Nov 29, 2015

Every week, we pick a trending topic and focus on it. This past week, several events brought corruption in Kenya to the forefront:

• The President effectively dropped 6 of his 19 cabinet team, meaning that 30% of the cabinet was dropped on corruption allegations
• The President, his November 23^rd speech entitled, "We have opened a new chapter in the war against corruption declared corruption" a standing threat to our national security”
• The Pope, during his visit to Kenya noted concerns about corruption.

Having encountered corrupt practices, this is a topic that Cytonn is very passionate about.

The United Nations Development Programme (UNDP) defines corruption as “the misuse of public power, office or authority for private benefit through bribery, extortion, influence peddling, nepotism, fraud, speed money or embezzlement”.  Corruption in Kenya has been prevalent since Independence and major graft scandals have gone unsolved since then. According to Transparency International’s Corruption Perception Index, an annual index depicting public administrative corruption levels within a country, Kenya ranks 145th out of 174 countries, a clear indication of the extent to which corruption runs deep. 

Corruption exists in various forms, including petty and grand corruption and according to Transparency International’s report on Corruption in Kenya it is estimated that the average urban Kenyan pays 16 bribes per month. The past 2 regimes have been plagued by major graft scandals namely (i) the Goldenberg Scandal during Moi’s regime which is estimated to have cost Kenya 10% of its GDP and (ii) The Anglo – leasing procurement scandal during Kibaki’s regime.  Embezzlement of public funds, and a system promoting political patronage has also been rampant in the country as evidenced by the recent Devolution Ministry Procurement Scandal. The most affected sectors in Kenya are (i) The Police, (ii) Land services, (iii) Public Administration, (iv) Public Financial Management in budget processes, Public Procurement and Revenue Administration, (v) Judiciary and, (vi) the Private Sector. Recently, President Uhuru has also mentioned that 70% of corruption originates or is instigated by the private sector.

Corruption is an extremely debilitating plague on two fronts. First, it diverts scarce national resources from productive deployment to the benefit of a few. Secondly, it limits economic growth and development by denying opportunities to genuine entrepreneurs while at the same time rewarding tenderprenuers.

According to the Corruption Perception Index 2014, Singapore ranks 7th in the world after decades of fighting corruption. We have picked it as a case study and analyse the steps the government took to battle corruption. The Corrupt Practices Investigation Bureau (CPIB), formed in 1952, is the sole agency responsible for combating corruption in Singapore. It is one of the oldest agencies in the world dedicated to fighting corruption, and its effectiveness in its role has shaped Singapore to what it is today. After independence in 1959, Singapore’s People's Action Party (PAP) government enacted the Prevention of Corruption Act (POCA), which gave the CPIB more powers to fight corruption. As a first step to tackle corruption, the government of Singapore first took initiative to understand the causes of corruption in the country in order to tackle the issue head on. The following were the main causes of corruption in Singapore;

1. Low Salaries – If the official is not to be tempted into corruption, there is a duty on the government to provide benefits that will ensure his loyalty. Singapore noted the disparity in the pay of low ranking civil servants and made reforms to improve their salaries and address this issue
2. Ample opportunities for corruption - Presence of excessive regulations together with increased bureaucratic discretion provided opportunities and incentives for corruption in that regulations governing access to goods and services can be exploited by civil servants extorting from groups vying for access to such goods and services
3. Low risk of detection and punishment – Despite corruption being illegal, individuals found guilty of corrupt offences most of the time go unpunished. Corruption thrived in Singapore as it was perceived by the public to be a low risk, high reward activity as corrupt offenders were unlikely to be detected and punished.

Interestingly, these three main causes of corruption in Singapore then are very much present in today’s Kenya. Kenyan civil service salaries are low, the myriad regulations provide ample opportunities for corruption and the cost of corruption is very low since there are rarely any convictions, especially with mega corruption cases. The only new dynamic that we can add is that ethnicity is also a cause for corruption in Kenya because the corrupt have successfully managed to shield corrupt practices as beneficial to their ethnic groups and have rallied their ethnic groups to protect them.

But back to Singapore…

After identification of the problem areas, Singapore embarked on an anti – corruption strategy that focused on (i) reducing the opportunities for corruption and (ii) reducing incentives for corruption. The strategy revolved around improvement of leadership, policies and administration and the factors that we attribute to the success include;

• Political Will – Political will serves as the main pillar for any reform. Having genuine motives is the key of turning any initiative and reform into a success. For Singapore, the government has matched its words with deeds by mobilizing the public, and the entire civil service to fight corruption. The first order of political will was put in place by the late Lee Kuan Yew when he made it clear that he did not tolerate corruption. In his book, From Third World to First World, Lee says “We had a deep sense of mission to establish a clean and effective government. When we oath of office at the ceremony in the city council chamber in 1959, we all wore white shirts and white slacks to symbolize purity and honesty in our personal behaviors and public life”
• Clear Frameworks on Corruption – Singapore’s war on corruption revolves around the following four pillars of (i) Effective Anti-Corruption Acts (or laws), (ii) Effective Anti-Corruption Agency, (iii) Effective Adjudication (or punishment) and (iv) Efficient Government Administration.
• Effective Administration and Good Governance - Alongside the statutory measures dealing with corrupt offenders, a proactive approach to curb corruption was adopted in the Government

Singapore’s war on corruption has proved to be a success story owing to the Government’s sincere and utter commitment to root out graft as it was consuming the country from within. Its effects is evident as according to the Ease of Doing Business Report 2016, Singapore ranks 1^st and in terms of clean government without corruption, Singapore ranks number 7. This is as a result of effective laws and enforcement that keeps corruption at bay. 

Kenya in its fight against graft has made some strides though not effective to eradicate it. These initiatives include;

• Legal frameworks – There are several laws enacted that provide a legal framework through which corrupt individuals can be prosecuted. The Anti – Corruption and Economic Act 2003, as an example, criminalizes active, passive and attempted corruption, as well as foreign bribery, abuse of office, money laundering, extortion, conflict of interest and bid rigging
• Institutional frameworks – The government has commissioned various institutions to handle oversight of Government operations such as (i) The Ethics and Anti – Corruption Commission (EACC) which was created in 2011 to investigate corruption and economic crimes, (ii) The Kenya National Audit Office (KENAO), whose mandate is to publish audited government reports after they have been presented to parliament, (iii) The Public Complaints Standing Committee which was set up in 2007 to receive all complaints relating to public officials and whose mandate also extends to look into allegations of abuse of office, corruption, breach of integrity and unethical conduct and (iv) The Public Procurement Oversight Authority (PPOA) which is in charge of policy formulation and implementation as well as monitoring and oversight of public procurement to ensure the procurement processes comply with the requirements of the act.

However, in order to succeed, we suggest we borrow two key things from Singapore – setting a clear and unmistakable political will as the foundation for fighting corruption and secondly, on top of the political will foundation, setting clear frameworks to fighting corruption:

1. First is that we need a clear political will to fight corruption. Just like Lee Kuan Yew’s Singapore, the political will has to come from the very top – the head of state. President Kenyatta Kenyatta needs to lay a zero tolerance to corruption. In his November 23^rd speech, "We have opened a new chapter in war against graft" seems to communicate a political will, but more will need to be done. One of the key distractors of war against graft in this country is ethnicity. Where the will to hold accountable corrupt individuals are weakened due to their ability to use their ethnic support as bargain chips. Luckily for President Uhuru, the average Kenyan is very supportive of anti-corruption initiatives that he does not need any particular tribal king, especially the corrupt one, in order gain broad popular support. A clear, fair and broad based campaign against corruption will gain deep and broad based public support. In addition to what will hopefully be a watermark speech, the president needs to strengthen political will in the following several ways
   1. Make fighting corruption the center piece of his remaining term
   2. Have a dedicated high profile office in the presidency focused solely on anti-corruption initiative. Just like he had most the Budget office from treasury to the presidency and just as Lee Kwan Yew moved the lead agency on anti-corruption, Corrupt Practices Investigation Bureau to the office of Prime Minister, President Uhuru needs a high profile Anti-Corruption Czar working from the office of the president. Without giving it much thought, we can’t think of a better person than John Githongo. The person cannot be from the system, they have to be from outside the system and with a track record of confronting corruption.
   3. In addition to an Anti-Corruption Czar, the president needs to have a public reporting mechanism for corrupt practices and have independent sniffing mechanism to identify officials betraying public trust and send names to investigating agencies.
2. Having set a strong foundation of political will, the second step is to set a clear framework to fight corruption. There is no need to reinvent the wheel, the Kenyan Government needs to focus their fight on corruption around the four pillars Singapore did;
   1. Effective Anti–Corruption Acts – The Government on its part has tried to come up with laws governing corruption but it needs to cut across all sectors, public and private. The Anti – Corruption and Economic Act 2003, as an example, which criminalizes active, passive and attempted corruption only covers the public sector but not the private sector.
   2. Effective Anti-Corruption Agency - The Ethics and Anti – Corruption Commission (EACC), which was created in 2011 to investigate corruption and economic crimes, has been inefficient as it has failed to effectively lead to the prosecution of even one person since its inception. Fully noting that EACC is a constitutional body, a fresh start with a completely new agency is one alternative or a reinvention of EACC is another alternative. But the public has lost confidence in EACC and it is important that the anti-corruption agency enjoys public confidence. It would also be helpful give EACC prosecutorial powers. In addition to EACC, we also have the investigative functions under the Director of Criminal Investigation and prosecutions under the Director of Public Prosecution. The President has to take a direct and objective interest and evaluate into the probity and effectiveness of these agencies.
   3. Effective Adjudication (or punishment) – The Judiciary in Kenya, as highlighted before is one of the Government arms that is affected by corruption. According to Freedom House (2012), since 2003, only 51 government officials have been convicted on corruption charges. The judiciary has so far seemed credible and enjoys a higher level of public confidence. The key challenge here remains the amount of time it takes to hear cases.
   4. Efficient Government Administration - An efficient administration is one which values integrity and incorruptibility. The Kenyan administration needs to embrace values of integrity and service. This serves as the final pillar of an effective campaign against corruption. Even if we have tough laws and strong enforcement, but the government is inefficient in addressing public needs, then opportunities will present themselves for corruption to thrive. For example, it is now a commonly known fact that if you need a Kenyan passport and you are willing to wait for the stipulated processing period, you can just apply and wait and your passport comes out. This is a big improvement from a time when passport processing was highly inefficient and unpredictable.
   5. Improved distribution of resources and improvement in economic inclusion

Implementing the above strategy will be a great step but following Singapore’s example, systems, structures and processes do not necessarily provide the path for success. The issue lies with sincerity of purpose, genuine efforts and the overall operating climate. Kenya has the structures, systems and processes in place but unless there exists a genuine will on the leadership’s part to succeed, any anti-corruption programme will remain a passive declaration. It is much more a mindset challenge rather than a question of fixing the system.

As Lee Kuan Yew said, “It is easy to start off with high moral standards, strong convictions, and determination to beat down corruption. But it is difficult to live up to these good intentions unless the leaders are strong and determined enough to deal with all transgressors, and without exceptions.”

Singapore’s GDP per capita in 1960 when Lee Kuan Yew launched the war on corruption was USD 427.9, today it is USD 56,286.8, a 132 times increase. This illustrates the very real benefits of winning the war on corruption.

--------------------------
Disclaimer: The views expressed in this publication, are those of the writers where particulars are not warranted- as the facts may change from time to time. This publication is meant for general information only, and is not a warranty, representation or solicitation for any product that may be on offer. Readers are thereby advised in all circumstances, to seek the advice of an independent financial advisor to advise them of the suitability of any financial product for their investment purposes.