Lesotho corruption case a watershed for corrupt officials and bribe-paying corporations

Lesotho, the tiny mountain kingdom, punches above its weight. This is not reflected in a bossy attitude; rather it has done what is seldom expected of relatively weak African states - it has tackled corruption in the multibillion-rand Lesotho Highlands Water Scheme head on, prosecuting corrupt officials and bribe-paying corporations.
It has proved "Afro-pessimists" wrong at the same time as dealing a knockout blow to those who say it is improbable that corporations can be held to account for criminal behaviour in the developed world -- and impossible to do so in the developing world. The scheme was the world's largest construction project when unveiled 20 years ago, designed to pipe water to apartheid SA's thirsty industrial heartland centred on Johannesburg. In return, the otherwise resource-impoverished Basotho people were promised, among other things, the benefit of electrification and monetary compensation.

To finance the project, SA's government needed access to capital that was no longer readily available because of international sanctions. The World Bank came to the rescue and in effect helped launder the money to Pretoria through the project's financial advisers based in London. The deal, argued by some to border on illegality, set the tone for what was to come once contracts were awarded to construction companies. By the start of this decade, more than a dozen international construction companies had been charged with bribing a senior Lesotho official.

A number have since been found guilty in the Lesotho courts in landmark judgments that detail the flow of funds through Swiss banks and the hands of intermediaries acting for the corporations. Most recently a senior official with the New Partnership for Africa's Development, who was formerly linked with the Lesotho dam project, was charged with corruption, proving that the political will exists to tackle graft without exception.

The response from the World Bank has consistently erred on the side of caution. Despite promises as far back as a 1999 closed-door meeting that it would provide financial support to the Lesotho prosecutors, no assistance has been forthcoming, leaving a poor state to foot the multimillion-dollar legal bill. Equally the Bank was slow in applying its policy to exclude corrupt companies from future World Bank contracts, eventually barring the Canadian multinational Acres in March 2004 for three years. This came more than 30 months after an internal World Bank probe concluded that Acres had paid for influence - reportedly allowing the company to commence big-ticket Bank-funded projects in Uganda, Palestine and Sri Lanka in the interim.

Given such a track record, and that the case is but one example in a litany of World Bank projects dogged by corruption in Africa, the announcement that the Bank is now seeking comment on its proposed new anticorruption strategy is timorous. There are three areas in the draft strategy, "Strengthening bank group engagement on governance and anticorruption", that require attention from policy-makers. They relate specifically to prosecution, disqualification and high-risk areas. Importantly, the policy document sets out the need to support "country efforts to strengthen their investigations and prosecution of corruption".

The lesson from Lesotho is apposite:

1. support needs to be disbursed rapidly, in the form of money and also,

2. where necessary, technical assistance to investigate and prosecute corruption

in Bank-related projects.
3. Attention must also focus on prosecution of corrupt officials and contractors,

regardless of their political influence in their home countries.

On debarment, the document focuses on the need for uniformity among development agencies in recognising each other's sanctions. Despite agreements between the European Bank for Reconstruction and Development (EBRD) and the World Bank, the EBRD has not debarred any companies, including Acres, according to a senior EBRD official speaking at a Commonwealth conference in London in April.

If international finance institutions don't co-ordinate their sanctions, illegal acts will continue with impunity.

In addition, policy has to be clear on a number of other issues, such as:

1. the need for fast-tracking the inclusion of corrupt corporations and individuals on to the debarment list,

2. issuing penalties that hurt a corporation's bottom line for years, and

3. recognising and abiding by national courts' decisions.

The Lesotho case proves that the practice of second-guessing the African bench by painting it with the uniform brush of "corruption" is at the very least offensive.

A third area, which the anticorruption policy fails to address, is the sensitive nature of construction and natural-resource projects funded by the Bank. Like the arms industry, these sectors have historically thrived on corruption. There is a need for an explicit recognition of this.

All payments made by corporations to governments must be made transparent and governments need to make what they earn transparent so that citizens can exercise effective oversight. The World Bank, and the home countries of the corporations implicated in corruption in the Lesotho Highlands Water Scheme, have many reasons to be shamefaced about the lack of support that Lesotho has been shown in its efforts to tackle corruption. At the very least, the epitaph on the trials needs to read that the conduct of international finance institutions and corporations in Lesotho must not be allowed to be repeated.

It is time the world listened to Lesotho and learnt from its example.