Economic Governance

Sound macro-economic management helped mitigate effects of crisis. Continued efforts needed on transparency,and tackling corruption and illicit financial flows. This requires collective international as well as African action.

Key commitments

Africa: African governments have made commitments in 3 broad areas: macroeconomic policy management, public financial management (including transparency), and tackling corruption. Twenty-one African countries are parties to the Extractive Industries Transparency Initiative (EITI) and countries have recently declared intent to implement their Africa Mining Vision for transparent, equitable exploitation of mineral resources. The AU Convention on Preventing and Combating Corruption (AUCPCC) which entered into force in 2006 covers offences including bribery and money laundering, asset recovery provisions, and corruption in the private sector. The African Peer Review Mechanism (APRM) provides a mechanism for reviewing progress in economic as well as political governance (see also Topic 11, Political governance).

Development Partners: Development partners have made commitments to support African efforts in these areas and to tackle related issues within their own jurisdictions. The latter includes commitments to: (i) promote transparency including through initiatives such as the EITI; (ii) tackle illicit financial flows  and help detect, freeze and repatriate stolen assets; and (iii) tackle corruption including through the UN Convention against Corruption (UNCAC) and the OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions (OECD Anti-Bribery Convention) and the G-20 Anti-Corruption Action Plan on Combating Corruption, Promoting Market Integrity, and Supporting a Clean Business Environment. G-20 countries have agreed to implement whistle-blower protection rules by the end of 2012. The 2011 G-8/Africa Joint Declaration reiterated joint commitments to good financial governance including transparency in revenue collection. Development partners have also made related commitments to promote responsible business conduct (see Private sector), greater tax transparency (see Foreign direct investment and other private financial flows), and greater aid transparency (see Development assistance).

What has been done to deliver on these commitments?

Africa: Many African countries have made significant efforts to develop robust macroeconomic policy. They have instituted reform across the public resource management cycle including the reconstitution of national revenue administrations, modernisation of legal frameworks including in procurement, creation of new structures in the budget preparation process, and strengthening of supreme audit institutions. In some areas, however, progress has been inhibited by a significant transparency deficit exacerbated by poor budgetary implementation and execution, inadequate accountability, deficient political will to adhere to constitutional frameworks, tax and budget management laws, and technical and managerial capacity shortfalls.

By April 2012, 7 African countries had been designated as EITI compliant and 13 were candidate countries. Sixteen African countries have met the minimum requirements of the Kimberley Process Certification Scheme for diamonds. Regional initiatives have been taken to tackle illegal exploitation of and trade in natural resources. Thirty-one countries have ratified the AUCPCC and 43 African countries have ratified the UNCAC. Nine African countries have first year reviews underway.
A number of new anti-corruption mechanisms have been established. The African Union Advisory Board on Corruption (AUABC) is now actively combating corruption on the continent and has developed a five year Regional Anti-Corruption Programmme (2011-2016) with the UN Economic Commission for Africa (UNECA). In January 2011 the African Development Bank launched a joint initiative with the OECD to support business integrity and anti-bribery efforts in Africa. The African Association of Anti-Corruption Authorities was also established in 2011 to strengthen cooperation in detecting, tracing, recovering assets and investigating corruption cases. In February 2012 the High Level Panel on Illicit Financial Flows was launched.

Development partners: Key recent developments include important moves in one major jurisdiction towards the mandatory reporting of payments made to governments by companies operating in the oil, gas and mineral sectors, and discussions on adopting similar requirements in other jurisdictions. An OECD Task Force on Tax Crimes and other crimes has been established to help tackle illicit financial flows. However despite the Stolen Assets Recovery Initiative (StAR) launched by the UN and the World Bank Group to help developing countries recover stolen assets, including the proceeds of corruption, the process for asset recovery remains lengthy and difficult, and  progress is slow and uneven. On bribery: since the OECD Anti-Bribery Convention entered into force in 1999, 290 companies and individuals have faced criminal sanctions for the bribery of foreign public officials in international business deals. 40 individuals have gone to jail and approximately 260 investigations are ongoing in 21 countries – though no separate data is available on how many of these relate to Africa.

What results have been achieved?

Macro-economic policy management: sound domestic macroeconomic policy created the space for African governments to adopt counter-cyclical policies to mitigate the effects of the crisis, and have provided the basis for subsequent recovery;

Public resource management: pockets of the public resource management cycle are performing better on average. But based on the review of about 20 African countries for which historical data on public financial management (PFM) is available, about half show no clear trend while the other half is almost equally split between those showing improvements in the quality of their PFM systems, and those where PFM quality has deteriorated. Most progress has taken place at the de-jure level, through adoption of new laws and regulations, whereas implementation is lacking;
Transparency: African countries lag the rest of the world in terms of transparency in revenue from the oil, gas and mining industry and the budget. The 15 African countries that made up the 2010 Revenue Watch Index report had an average score of 37.6 compared to an average of 51.8 for the 41 countries covered by the report. Of the 27 African countries surveyed for the Open Budget Index (OBI), 18 published either no or scant or minimal budget information and 8 published some budget information. Only one African country published significant or extensive budget information.
Corruption: Every year an estimated US$20 to 40 billion in stolen assets is lost to developing countries through corruption, much of which finds safe haven in international financial centres. Some governments in sub-Saharan Africa have made substantial efforts to curb corruption, but their full impact remains to be felt. Measured through perceptions, progress continues to be slow: Transparency International’s 2011 Corruption Perceptions Index indicates that levels of corruption continue to be seen as higher than in other regions with little if any improvement compared to 2010.
Recovery of stolen assets: Some African countries have recovered stolen assets but difficulties in inter-jurisdictional co-operation mean that the processes involved are often complex and costly. A recent OECD/StAR report shows that between 2006-09 only US$10.9 million was repatriated to Africa. Most large-scale corruption activities continue to be the use of legal entities to conceal ownership and control of corrupt proceeds.

What are the future priority actions?

•Continue to adopt sound macro-economic policies, supported by strong and independent institutions including central banks;
•Improve transparency in public financial management systems;
•Step up efforts to counter bribery and corruption through implementation of the AU Convention.

 Development partners:

•Promote improved transparency of payments made by companies to African governments, in all sectors;
•Step up efforts to stem illicit flows and to help African governments identify and recover stolen assets;
•Step up efforts to tackle bribery and corruption through implementation of the UN Convention and of OECD anti-bribery standards.