Bribery and corruption are still huge risks for business

Meanwhile, another new report shows Sub Saharan Africa at the bottom of the global list in terms of corruption. In its Foreign Bribery Report 2014, the OECD said bribes in the analysed cases equalled 10.9% of the total transaction value on average and 34.5% of the profits—equal to $13.8m per bribe. But given the complexity and concealed nature of corrupt transactions, this is without doubt the mere tip of the iceberg, warned the OECD. Bribes are generally paid to win contracts from state-owned or controlled companies in advanced economies, rather than in the developing world, and most bribe payers and takers are from wealthy countries.hideThe OECD Foreign Bribery Report analysed more than 400 cases worldwide, involving companies or individuals from the 41 signatory countries to the OECD Anti-Bribery Convention. Almost two thirds of cases occurred in just four sectors: extractive (19%); construction (15%); transportation and storage (15%) and information and communication (10%). Bribes were promised, offered or given most frequently to employees of state-owned enterprises (27%), followed by customs officials (11%), health officials (7%) and defence officials (6%). Heads of state and ministers were bribed in 5% of cases but received 11% of total bribes. In most cases, bribes were paid to obtain public procurement contracts (57%), followed by clearance of customs procedures (12%). A further 6% of bribes were to gain preferential tax treatment. “Corruption undermines growth and development. The corrupt must be brought to justice,” said OECD secretary general Angel Gurría. “The prevention of business crime should be at the centre of corporate governance. At the same time, public procurement needs to become synonymous with integrity, transparency and accountability.” The report also reveals that the time needed to conclude cases has increased, from around two years on average for cases concluded in 1999 to just over seven years today. The OECD said this may reflect the increasing sophistication of bribers, the complexity for law enforcement agencies to investigate cases in several countries or that companies and individuals are less willing to settle than in the past. In 41% of cases, management level employees paid or authorised the bribe, whereas the company CEO was involved in 12% of cases. Intermediaries were involved in three out of four foreign bribery cases. These intermediaries were agents, such as local sales and marketing agents, distributors and brokers in 41% of cases. Another 35% of intermediaries were corporate vehicles, such as subsidiary companies, companies located in offshore financial centres or tax havens, or companies esta-blished under the beneficial ownership of the public official who received the bribes. The OECD called on governments around the world to strengthen sanctions, make settlements public and reinforce protection of whistleblowers as part of greater efforts to tackle bribery and corruption. It added: “The overwhelming use of intermediaries also demonstrates the need for more effective due diligence and oversight of corporate compliance programmes and for company executives to lead by example in fighting foreign bribery.” Meanwhile, Transparency Inter-national has just released its 2014 Corruption Index. It shows 92% of Sub Saharan countries score less than 50 points out of a possible 100. The global average score is 43 out of 100, while the Sub Saharan average is 33 points out of 100. Only eastern Europe and central Asia matched that poor performance. Botswana remains the cleanest African country on the table, coming in at number 31, with 63 points, down by one point on 2013 and by two points on 2012. At the bottom of the table, Somalia was in 179th position alongside North Korea with just eight points, a number that has remained unchanged from the 2013 and 2012 levels. Nigeria and Cameroon have both improved slightly on 2013 levels. The scores of several countries rose or fell by four points or more. The biggest fallers included Angola, Malawi and Rwanda (all down four). The biggest improvers were Côte d´Ivoire, Egypt, (plus five), Mali and Swaziland (plus four). José Ugaz, Chair of Transparency International, said: “The 2014 Corruption Perceptions Index shows economic growth is undermined and efforts to stop corruption fade when leaders and high level officials abuse power to appropriate public funds for personal gain. “Corrupt officials smuggle ill-gotten assets into safe havens through offshore companies with absolute impunity,” Mr Ugaz added. “Countries at the bottom need to adopt radical anti-corruption measures in favour of their people. Countries at the top of the index should make sure they don’t export corrupt practices to underdeveloped countries.” Somalia has also come bottom of a Political Risk Atlas (PRA), published by Verisk Maplecroft. In the newly released Atlas, the company warns ‘global stability is unlikely to improve over 2015’. It points to potentially divisive elections in key markets, including Nigeria, as the primary issues driving political risks for investors in 2015. The PRA, which scores 198 countries on 54 political risks to enable organisations to identify risks to their operations, investments and supply chains, identifies ten countries as posing an ‘extreme risk’ for dynamic, short-term risks, such as terrorism, conflict and rule of law. Somalia marginally retains its status as the highest risk country for the seventh year, followed by the Central African Republic (third), South Sudan (fourth), Libya (sixth), DR Congo (eighth), Sudan (ninth) and Nigeria (11th). Verisk Maplecroft’s analysis reveals 2014 witnessed a significant surge in terrorism risks, with total global fatalities increasing by almost 25% to 18,598, compared with a yearly average of 14,951 in the period 2008 to 2013. Mass casualty attacks by Islamist militant groups, such as Boko Haram in Nigeria, have also led to a higher death toll per attack—from 1.43 per attack between 2008 and 2013 to 2.09 in 2014. Maplecroft expects the upward trajectory of terrorism and political violence to continue in 2015. Outside of Nigeria, Maplecroft highlights Egypt and Libya as countries to watch, as terrorist incidents have nearly doubled in the past year. “Poor governance, extreme levels of corruption and civil unrest are among the key challenges facing business operations in the emerging markets in 2015,” stated Charlotte Ingham, Principal Political Risk Analyst at Verisk Maplecroft. “Corruption not only undermines overall governance levels, but also serves as a key source of popular dissatisfaction.” With nearly 70% of countries rated as ‘extreme’ or ‘high risk’ in Verisk Maplecroft’s Corruption Risk Index and 41% in the Civil Unrest Index, widespread discontent is likely to remain a significant feature of the global political risk environment in the short term, it warned. Four of Verisk Maplecroft’s ten highest risk countries—Central African Republic, South Sudan, Libya and Yemen—are increasingly unlikely to see elections take place as scheduled in 2015, which it said highlighted ‘how extreme and persistent levels of political violence and regime instability conspire to prevent the worst performing nations from establishing even basic forms of governance’.

Bribery and corruption are still huge risks for business

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