Alex T. Magaisa
This is an article describing the ways by which, typically, the state is looted through irregular and corrupt means by those in positions of authority and influence or those connected to them.
Corruption has become endemic in Zimbabwe as a few basic findings from a national survey at the end of 2014 by the research agency, Afrobarometer, demonstrate:
- Over two thirds of Zimbabweans (68%) believed that corruption had increased over the previous year;
- An overwhelming majority (80%) felt that the Government was doing fairly/very badly in the fight against corruption;
- 25% did not report cases of corruption because of fear of negative consequences resulting from reporting;
- A further 20% did not report because they felt nothing would be done by the authorities even if they reported;
- 14% actually thought corruption had become a way of life and saw no reason to report it. Everyone was doing it;
- 9% felt there was no point reporting corruption as the officials where they would report to are also corrupt.
These statistics reveal a grim picture of corruption and hopelessness among the ordinary people of Zimbabwe, who feel powerless in the face of the problem.
But how exactly does this corruption take place? Why has it become so normal to some people? The instruments of corruption range from the very simple to the sophisticated, but actually most of the means are of the elementary type. Corrupt deals are almost always clothed in a veil of legitimacy. They have to look legitimate and oft-times they do look legitimate to an ordinary by-stander. What we attempt to do here is to list a selection of the instruments of corruption and how they are used to loot the state.
As we shall see, looting the state is an entire industry on its own, benefiting mostly the politically well-connected. We refer to this exclusive club that consists of persons within or connected to the state as “rent-seekers” because their main enterprise is to extract rents from others in the conduct of state business. The state and institutions around it present enormous rent-seeking opportunities. In a future article we shall explore ways of minimising the effects of these instruments of corruption, but for the moment our interest is in identifying the instruments. We would be grateful for further input because we know more people out there know more than we do regarding the manner in which the state is looted.
Be a service provider to the state or a state institution
The state and institutions around it require a supply of goods, materials and services in the conduct of their business. Let us take by way of example, the supply of uniforms to the security forces – army, air force, police and prisons. Prisoners need uniforms too. These are huge multi-million dollar contracts running for long periods. Someone has to supply these goods. All you need is to position the right persons to win these contracts and they are guaranteed a constant flow of income. These contracts are not easily won by ordinary people. If they are ordinary people, they are probably paying ‘rents’ in some way to the bosses within The System.
Another example is government vehicles – another multi-million dollar business given that government has a huge fleet of vehicles under CMED. The government is not in the business of buying vehicles so it sub-contracts and someone has to do it on its behalf. The sub-contractor goes and negotiates a deal with foreign suppliers and they earn a handsome fee for their service. They might even use the facility to bring their own fleet duty-free!
Examples are too many. Harare Hospital might be short of bandages or Paracetamol. Someone has to supply these basic goods. Those who are within The System will simply form their own companies which will become suppliers of bandages and Paracetamol to the health institution – all contracts worth thousands of dollars. Just a contract to supply tissue paper to the hospital or the prison will earn someone a lot of money. But they have to pay ‘rent’ to those who award the contract.
These companies which get government contracts are not your ordinary companies. They are usually very well connected to political actors or they pay loyalty fees to the political actors otherwise they can kiss goodbye to any future contracts. Some people might complain that the government does not pay on time. That may be true, but it’s not like a debt owed by a company which can go insolvent. Eventually, government will pay. And if you are a big person, government always prioritises your payment.
Pay inflated fees to a service provider
When the government contract has been awarded to a preferred supplier, the fee for the service will be inflated. If the regular cost of a bandage is a dollar per item, it will simply be doubled. That way the service provider earns double the normal fee. If hiring conference equipment for a state function usually costs $1,000, the supplier will charge $3,500. The inflated fee will be used to pay the various ‘rents’ to rent-seekers who all expect a stake from the contract. This seems to be what was happening at Air Zimbabwe, the national airline, which has led to the jailing of two senior executives.
A new service provider, Navistar was appointed to provide insurance brokerage services to the airline. The amounts paid for the service were grossly inflated and it seems some were never remitted to the insurers leaving the airline badly exposed. It seems the officials simply replaced the long-standing service provider, chose their own cronies and paid grossly inflated fees, prejudicing the company and the taxpayer.
Don’t go to tender – Just call a friend!
If you want to avoid scrutiny of deals, the most obvious way would be to circumvent public procurement procedures prescribed under the law. Why go to tender when you have your own preferred company which will pay rents to you for the favour of the contract? We saw a case last year in which Zinara, the national roads authority ended up with snow-graders in a country with sub-tropical climatic conditions. The contract did not go to tender and a senior official in the public body was reported to have signed both on behalf of Zinara and the service provider – a clear case of conflict of interest. But who cares? Going to tender is regarded as a nuisance, so they just award contracts to their cronies. The snow-graders are lying somewhere in Harare which has not had snow in living memory but someone got awarded a hefty fee for the service.
However, in some cases, there is some pretence of following tender procedures. In this case, the process is no more than a facade to present a false picture that public procurement rules are being followed. The preferred contractor will still win the contract anyway even if they have no capability to perform the contract. That is no bother as they will simply sub-contract to those who can actually do job. This was the case some years ago when Harare International Airport was being constructed. And it happens most of the time. The company that wins does not need to have the capacity at all. It will simply sub-contract, most probably to their fellow competitors in the bidding process. If this is too blatant, they will simply “partner” with a capable foreign company, giving it an “indigenous” element and make sure they win the bid. The foreign company will do the job and the local officials will get their fees.
Pay Bonuses to the Facilitator/Middleman
In negotiating contracts, especially involving foreign companies, there is often a person who claims credit for facilitating the deal. This is the middleman. The middleman will demand a fee, either from the government or from the service provider. We saw recently, in the case involving Brainworks Capital, where it claimed to have been negotiating indigenisation deals between government and mining companies. There was an allegation that Brainworks had demanded a $17 million fee from Zimplats, which the latter refused to pay arguing that if anyone had to pay, it was the government. Brainworks later said all other indigenisation deals did not materialise but if they had, then one can only imagine the magnitude of the ‘fees’ they would have earned for ‘facilitating’ the indigenisation deals. It is important to note that all accept that Brainworks appointment to this role did not go through the tender process.
In another case which involves a Permanent Secretary of Government, Air Zimbabwe was allegedly directed to lease a plane from a South African company without going to tender. An associate of the Permanent Secretary was to be paid a “finder’s fee” of $10,200 per month. The same official is also accused of directing the national airline to pay a $305,000 “success fee” to Navistar, an insurance broker that negotiated payment of an insurance award from a British insurer. These “success fees” and “finders’ fees”, if true are simply examples of extra-legal payments that are made by the state or its institutions and agencies in fulfilment of corrupt relationships.
Go on a trip and get T & S
The most common abuse has to be through travel and subsistence payments on government trips. To be fair, this is a culture across the board – in commercial organisations, non-governmental organisations, etc. It is by no means a problem exclusive to government, although it is worse because they are funded by the taxpayer. Whenever a person travels, whether within or outside the country, they are paid travel and subsistence or T& S, as the payments are usually called. This is paid in cash, before the trip. There is no guarantee that all persons travel in the end. Ideally, one is supposed to account of proper use of the money by presenting receipts upon return but the problem is that receipts are easily created or doctored.
Travel is such a lucrative opportunity that virtually everyone prays that they also get on a trip. This will mean cosying up to the boss, who normally has the power to decide on the travelling party. Oft-times a system of rotation is put in place for junior officials so that they also get to “eat”. The justification is usually that government does not pay well and T& S are therefore an opportunity for compensation. This is why President Mugabe’s numerous trips outside the country are a point of particular interest. Those who travel with him are guaranteed handsome payment and because they are so many, there is probably a rotation system so that no one is left out. All this, of course, looks perfectly legitimate – Government business involves travel and senior officials are usually accompanied by various persons for security and other functional reasons. They all need to be paid.
The problem is that this seemingly legitimate activity is liable to abuse. Since it is such an easy rent-seeking opportunity, unnecessary trips end up being created. All invitations to events are accepted without discrimination. No-one passes an opportunity for travel. The odd thing is that Parirenyatwa Hospital might run out bandages or Paracetamol, but there will always be money for government travel – a clear case of misplaced priorities.
We can see the problem of excessive and unnecessary travel in the recent case which led sacking of the board of POTRAZ, the telecommunications regulator. The Minister cited persistent and unnecessary travel as examples of the abuse of financial resources. The board gave authorisation for some of its members to attend training events outside the country even though they were available locally. On one occasion two board members had sought Cabinet authority to travel to the UK to attend a training course on “How to chair board meetings” at a cost of $24, 000.
On another occasion, two board members wanted to travel to the United Arab Emirates for a similar seminar at a cost of $18,000. One senior official spent 22 days in South Korea, allegedly on a conference and travelled First Class. Another two board members had spent 26 days attending a similar event in Switzerland at a total cost of $44,000. In just nine months the board chairman had received $90,000 in travel allowances alone. All in all the board had in their short tenure spent a quarter of a million dollars on travel alone.
This is a blatant example of board members literally looting the state agency using what appear to be legitimate instruments. This is more than poor corporate governance. The Minister did well to sack them but this is really criminal abuse of office. The new constitution prohibits this type of conduct. What the board members did is in contravention of Chapter 9 of the new constitution. Ideally, they should pay back the money they looted under the guise of T&S.
But what happened at Potraz is probably just a tip of the iceberg. State-owned companies are especially prone to abuse of this nature. If Government is serious about curbing corruption, they should take a serious look at the abuse of T&S at state-owned enterprises and other government institutions.
One of the reasons why T&S is prone to abuse is that cash is paid in advance. Every other place I know, the general rule is that a person uses his own resources and keeps receipts, which he or she uses to claim from the employer. In Zimbabwe, whether it’s government, civil society or commercial entities, the culture is completely different. Payment comes first and you account later. It is a perfect recipe for abuse and I am not surprised the facility is easily abused.
Organise a conference or workshop
Another way of looting the state if you cannot travel is to organise a conference or a workshop. Such an event presents many opportunities. First, a venue must be booked. There are so many venues in Harare and beyond – hotels, lodges, conference centres and competition is stiff. The well-connected will usually earn the right to host a conference or workshop, but they must also demonstrate their gratitude to the bosses who would have chosen them ahead of others. This is the ‘rent’ they have to pay for the award of the contract as hosts. This might explain why the same actors almost always get the contracts to host the same institutions every time.
A conference or workshop somewhere far away, like Victoria Falls, Nyanga or Kariba is even better because the longer the distance, the more the fuel coupons and the bigger the T&S. It means a longer stay away from base and therefore fatter allowances.
One alternative is to pitch a tent and hire a private caterer. Here, a friend who hires out tents, chairs and conference facilities will be awarded a contract. And if the wife or girlfriend runs a catering business, they will probably get the contract to cater for the conference. If it’s necessary to hire vehicles for delegates, the friend who owns a car hire business will probably get it. Runners may be required for the conference, in which case unemployed relatives will get temporary jobs.
It will be necessary to print posters, booklets, brochures, folders, branded pens, pencils, writing pads and other material for the conference. There is a friend’s son who runs a printing business across town, so he will get that contract. He will, of course, be expected to “thank” the big people properly.
You probably need “distinguished experts” to deliver papers, so you call upon the usual friends who have presented at all conferences in the past. They too, will get “a modest honorarium” for their service. Or you might say they received $2,000 when actually they got only a fraction of that sum or nothing at all!
All these service providers will need to be paid and the fees will be quite hefty and often inflated, but who cares? There might be no money to raise wages for the regular employees, but there will be more than enough money in the budget for all these service providers. Of course, all this looks perfectly legitimate and above board, except that in reality it’s all very murky and thoroughly corrupt. The trouble is, as the 14% of Zimbabweans said in the Afrobarometer Survey, all this is regarded as normal. It is what the late Professor Masipula Sithole would have referred to as “normalising the abnormal”.
This is just a selection of the basic means through which the state is looted. Civil society, in its own corrupted space, is no better. There too you will find hyenas, jackals and vultures fighting over the dying beast. Just about all of the means described in relation to the state and its agencies apply in various guises in the civil society zone and also probably in the commercial sector. These things are seen as a normal. The view is that this is what everyone else is doing.
That, regrettably, is the culture at the centre of what is truly a social problem threatening the core values of society. There are very few, if any, clean hands. The entire country needs root-and-branch reform, well beyond the narrow confines of political reform, which is only one part of the solution.
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