a Nigerian CEO single-handedly wipe out source of Zimbabwean ‘indigenisation’ corruption?

The Zimbabwean economy has been struggling hard under the regime of President Robert Mugabe for years, having contracted as much as 40-50% and suffering from galloping inflation rates of over 79 billion % (so-called hyper-inflation, which is exceedingly rare today).  This has, in turn, led to tremendous human suffering, including famine, a significant exodus from the country, a decline in life expectancy, etc.

One of the oft-cited culprits hindering foreign direct investment (FDI) into Zimbabwe has been the official policy of “indigenisation.”  Andreas Stargard, an advisor on African competition and fraud issues and a Primerio director, comments:

“After the 1979 Lancaster House Agreement set in motion the ultimate Land Reforms and other measures that would allow the new majority rule to eradicate the remnants of the British Empire’s colonisation of the former Rhodesia, the Zanu-PF policy of requiring all FDI to cede 51% or more of the investment’s equity interest to native Zimbabweans, foreign interest in the country has dropped significantly.  The indigenisation policy has sent investors running — well above and beyond their already extant currency worries and the spectre of government-sanctioned expropriation.”

Indigenisation and its effects

The indigenisation rule applies to “any person who before the 18th of April 1980 was disadvantaged by unfair discrimination on the grounds of his or her race, and any descendant of such person.”  This law, the so-called ‘Indigenisation and Economic Empowerment Bill of 2008‘ (IEEB), has not only hindered DFI, but also led to an exacerbation of corruption within the Zimbabwean business and government circles, as it acting as the Zimbabwean majority front-man has become a lucrative calling for otherwise unqualified government officials or their family members.

The Economist has noted, just prior to the 2008 enactment of the Zimbabwean law, that the vagueness of its provisions could be a harbinger of confusion (and, correspondingly, corruption):

Zimbabwe’s bill contains a lot of ambiguity, and gives a lot of loosely-defined discretion to the government. It is unclear whether the transfer would apply only to future mergers, demergers, restructurings and transfers, or to all existing companies. Moreover, the minister for indigenisation and empowerment would have to approve all ownership transfers and would have the power to impose alternative local partners if he disapproves of those involved in the proposed transactions. He would also have the authority to exempt selected companies from the ownership requirements for a certain period.

Dangote to the rescue

The man who has now called into question — and apparently successfully so — the Zimbabwean indigenisation rules is none other than one of  Africa’s foremost Black billionaire businessmen, Aliko Dangote.  He is the CEO of his eponymous company, Dangote Group, which has expanded from being once a mere concrete business to an conglomerate empire of significant proportions and well over $3 billion in annual revenues — enough to make Mr. Mugabe’s ministers now consider reforming (if only silently and unwillingly) the existing policy’s hurdles to FDI.

Although the Zimbabwean Vice President, Mr. Emmerson Mnangagwa, has denied any connection with the suddenly ongoing reforms to indigenisation rules and the Dangote Group’s recent promise to invest up to $400 million of sorely-needed hard, foreign currency into government coffers and domestic commercial banks, this seems to have been precisely the case, in AAF’s view.  Bloomberg has reported that not only Dangote, but also the (decidedly non-Black, despite its name) BlackRhino private-equity infrastructure fund, which is a Blackstone subsidiary, would consider concomitant investing into Zimbabwean power generation.  Other media outlets likewise reported the dramatic change in demeanour over the past two weeks, since Mr. Dangote’s initial visit to the country and his subsequent threat to withdraw his investment promise, if needed reforms were not undertaken swiftly:

When Nigerian billionaire Aliko Dangote arrived in Zimbabwe last month, the red carpet was rolled out for Africa’s richest man.

He was showered with exclusive hospitality and access to ruling elites, including meetings with the two Vice Presidents Emmerson Mnangagwa and Phelekezela Mphoko before seeing President Robert Mugabe.

Since then, after Mr. Dangote strategically “forgot” to mention Zimbabwe as one of his target countries, thereby prompting deservedly worried Zanu-PF reactions, the ruling party has apparently gotten the memo from the mega-CEO: it recently released an official Presidential memorandum announcing reforms to “improve the easy of doing business” in Zimbabwe.  Says Stargard:

“See, under the existing IEEB rules, it’s not enough to be Black in Zim by the Zanu-PF’s standards for doing business — one must also be Zimbabwean by birth (or at least as of the country’s independence day in 1980).  So Mr. Dangote does not qualify for preferential treatment, and therefore would have to cede over half of his local investment value to domestic ‘business interests,’ AKA a vast array of potentially corrupt shell entities or individuals waiting to benefit from the Dangote/BlackRhino investment slush fund.”

A local Harare attorney, Obert Gutu (Twitter), told a Financial Gazette reporter that in his view, the ambiguities and resulting counter-productive effects outweighed the upsides of the law: “The contradictory statements that are being made by different ZANU-PF cabinet ministers are symptomatic of policy incoherence and institutionalised confusion.”

Mr. Dangote would seem to agree with Mr. Gutu’s views, expressed more than a year ago in the Gazette’s aptly titled article “Indigenisation Act Continues To Create Confusion“:

“It is a populist indigenisation policy that is benchmarked on emotive utterances that do not resonate with the reality that is presently obtaining within the global macro-economic architecture.  For as long as the ZANU-PF government trumpets this populist indigenisation policy, Zimbabwe will not attract any meaningful foreign direct investment. Our national economy will remain fragmented, perilous and fragile.”

We conclude by (1) hoping that Mr. Dangote’s influence (or at least that of his U.S. dollar-denominated chequebook) bears fruit and stamps out a good part of the extant corruption in Zimbabwean politics; and we (2) note that Zimbabwean indigenisation stands not alone in Africa — other countries, notably South Africa with its Black Economic Empowerment rules in effect since the early 2000s, have similar (although perhaps less draconian) measures in place to level the playing field in the former European colonies.  The Zanu-PF version of Black economic empowerment is, however, apparently too counter-productive even for Africa’s most influential Black businessman, as we are now beginning to learn…

To be continued