U.S. President Barack Obama addressed the 54 member states of the African Union on Tuesday in the Ethiopian capital of Addis Ababa. He is the first U.S. leader to visit the pan-African government.
During his speech, Obama reprimanded the continent's leaders for their corrupt policies and frequent refusal to obey their own constitutions.
"Nobody should be president for life," he said.
He also claimed that personal excess and graft were "draining billions of dollars" from the African economy, reducing funds available for developmental and infrastructural projects.
A Real Problem
Africa, unfortunately, plays host to a plethora of social, economic and political problems, not the least of which is the rampant corruption that plagues many of the continent's governments.
While Africa includes only about a quarter of the world's countries, it is home to fully half of the 30 most corrupt governments, according to Transparency International. There are no African countries listed among the 30 least corrupt administrations.
Greed and irresponsibility often penetrate every level of government. Sub-Saharan villagers, many of whom live on less than $2 a day, are forced to choose between buying food and paying bribes to receive treatment at overcrowded clinics.
On a national level, governmental marketing boards from Ghana to Nigeria establish monopsonies on valuable cash crops. The officials who run these institutions often push down the prices paid to private farmers for their efforts and export the goods at substantial premiums, splitting the difference among themselves.
And even in the continent's nominal democracies, elections often aren't fair games. A United Nations investigation concluded Monday that Burundi's presidential race, which reelected Pierre Nkurunziza for an unconstitutional third term, was not "inclusive, free, and credible."
The Cost
In 2002, the African Union estimated that corruption cost its member nations' economies $150 billion each year and drained about a quarter of their collective GDP. Given that the number of democracies in the continent has declined over the past decade, it is likely that that figure is even larger today. By contrast, international aid to African countries totaled only $22.5 billion in 2008.
With foreign aid having been largely unsuccessful in fueling the region's weak economy – the World Bank admitted that 75 percent of its agricultural projects in Africa are failures – many suggest that reducing corruption could be one of the most promising routes toward sustainable development.
An analysis by the Center for Strategic and International Studies concluded that "removing corruption eliminates a pernicious tax on business, and frees up resources for constructive investments." Additionally, a trustworthy government helps build the confidence of foreign investors as well as domestic support for "tough but constructive" policy measures.
The Control Risks Group believes that corruption constitutes the largest risk factor that Western companies face while doing business in Africa. According to the Center for Strategic and International Studies, the cost of conducting business operations can be amplified by 10 percent because of corruption, while the cost of public contracts with corrupt governments is 25 percent higher than average.
In addition to hurting African companies, corruption also damages the public sector. According to the Organization for Economic Cooperation and Development, irresponsible officials often misallocate public resources. Money is funneled into large infrastructure and military projects – which offer large kickbacks, at the expense of sectors such as healthcare and education – which promote better quality of life and upward mobility for citizens. Additionally, public contracts are awarded to the highest bribers instead of the most qualified companies.
The human costs of corruption, especially for society's poorest, have been well documented. Infant mortality is twice as high in corrupt countries as in non-corrupt ones; child mortality is three times as high; high school dropout rates are five times as high.
The IMF has argued that corruption exacerbates income inequality as well by hindering overall growth, creating biased tax systems, leading to poorly targeted social programs and allowing for a small group of aristocrats to mold public policy in their favor. And income inequality, of course, hurts overall economic growth.
Obama realized, during his caustic critique of African political corruption, that irresponsible leadership costs the region hundreds of billions of dollars each year. Although the continent is host to many of the world's fastest growing economies, Africa will be hard-pressed to near its full potential unless politics becomes a cleaner business.
Image Credit: Public Domain© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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