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Africa Needs Governance and Globalization

Interviewee: Mo Ibrahim, Founder and Chairman, Mo Ibrahim Foundation
Interviewer: Stephanie Hanson, News Editor, CFR.org
April 1, 2009

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Mo Ibrahim is a Sudanese businessman and head of the Mo Ibrahim Foundation, which he started in 2007 to draw attention to governance and leadership in Africa. The foundation produces an annual Index of African Governance and awards a $5 million prize to a former African head of state who "has demonstrated excellence in Africa leadership." Ibrahim, who founded Celtel, one of Africa's leading telecommunications companies, says in addition to good governance, Western countries must focus on improving infrastructure and education in Africa. He notes the importance of good governance in both the public and private sectors: "Why is it legal for a large oil company to sign a multibillion dollar contract in Angola or somewhere without disclosing it?" he asks. He also stresses the importance of African countries working toward regional integration.

What are Africa's particular vulnerabilities with respect to this global recession?

We are all worried about the likely effect of the financial crisis because commodities prices are plummeting already, and the amount of development aid is in question now--whether the G-20 will maintain its promises given the problems they have in their own countries. The [third] area, besides aid and the price of commodities, is remittances, since their amount is actually far larger than aid. What the children of Africa send back home is going to be affected as well. You can add also the retreat from globalization--we see a rising of protectionism. The developed countries are shoring up their financial systems but nothing has been done about the financial systems and institutions in developing countries. Those countries might not be able to shore up or offer the sort of blanket guarantees being offered by the developed countries. That also may have a negative effect. I'm really watching with concern what's happening. It's really important to remember that Africa was sold globalization when it suited the West and developed countries. We should not forget globalization now given this crisis, which again is not the making of Africa.

What are some different policies that you think the United States or other Western countries could put into place to improve the business climate in sub-Saharan Africa?

We all need to insist on good governance. We are insisting, as Africans, on good governance. There is tremendous development on the civil-society front in Africa; we have an active civil society now that is growing very fast, and we really need the support of the United States to stand firm for the importance of good governance. The Millennium Challenge [Corporation] was a very interesting development in that area, which links aid with good governance. We should have that linkage, and I believe we should focus really on two areas in order to help Africa. One is that of the infrastructure, and the other is the area of education. This is what would help in the long term [to] provide the right environment for investments.

There's been a lot of press and attention paid to the size of the award that your foundation is giving, the $5 million award. But what seems to be less known is that there is a provision in the award that the person who receives it has up to $200,000 a year to spend on charitable projects. Have the two winners of the award been using that money, and if so, what for?

Absolutely. For example, you have President [Joaquim] Chissano [former president of Mozambique] speaking today [March 23] at the Council on Foreign Relations--we funded his trip. And later he will be coming to Washington to work with the Brookings Institution for a couple of weeks; we funded that. [Former President of Botswana Festus] Mogae is actually this week in Washington; he'll be spending two or three months there. The idea is to engage the policymaking sort of people--the press, the civil society, the government, Congress, etc., to give American opinion formers and decision makers a better view about Africa.

It's really important to remember that Africa was sold globalization when it suited the West and developed countries. We should not forget globalization now given this crisis.

Mogae gave about ten lectures in the past two months in various universities in Africa, and [Chissano is working] to do peacemaking in Uganda and in the DRC [Democratic Republic of Congo]. So those are really good people, and they are demonstrating there is life after office. They can continue to serve the continent at large. You don't have to be president to serve; sometimes actually the ability to serve is much higher if you are not shackled by the protocol and the etiquette.

I was hoping that we could talk a little bit more about business and the links between business and governance. When you started Celtel, what were the biggest barriers to building a business at that time?

The biggest barrier really is funding. We found it almost impossible to get funding for our business in Africa. The banks would not touch us. On one hand, of course, there was the telecom bust of 2001-2002, so for two years the banks were reluctant to do anything with telecoms, but actually over the whole period of the company, until 2005 when we sold the company, we managed to raise very little debt. We sold the company in 2005 for $3.4 billion dollars and the total amount of debt on the company was less than $90 million.

It just shows how difficult it was. This is a company that was making $200, $300 million profit a year, net profit, who could not get funding. The same bankers who were doing all the toxic stuff around here wouldn't lend to Africa for a successful business which is profitable, which is growing at nearly 50 percent per annum. No, Africa was considered to be a risky place while the housing market here was considered to be a safe place. It just gives you an idea of what kind of stupid system [exists], and it raises issues about integrity and the cleverness of our bankers.

Do you feel that things are different now in 2009? If you were to start another business in Africa, would funding still be your biggest barrier or would it be infrastructure, corruption, or competition with foreign aid?

Celtel, our company, made it easier because we demonstrated it is possible to build a successful business in Africa without paying bribes. That's an issue we took a stand on and we proved that, yes, corruption exists, and if you hand around envelopes, people will take them, but if you don't hand them out and you take a firm stand, you can still do business. We raised the question of whether it was politicians who corrupt businesspeople or businesspeople who corrupt the politicians. We need to look at that, because we always focus on governance and transparency in the government, but governance and transparency in the business area is something we still really need to look at. And if anything, the financial crisis, in my view, was a failure of governance, a massive failure of global governance. The management of these banks did not do their jobs, and the regulators did not do their jobs, so it was a big failure of governance in the private sector. So really governance is required, corporate governance and public sector. Sometimes we just focus on one area.

 

There is tremendous development on the civil-society front in Africa; we have an active civil society now that is growing very fast, and we really need the support of the United States to stand firm for the importance of good governance.

Let me give an example. Here in the states, you had the commendable Foreign Corruption Act [Foreign Corruption Practices Act of 1977] for probably thirty years or more. Europe dragged its feet and didn't use the Foreign Corruption Act until the year 2000, 2001. And until that time, bribes were legal. Actually, it was tax deductible. The same governments which stand on soapboxes and lecture everybody about the need to do clean business, etc., wink and then let their businesspeople bribe their way around the continent while offering them tax relief. OK, 2000, 2001, under pressure from the OECD [Organization for Economic Cooperation and Development], European countries introduced laws which made it illegal.

But I keep asking the question in Europe--I speak a lot in Europe--and I keep asking, did the French government prosecute anyone in France for corruption? British government? No. German government? No, none. Nobody prosecuted anybody for corruption in Africa. So either there's no corruption or they're breaking their own laws. This is something which always irritates me. We don't walk the talk. We like the sound bites, but we don't stand scrutiny, so really the question is credibility. If we want to talk against corruption, we should act against corruption. And it's easy for one to act; there is a big initiative now for transparency in the extractive industries [EITI, the Extractive Industries Transparency Initiative]. I was speaking in Germany last year, and there were a lot of governments sitting there, actually, all the European countries were there, and I asked the question, "Why is it legal for a large oil company to sign a multibillion dollar contract in Angola or somewhere without disclosing it?" That should be an added requirement by [international accountants], if that is a legal requirement by the auditors. And it should be reported. Everybody would be forced to do it. Why aren't we introducing that? If we're convinced that's important, why aren't we doing it? Why aren't we making it illegal?

There's legislation pending in Congress, actually, about this very issue.

I understand, but the Americans have said very clearly that they will only implement that if the Europeans implement it too because you don't want to repeat the same saga of the Foreign Corruption Act. And somebody needs to raise the question to our friends in Europe: Are you going to drag your feet on this one as well or what? It's simple; it's easy. If you really want it, if you have the will to do it, you can do it.

Are there other specific mechanisms that either the United States or Europe could put in place that would address this issue of improving the business climate in Africa?

If we have that clear line on transparency and corruption; if we have that clear line on governance; if we focus our aid really in that direction, we can focus also on infrastructure, the process of moving things, how to get things moving out of the ports, for example. Why do you need fifty checkpoints to bus [goods across a country]; why not just one? But Africa also has a lot of things to do. Recently I attended the declaration meeting of something called CoDA, which is the Coalition for Dialogue on Africa, which is essentially an African think tank chaired by President Mogae and attended by the chair of the African Union and the African Development Bank and the head of the Economic Commission for Africa, besides a number of people from civil society and business. So it was really a nice sort of forum, and what we thought we would need to focus on is the area, for example, of regional integration. If we want to move some countries in Africa we need subregional [trade], and no amount of aid is going to solve the problem. And regional integration was very important. Why does a lorry going from A to B, two neighboring countries, have to be stopped seventy times, and each time $5 has to be paid to get across? It's just unacceptable. Africa does not trade with itself, does not communicate with itself, so it's time. We have work to do as well. And we should recognize that and we should face it and we should do it.

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