Peter Schorsch
It is always sad to see corruption stand in the way of economic development, but it is truly heartbreaking when it occurs in the poorest regions of the world.
All too often, the countries that are most in need of aid, investment, and development are they very same countries whose corrupt governments squander their nations’ futures on sweetheart projects with bloated budgets and rampant allegations of graft and misuse of funds.
It also is unfortunately common to see our tax dollars, in the form of USAID grants and loans – like the Millennium Challenge Corporation – and other foreign aid, going towards these state-managed shakedowns.
The final dark irony is that sometimes not only do these nations’ citizens, and we, the US taxpayers, lose out to these corrupt kleptocracies, but sometimes, so do American companies; ethical U.S. businesses and the people they employ are harmed when they can’t fairly compete with foreign companies that are less scrupulous in their foreign business dealings.
One recent example that immediately comes to mind is the Zimbabwe Electricity Distribution Company’s tender for the development of a new 200-megawatt project. Despite Jacksonville, Florida-based, APR Energy Holdings initially winning the tender based on the project price and its ability to meet all technical requirements, the tender approval was quickly revoked.
After intervention from President Robert Mugabe’s (yes, THAT President Mugabe) office, the tender was re-awarded to a less established company, Sakunda. It just so happens that one of Mugabe’s in-laws has a financial stake in Sakunda. This shady deal will result in higher energy costs in a country that is already dealing with crippling debt and budget deficits.
Are we about to see the same thing happen in small, African nation of Benin? We’ll know soon what the answer is.
The same Florida-based APR Energy recently submitted a $35 million bid to build a 120MW power station for much-needed electricity generation in Benin. Apparently, APR had the lowest price by roughly $12 million – some 30% less than the next lowest bidder. Don’t be surprised, however, if the European firm Aggreko or another “connected” firm in the region ultimately “wins” the project, at a significantly higher cost.
Who benefits when countries like Zimbabwe, Benin, or other poor African nations choose to overpay for infrastructure development? It’s surely not the poorest citizens; they will pay extra for the electricity needed to run small businesses and light their homes; or suffer regular power blackouts and brownouts in their communities. The people who need this power the most will pay the highest price for shady government dealings.
Benin’s pending choice could have much bigger consequences for U.S. foreign policy and investment. If Benin decides to forgo transparency and competition, similar internationally financed development projects could suffer when foreign investment is greatly reduced or even cut-off.
While the Mugabe dictatorship in Zimbabwe has made that country an international pariah, Benin is a country with significant potential for growth and development, and an acute need for international assistance to do so.
The U.S. government-backed Millennium Challenge Corporation has pledged to invest $375 million in developing Benin’s energy production sector. Will the US government continue with this commitment if it becomes clear that the Benin government will choose higher-priced and less-qualified companies to execute projects?
Zimbabwe and Benin are but small examples of the broader costs of pervasive corruption in the developing world; it ultimately is the citizens of these nations who bear the brunt of those costs.
The U.S. has an obligation to take corruption into account when administering foreign policy and aid – particularly in struggling nations. And Benin should lead by example, rather than follow in the footsteps of the kleptocrat dictator, Robert Mugabe.
