Earlier today, one of my business development guys (let's call him JM) went to follow up on a quote he dropped off a couple days ago to be signed by the number 2 executive at a large company. JM had met with this executive a couple times and the executive had introduced him to the IT manager for follow up. JM and his direct supervisor met with this IT manager a number of times, including as recently as two weeks ago.
Today, the executive requested that the proposal which had been given to the IT Manager months before be attached to the quote so that he could approve it. The IT Manager was called and, forgetting that it was this same executive who had introduced him to JM, he claimed never to have met JM, never to have received any proposal, and basically, he had never heard of our company. The executive asked the IT Manager to go look for the proposal. JM waited, and waited for over an hour before deciding to come back to the office to get another copy.
In another context, one might interpret this incident as perhaps a personal problem the IT Manager might have with JM. But in the context of this country, we understand exactly what the problem is. The IT Manager gets his products/services from companies who give him a percentage of the deal. He is in fact known for that. If you don't play the game, he punishes you.
The case of this IT manager is not unique. We experience private sector corruption on almost all the deals that we are faced with. There is an expectation that you have to increase the amount of the invoice between 10 and 50%, sometimes more, and give the extra to the decision maker. They call it "surfacturation" or overbilling in English. Sometimes part will go to to the decision maker and he will split with others along the line like the accountant who will hold up payment if he does not get his share.
We have made a conscious choice not to go that route but it has come at a cost that we never expected would be so high. In one case, a manager at a company for which we had already signed a contract threatened us with making our life "hell" if we did not "thank him" for his committee vote in our favor. We did not comply. He followed through with his threat. Certain purchases for which we already had written orders were passed to competitors. Certain of our invoices approved for payment ended up torn and in the trash. And so on and so on.
Trying to go through the top is not a workable option either. You might be close the owner or General Manager and he might like your proposal. However, if he is not an IT expert (which most are not), he will ask for the opinion of others in the company. If these people decide that they want to block you because they don't have a personal interest in the deal, they will make up all sorts of excuses to prove to the boss that your proposal is not a good one or otherwise badmouth your product or company.
Sometimes, the person at the top is worse than those working for him. We have been asked a number of times what "envelope" was planned for the General Manager. Even expatriate managers play the game. It does not take them long in this country to discover how to increase their income exponentially.
A couple weeks ago, about two dozen private sector companies in this country signed an Ethics charter. Nice initiative but the companies read like a Whose Who of the most corrupt private sector companies in the country! The specific examples I listed in this blog were in companies which signed the Charter.
When I came back to this country to do business, I specifically avoided government clients because I expected to face corruption and it was important to me not to do business that way. I wanted to prove that ethical business practices could also lead to success. I was laughed at more times than I can recall.
The shock came not from the expected public sector corruption but from the corruption in the private sector, including – especially - multinationals. After a while, you begin to wonder if you are the one who is wrong. Educated and successful business people will justify their corrupt practices in saying that it is a win/win. The client gets the product; you get the contract and get paid; because you increased your price by the amount of the "commission" to the decision makers so you don't lose any money; the decision makers are happy, you are happy, the company is happy. I have had a number of arguments with friends and sometimes staff who feel that my intransigent style is hurting our ability to do business. They are right in the short term anyway but I just won't bend.
One of my parent's friends told me when I arrived that "honesty is a luxury." I did not really understand what she meant at the time. Today, I understand. Is it selfish to pass up contracts for ethical reasons while employee salaries are late? Can you operate in a vacuum avoiding accepted business practices?
Those are not easy questions to answer when you can't meet your obligations and you begin to wonder if it is worth it. Many of my friends who decided not to bend went back to the US. Others decided to stay and play the game. A few are like me, stubbornly idealistic and believe that in the long run, honesty will pay off. I sure hope we are right...
November 8, 2006
Lessons for Africa on the US Elections
People can celebrate or grieve over yesterday's mid-term elections in the US depending on their political leanings. Continental Africans tend to favor the Democrats over the Republicans. The reasons for this preference are generally linked to Africans' feelings about US foreign policy in the Middle East and elsewhere in the world and really do not reflect US policy in Africa which does not change significantly from one administration to the next.
But what does the election mean for Africa with the Democrats in power? The African American politician with the closest link to Africa, Barack Obama, a Democrat who was not up for re-election, has been rather outspoken against African dictators and corruption and perhaps he rings in a new era for relations between African American politicians and African. This is a notable change from the past when our African American brothers and sisters in the US Congress enjoyed canoodling with African dictators. We saw this with Jesse Jackson, Carol Mosley Brown, and more recently with William Jefferson.
The message that the Louisiana electorate sends to us here in Africa, after re-electing Rep. Jefferson who was found with $90,000 in cash in his freezer is a dismal one. Our African leaders will point to this example and say "see, even in America..."
But there is very positive lesson for Africa that comes out of the mid-term election. The US has been under one party rule for the last six years with both houses of Congress under Republican control for 12 years. The US electorate, in its vote, protested against this one party state. They want a balance of power and the checks and balances that come with it. The message is loud and clear.
Some countries in Africa, including the one I am in, have been in a virtual one party state for decades. Even those who have "free" elections are controlled by a single party. This is never good for democracy as we have seen in the US with the increase of corruption scandals and the general arrogance of the Republicans and the Bush administration.
The difference is that in Africa, one party control also means that the State itself is used to campaign. Public servants, government funds and often, state-owned corporations are used as campaign assets for the party in power. During elections, public servants are given paid time off to campaign for the party in power and often even receive Per Diems and travel expenses at taxpayer expense; state owned corporations are forced to pay out substantial sums of money to support the party in power's campaign. This makes it virtually impossible for any opposition party to make any significant inroads in elected office and there are therefore no checks and balances.
We hope that the new Congress will remember how it came to power and help our governments in Africa do away with the one party state mentality and understand the importance of checks and balances. We also hope that the new Congress is made of of more Barack Obamas than of William Jeffersons...
This is probably where I need to add a disclaimer: While in the US, I voted Republican in almost every race except for one election for the US. House of Representatives. I stayed up all night yesterday to watch the election returns. I am kind of dissapointed about a couple of races but I think this is a good thing for democracy.
But what does the election mean for Africa with the Democrats in power? The African American politician with the closest link to Africa, Barack Obama, a Democrat who was not up for re-election, has been rather outspoken against African dictators and corruption and perhaps he rings in a new era for relations between African American politicians and African. This is a notable change from the past when our African American brothers and sisters in the US Congress enjoyed canoodling with African dictators. We saw this with Jesse Jackson, Carol Mosley Brown, and more recently with William Jefferson.
The message that the Louisiana electorate sends to us here in Africa, after re-electing Rep. Jefferson who was found with $90,000 in cash in his freezer is a dismal one. Our African leaders will point to this example and say "see, even in America..."
But there is very positive lesson for Africa that comes out of the mid-term election. The US has been under one party rule for the last six years with both houses of Congress under Republican control for 12 years. The US electorate, in its vote, protested against this one party state. They want a balance of power and the checks and balances that come with it. The message is loud and clear.
Some countries in Africa, including the one I am in, have been in a virtual one party state for decades. Even those who have "free" elections are controlled by a single party. This is never good for democracy as we have seen in the US with the increase of corruption scandals and the general arrogance of the Republicans and the Bush administration.
The difference is that in Africa, one party control also means that the State itself is used to campaign. Public servants, government funds and often, state-owned corporations are used as campaign assets for the party in power. During elections, public servants are given paid time off to campaign for the party in power and often even receive Per Diems and travel expenses at taxpayer expense; state owned corporations are forced to pay out substantial sums of money to support the party in power's campaign. This makes it virtually impossible for any opposition party to make any significant inroads in elected office and there are therefore no checks and balances.
We hope that the new Congress will remember how it came to power and help our governments in Africa do away with the one party state mentality and understand the importance of checks and balances. We also hope that the new Congress is made of of more Barack Obamas than of William Jeffersons...
This is probably where I need to add a disclaimer: While in the US, I voted Republican in almost every race except for one election for the US. House of Representatives. I stayed up all night yesterday to watch the election returns. I am kind of dissapointed about a couple of races but I think this is a good thing for democracy.
November 6, 2006
Transparency Corruption Report - Improvement for Africa
Transparency has just released its 2006 corruption index. Based on the report, the bottom 20 are not all African countries. In fact, only two African countries make up the worse five and we make up less than half of the worse 20.
It may not seem like much but this is a significant improvement over previous years where the bottom 20 were almost all African.
I guess I should be happy but somehow I am not. Our politicians will brandish the reports to show how they are making progress and we will fill up the bottom 20 next year. And I cannot imagine how things are getting better given that I can't see how things can get any worse. I am confronted with corruption daily. There are few situations where corruption IS NOT an issue. How does it possibly get worse than this? I am almost afraid to find out.
Well congrats to the few African countries that made it to the top 50 like Mauritius and Botswana. Other countries should take note that these two show up in the top economic success stories in Africa too.
It may not seem like much but this is a significant improvement over previous years where the bottom 20 were almost all African.
I guess I should be happy but somehow I am not. Our politicians will brandish the reports to show how they are making progress and we will fill up the bottom 20 next year. And I cannot imagine how things are getting better given that I can't see how things can get any worse. I am confronted with corruption daily. There are few situations where corruption IS NOT an issue. How does it possibly get worse than this? I am almost afraid to find out.
Well congrats to the few African countries that made it to the top 50 like Mauritius and Botswana. Other countries should take note that these two show up in the top economic success stories in Africa too.
An American subsidiary has no rights -- How corruption leads to absurdity
When we registered our company in this country in 2002, we registered as a wholly owned subsidiary of the US based company. We took this decision for purely management reasons as we wanted to maintain control over the subsidiary.
A couple of years ago, the subsidiary had to take a large client, one of Africa's largest companies, to court after they would not pay their bills. After a year, many many court hearings, and lots of adventures I will eventually post about, we finally won a multi-million dollar judgment. Yea, we thought, finally! Our celebration was short lived. This client had better understood the legal environment than we had. Getting a judgment is one thing, enforcing it is a whole other.
The defendant filed multiple procedures to prevent us from collecting on the judgment. Their argument? Our company is a registered subsidiary of an American company and therefore we lack the judicial identity permitting us to appear in this country's courts.
What?! You can sign a contract with this subsidiary; use the product you bought from this subsidiary; you partially pay this subsidiary; this subsidiary can obtain a judgment; but when it comes to enforcing the judgment, this subsidiary has no rights. As absurd as the argument was, it took the lower court 6 hearings to render a decision (in our favor, thus against the "no rights" argument). The defendant took the case to the Court of Appeals which took 5 months to finally agree with the defendant. Yes, as a registered subsidiary of an American company, we have no rights.
Obviously, this is a huge loss for us but the repercussions of such an absurd decision are much farther reaching than our case. Indeed, all investors, local or foreign, must feel confident that their investment is protected. And, in case they have recourse to the courts, these will be impartial. If an investor from the all powerful USA cannot count on the judicial system in this African country, then who can?
There is evidence that the decision was reached after large sums were paid to certain judges by the defendant. We actually obtained proof of some of the transactions and submitted the evidence to authorities who did absolutely nothing.
We knew going in that in case of subjectivity, we would most certainly lose to this very wealthy and powerful defendant. This is why we sued only for contract based invoices, no damages. We thought that since the case had received so much attention, the judges would not risk taking decisions which were blatantly unfair. We were wrong. When faced with enough cash, the judges showed no shame.
How many investors will shy away because of this decision? How many jobs will be lost? The consequences of corruption don't end with immorality. There are economic consequences as well.
A couple of years ago, the subsidiary had to take a large client, one of Africa's largest companies, to court after they would not pay their bills. After a year, many many court hearings, and lots of adventures I will eventually post about, we finally won a multi-million dollar judgment. Yea, we thought, finally! Our celebration was short lived. This client had better understood the legal environment than we had. Getting a judgment is one thing, enforcing it is a whole other.
The defendant filed multiple procedures to prevent us from collecting on the judgment. Their argument? Our company is a registered subsidiary of an American company and therefore we lack the judicial identity permitting us to appear in this country's courts.
What?! You can sign a contract with this subsidiary; use the product you bought from this subsidiary; you partially pay this subsidiary; this subsidiary can obtain a judgment; but when it comes to enforcing the judgment, this subsidiary has no rights. As absurd as the argument was, it took the lower court 6 hearings to render a decision (in our favor, thus against the "no rights" argument). The defendant took the case to the Court of Appeals which took 5 months to finally agree with the defendant. Yes, as a registered subsidiary of an American company, we have no rights.
Obviously, this is a huge loss for us but the repercussions of such an absurd decision are much farther reaching than our case. Indeed, all investors, local or foreign, must feel confident that their investment is protected. And, in case they have recourse to the courts, these will be impartial. If an investor from the all powerful USA cannot count on the judicial system in this African country, then who can?
There is evidence that the decision was reached after large sums were paid to certain judges by the defendant. We actually obtained proof of some of the transactions and submitted the evidence to authorities who did absolutely nothing.
We knew going in that in case of subjectivity, we would most certainly lose to this very wealthy and powerful defendant. This is why we sued only for contract based invoices, no damages. We thought that since the case had received so much attention, the judges would not risk taking decisions which were blatantly unfair. We were wrong. When faced with enough cash, the judges showed no shame.
How many investors will shy away because of this decision? How many jobs will be lost? The consequences of corruption don't end with immorality. There are economic consequences as well.
November 5, 2006
Unpatriotic?
I started this blog a year ago and have not had the courage to post. This has not been for lack of interesting stories or material. Not a day goes by without something happening that would discourage any entrepreneur anywhere in the world.
Somehow I feel guilty about posting anything negative about Africa. If I post the truth, undoubtedly it will contribute to Africa's negative image. I have always been involved in promoting a new image for Africa. Is my relunctance to say anything negative about having to admit that I was wrong or is it really about not wanting to add to Africa's woes?
Is keeping my country anonymous really fair to those countries in Africa who are making real efforts to turn things around? So many questions.
I justify my action in saying that the truth should always prevail. And after all, as much as I might criticize the environment I am in, I am there, doing it, day after day. I have not given up. So my message is one of frustration, but also one of hope.
Somehow I feel guilty about posting anything negative about Africa. If I post the truth, undoubtedly it will contribute to Africa's negative image. I have always been involved in promoting a new image for Africa. Is my relunctance to say anything negative about having to admit that I was wrong or is it really about not wanting to add to Africa's woes?
Is keeping my country anonymous really fair to those countries in Africa who are making real efforts to turn things around? So many questions.
I justify my action in saying that the truth should always prevail. And after all, as much as I might criticize the environment I am in, I am there, doing it, day after day. I have not given up. So my message is one of frustration, but also one of hope.
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