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Posted by on Feb 10, 2011 in Economy, International, Places | 0 comments

Corruption Kills – Especially in Sub-Saharan Africa

Guest post by Aaron Scheinberg

In a region where over 70 percent of citizens still depend on subsistence farming to survive, and where the number of people living on less than a dollar a day has increased fifty percent over the last 15 years, any barrier to growth in farming and agro-business can literally kill millions. And who is to blame for strengthening this hideous poverty trap? Certainly, some blame lies with the African governments and international donors, but one of the most corrosive agents operating in Africa today is China. President Obama must take advantage of Chinese President Hu Jintao’s recent visit to the U.S. to press China on its enabling of corruption in Africa.

This summer, as part of my internship for the Harvard Kennedy School International Development Program, I had the opportunity to work in East Africa. I joined a social for-profit company called Anza Technologies that sells low-cost, “poverty alleviating” products to rural subsistence farmers. Our business model relies on the fact that we can make our products out of recycled materials and sell them for a very low price. Every cent matters when it comes to these farmers, yet we’re constantly struggling with the high costs of distribution. The culprit – other than poor roads and railway systems – is corruption.

In fact, bribery along the supply chains in Tanzania accounts for 10-33 percent of the total cost of transportation and distribution. Along the major road from Dar-es-Salaam to Iringa, an average truck is stopped between 10 to 15 times by police and traffic cops. Foreign businesses must decide whether to “grease the wheels” and pay off these police or take a long-term outlook and refuse to engage in bribery. But of course, not only do these businesses pay the bribes, they account for bribery as a “cost of doing business” in Africa.

While American companies may not be immune to such bribery, it’s the BRIC countries, most notably China, that are most likely to engage. Transparency International’s Bribe Paying Index reveals that China is one of the largest suppliers of bribery around the world (second only to Russia), particularly in Africa. With all of the rhetoric surrounding China’s desire to invest in Africa, leaders should beware of the cost that comes with such investment.

Consumers in sub-Saharan Africa also need to beware of China’s so-called “investments.” This summer I witnessed first-hand the huge influx of fake and sub-standard consumer products from China into the local village and city markets. Chinese businessmen trying to make a quick yuan dumped millions of dangerous consumer and electronic goods onto unknowing consumers and unregulated markets.

For some poor farmers, these products were just an inconvenience, breaking down long before they should have. For others, the goods were a real health hazard, made with harmful materials and wires that were prone to starting fires. By pushing prices so low and subsequently de-legitimizing entire industries, these businessmen squeezed honest dealers out of the market. The situation has gotten so bad that last week the Tanzanian government issued a 30-day ultimatum for Chinese businessmen to leave the Kariakoo market entirely, one of the largest markets around Dar-es-Salaam.

The culture of corruption and its acceptance by the Chinese starts at the top. It’s no wonder that Chinese businesses in Africa are so comfortable with unethical actions when Hu Jintao’s own son was involved in a corruption scandal in Namibia in 2009. Therefore, targeting China’s leadership is essential to solving this crisis. President Obama needs to use the Chinese president’s recent visit as an opportunity to pressure China to act more responsibly around the world, particularly in Africa.

Instead of furthering the suffering of the African people, foreign businesses should team up together to form an ideological-economic union that will fight bribery. If the thousands of businesses in Africa jointly decide to refuse to pay bribes along the supply chains, pressure will mount against the police and companies engaging in bribery.

And African citizens must demand products that come from “corruption-free” companies. Any “prisoner’s dilemma”-type risk in this union could be ameliorated through education in the long-term costs of corruption. The end of bribery and corruption is good for business and is good for the African people.

In his upcoming book The New Harvest: Agriculture Innovation in Africa, Harvard Kennedy School Professor Calestous Juma shows that Africa could make the transition from a hungry importer to self-sufficiency in a single generation. Africa could feed itself in our lifetime. The first step, the step we can take today, is to reduce the debilitating corruption propelled by the Chinese. It’s clear that business as usual is not working. We must change our strategy now to prevent millions from starving in the future.

Mr. Scheinberg, a Truman National Security fellow, is a graduate of the United States Military Academy at West Point and served in the Army for five years. He was an infantry and tank platoon leader in Iraq from 2005-07 and was awarded the Bronze Star for combat service in the “Triangle of Death” before becoming a Civil Affairs Officer in the Babel Province of Iraq. Upon leaving the military, he enrolled in a dual degree program at the Harvard Kennedy School of Government (MPA/ID) and Columbia Business School (MBA). He spent this past year working in international development and fighting corruption in Tanzania.