Chipping Away At Business Corruption In Africa: Things May Be Getting Better

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Written by Dana Sanchez

Anti-corruption legislation is improving the business environment globally, making it easier for good companies to operate in high-risk markets, according to results of a survey by Control Risks, a U.K-based global business risk consultancy.

In an annual survey of business attitudes to corruption, 824 companies were polled worldwide, CPIFinancial reports.

There’s growing awareness of the corruption problem, and the importance of managing it, in Africa, Lexology reports. This reflects in part the impact of anti-corruption laws outside Africa — particularly the U.S. Foreign Corrupt Practices Act and other pieces of legislation around the world that have similarly sought to tighten rules to prevent corruption.

Business corruption is still a major cost with an average of 34 percent of survey respondents from Africa reporting that they lost out on deals to corrupt competitors, according to CPIFinancial.

Perceived risks of corruption continue to deter investors with 30 percent of global survey respondents saying they have decided not to conduct business in specific countries.

And corruption is killing deals with 55 percent of African respondents and 41 percent of global respondents reporting that the risk of corruption is the No. 1 reason they pulled out of a deal on which they had already spent time and money.

But globally, the picture is improving, according to the survey, CPIFinancial reports. Companies from countries with tight enforcement report fewer losses from corrupt competitors in 2015 than in 2006. In 2015, 24 percent of U.S. companies said they had lost out to corrupt competitors, compared with 44 percent in 2006. These figures are echoed in the U.K. and Germany. International anti-corruption laws “improve the business environment for everyone,” 81 percent of respondents said.

Companies are now more willing to challenge suspected corruption, the survey results show. If they feel they lost out due to corruption, 39 percent of companies globally said they would complain to the company awarding the contract, compared to 8 percent of respondents in 2006. In South Africa, this was especially true at 70 percent. In 2006, 6.5 percent of respondents said they would appeal to law-enforcement authorities, compared with 19 percent of global respondents in 2015 and 60 percent in South Africa. In 2015, 24 percent of respondents said they’d try to gather evidence for legal action, according to CPIFinancial.

Despite positive developments, the Control Risks survey suggests companies still need to do more.

“Too many businesses are still losing out on good opportunities to corrupt competitors, or choosing not to take a risk on an investment or entering a new market in the first place for fear of encountering corrupt practices,” said Daniel Heal, a director at Control Risks for East Africa.

“Companies need to find a balance and do more due diligence early on in any negotiation or market entry planning, to spot the points of light in countries that may otherwise appear as no-go areas,” Heal said.

The survey reflects the impact of globalization, according to Lexology. Businesses in South Africa and Nigeria are being influenced in their practices by counterparts in environments where corruption is less of a challenge or more routinely checked. The findings are striking because they demonstrate the extent to which company culture has evolved, even in the absence of changes to corruption environments where the companies operate, Control Risks reported.