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Lesotho: Anti-Corruption Actions
AfricaFocus Bulletin
Nov 12, 2006 (061112)
(Reposted from sources cited below)
Editor's Note
Search the World Bank's website section on anti-corruption
(http://www.worldbank.org/anticorruption) for "Lesotho" and you
will get the following response: Your search - Lesotho - did not
match any documents. No pages were found containing "Lesotho".
But while the World Bank may not be paying attention, the small
Southern African country has taken the lead in attacking
corruption in the Lesotho Highlands Water Project, a giant scheme
financed by the World Bank itself.
This AfricaFocus Bulletin contains several articles about actions
against corruption in this project providing water to South
Africa from the highlands of the Lesotho mountains - an overview
by Hennie Van Vuuren of the Institute for Security Studies in
Cape Town, and press releases from Odious Debts Online and the
International Rivers Network on the World Bank's belated decision
to temporarily bar a German contractor convicted of corruption on
the project.
For additional resources see the websites cited below and
particularly the site of the Transformation Resource Centre (TRC)
in Lesotho, which has mobilized civil society and provided
extensive documentation on the project and its flaws. Most
recently, the TRC has published a report entitled "On the Wrong
Side of Development: Learning from the Lesotho Highlands Water
Project (download this and see other resources at
http://www.trc.org.ls/water.htm)..
++++++++++++++++++++++end editor's note+++++++++++++++++++++++
Time to listen to Lesotho! - The World Bank and its new
anti-corruption agenda
Comment by Hennie Van Vuuren
11th September 2006
[Hennie van Vuuren is the head of the corruption and governance
programme at the Institute for Security Studies in Cape Town,
South Africa.
To view a detailed case study on the Lesotho Highlands corruption
and bribery trials visit the ISS Internet Portal on Corruption
(http://www.ipocafrica.org).]
Lesotho, the tiny Southern African mountain kingdom, punches
above its weight. This is not reflected in a bossy attitude,
rather is has done what is seldom 'expected' of relatively weak
African states - it has tackled corruption in the multi-billion
rand Lesotho Highlands Water Scheme head on, by prosecuting both
corrupt officials and bribe paying corporations. It has in short
proved afro-pessimists wrong, while dealing a knock-out blow to
those who argue that it's 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 biggest construction project when unveiled twenty
years ago and was designed to pipe water hundreds of kilometres
away to apartheid South Africa's thirsty industrial heartland
centred on Johannesburg. In turn, the otherwise resource
impoverished Basotho people were, amongst other things, promised
the benefit of electrification and monetary compensation.
To finance the project the corrupt South African regime needed
access to capital that was no longer readily available as a
result of international sanctions against apartheid. The World
Bank came to the rescue and effectively helped launder the
financing to Pretoria through the project's financial advisers
based in London. The deal, argued by some to be on the borderline
of illegality, set the tone for what was to come once contracts
were awarded to construction companies. By the start of this
decade over a dozen international construction companies had been
charged of bribing a senior Lesotho official and a number have
since been found guilty in the Lesotho courts in landmark
judgements 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 to the Lesotho dam project
- was charged with corruption proving again that the political
will exists to tackle graft without exception.
The response from World Bank has consistently erred toward
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 fit the multi-million dollar legal bill. Equally the
bank was slow in applying its policy to exclude corrupt companies
from future World Bank contracts, eventually debarring the
Canadian multinational Acres in March 2004 for three years. This
came over thirty months after an internal 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 the Lesotho case is but one World
Bank project dogged by corruption in Africa, the announcement
that the Bank is now seeking comment on its proposed new
anti-corruption strategy are timorous. Two areas in the draft
strategy, Strengthening bank group engagement on governance and
anti-corruption that need more attention are precisely around
prosecution and debarment.
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 clear
that such support needs to be disbursed rapidly and in the form
of both money and where necessary technical assistance to
investigate and prosecute corruption in Bank related projects.
This must also focus on prosecution of both corrupt officials and
contractors, regardless of the political influence they have in
their own home countries.
On debarment, the document is also not specific and rather
focuses on the need for uniformity amongst development agencies
in recognising each other's sanctions rules. This is important
because despite agreements between the European Bank for
Reconstruction and Development (EBRD) and the World Bank - the
EBRD has not debarred any companies including the Canadian Acres
according to a comment made at an April 2006 Commonwealth
corruption conference in London by a senior EBRD official. If
international finance institutions don't co-ordinate sanctions
impunity will continue to prevail. In addition the policy has to
be clear on a number of other issues such as the need for
fast-tracking the inclusion of corrupt corporations and
individuals on to the debarment list, issuing penalties that hurt
a corporation's bottom line and recognising the decisions taken
by national courts. The Lesotho case proves that the practice of
second-guessing the African bench by painting it with the uniform
brush of 'corrupt' is at the very least discriminatory.
The World Bank, and the home countries of the corporations
implicated in corruption in the Lesotho Highlands Water Scheme,
have many reasons to be shame-faced for the lack of support that
Lesotho has been shown in its tenacious efforts to tackle
corruption. At the very least the epitaph on the corruption and
bribery trials needs to read that the conduct of international
finance institutions and corporations in Lesotho must not be
allowed to be repeated over and again elsewhere. It is time the
world listens to Lesotho!
German firm barred by World Bank for bribery in Lesotho project;
ban should have come sooner, says analyst
Odious Debts Online
Special Edition, November 7, 2006
[Odious Debts Online (http://www.odiousdebts.org) is produced by
Probe International, a non-profit organization based in Toronto,
Canada.]
The World Bank has suspended contracts to the German engineering
firm, Lahmeyer International, after finding the company guilty of
paying bribes in the multi-billion dollar Lesotho Highlands Water
Project (LHWP).
The World Bank's sanctions committee found that Lahmeyer had
engaged in corrupt activities by bribing the Lesotho Highlands
Development Authority's chief executive, Mr Masupha Sole, the
government official responsible for contract award and
implementation under the LHWP, in violation of the Bank's
procurement guidelines.
But the decision to debar Lahmeyer for bribery - a crime for
which it was indicted in 1999, and convicted and affirmed on
appeal in 2004 - has been too long in coming, said Patricia Adams
of the Canadian-based foreign aid watchdog, Probe International.
"It sends the wrong signal to other corporate bribers," said Ms
Adams. "In those seven years since the original indictment,
Lahmeyer was able to carry on business as usual. Rather, the Bank
should have taken swift action and suspended the company's right
to do business with the Bank when they were originally indicted -
as is allowed for under the U.S. Foreign Corrupt Practices Act -
pending a decision by the Lesotho courts."
Declaring the Bank's support for Lesotho's lead in holding
corporate bribers to account, World Bank President Paul Wolfowitz
said:
"The Government of Lesotho has shown courage and leadership in
successfully prosecuting its own officials and several large
foreign companies for corruption. Institutions like the World
Bank, and the governments of rich countries, should support the
bold stance of poor countries like Lesotho which are working to
make sure that precious public resources go to help the poor, for
whom they are intended."
In its statement announcing the debarment, however, the World
Bank said the period of Lahmeyer's ineligibility to bid on
Bank-financed contracts could be reduced by four years if the
company introduced a "satisfactory corporate compliance and
ethics program" and disclosed any other past misconduct,
presumably under the Bank's new Voluntary Disclosure Program (or
VDP).
Despite the Bank's outward appearance of support for Lesotho's
actions, the protection offered by Bank programs like the VDP are
ultimately "bad for developing country citizens and taxpayers,
and the rule of law," said Ms Adams.
"The VDP program allows 'confessors' confidentiality and thus
allows the Bank to cover-up its own negligence or complicity,
which undermines the administration of justice in countries where
it is a criminal offense to bribe a foreign official," she said -
the same stance the Bank is publicly congratulating Lesotho for.
In addition to debarment from World Bank contracts, Lahmeyer was
fined $10 million rand ($1.63 million) in 2003 after being found
guilty of bribing Masupha Sole in relation to the Lesotho
project, touted as southern Africa's largest water scheme
undertaking to date.
Three other companies previously charged by the Lesotho courts
for paying bribes to win contracts for the Lesotho Highlands
Water Project are Impregilo, an Italian construction company, and
engineering firms Acres International, based in Canada, and the
French company, Spie Batignolles.
The official World Bank statement regarding Lahmeyer's debarment
is available on the Odious Debt website
(http://www.odiousdebts.org)
Corrupt Lahmeyer Debarment Welcome but Late -- NGOs
Press Release
November 7, 2006
International Rivers Network
http://www.irn.org
Contacts
Environmental campaigners welcomed yesterday's decision by the
World Bank to debar German-based Lahmeyer International for
bribing officials to win contracts for Africa's largest
inter-basin water transfer scheme, the Lesotho Highlands Water
Project (LHWP).
Korinna Horta of Environmental Defense said: "We welcome the
World Bank's decision to suspend Lahmeyer International from
doing business with the Bank for a period of seven years. This
decision represents an important departure from just talking
about corruption to taking serious action. It sends an important
signal to international companies that bribery of foreign
officials carries considerable risk."
However, the Bank's decision comes three years after the Lesotho
court found Lahmeyer guilty of corruption, during which time
Lahmeyer received at least 18 Bank contracts totaling nearly US
$15 million. Four contracts worth a combined US $1.4 million were
granted since the Bank reopened its debarment investigation of
Lahmeyer in August 2005.
Terri Hathaway of International Rivers Network said: "Although we
welcome this decision, the World Bank's sluggish response has
only been to Lahmeyer's advantage. Future action must come more
swiftly. The Bank can not be serious about fighting corruption if
it chases criminal companies, but gives them a generous lead
time."
Environmental Defense and International Rivers Network call on
the World Bank to ensure that future court convictions for
corruption occurring under World Bank contracts carry immediate
debarment and for the Bank to work with other multilateral
development banks and bilateral aid agencies to obtain
cross-debarment of guilty contractors.
Besides serious allegations of corruption, the LHWP has caused
the vulnerable Highlands population to lose fields, grazing lands
and access to fresh water sources. Despite promises, their
livelihoods have not been reestablished, and poor people have
been pushed closer to the edge in their struggle for survival.
Problems of erosion and the downstream effects of massive water
diversion are disrupting ecosystems and people's livelihoods.
Mabusetsa Lenka Thamae of the Transformation Resource Centre in
Lesotho said: "Corruption on large infrastructure projects is a
serious problem that directly affects project benefits,
especially for project-affected people. Corruption is a two-way
street, and companies that bribe must be brought to justice just
like project officials who have accepted bribes."
"In addition to corruption, the Lesotho Highlands Water Project
has been marred by environmental problems and impoverishment of
the affected communities. The World Bank should not close its
books on the project as long as these serious problems remain to
be solved," said Horta.
Background
Lahmeyer International was part of the consortium which carried
out the 1986 feasibility study for the LHWP. The Project's first
phase is complete, including the Katse Dam, the Muela Dam, 82 km
of water tunnels, and 200 km of access roads at an estimated
total cost of US$2.5 billion. If completed, the entire scheme
would divert about 40% of the water in the Senqu river basin to
South Africa's industrial Gauteng region.
In 2002, the Lesotho courts handed down its first corruption
conviction, to Acres International of Canada. The World Bank
delayed its decision to debar Acres for more than two years after
the conviction, allowing the company to receive at least four
Bank contracts, including just one week prior to debarment. Acres
was debarred from receiving Bank contracts for a period of three
years.
The World Bank decision makes Lahmeyer ineligible to receive Bank
contracts for a period of seven years, although this may be
reduced to only three years should Lahmeyer meet the Bank's
criteria.
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues,
with a particular focus on U.S. and international policies.
AfricaFocus Bulletin is edited by William Minter.
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