Dada Adefolami

Dada Adefolami

Sustainable economic development in commonwealth, Africa – Nigeria can be achievable if corruption is reduced and eliminated. corruption can occur on different scales. Corruption ranges from small favors between a small number of people petty corruption, to corruption that affects the government on a large scale grand corruption, and corruption that is so prevalent that it is part of the everyday structure of society, including corruption as one of the symptoms of organized crime. Corruption and crime are endemic sociological occurrences which appear with regular frequency in virtually all countries on a global scale in varying degree and proportion. Individual nations each allocate domestic resources for the control and regulation of corruption and crime.

The problem of corruption is especially deep rooted in Africa. And it has been a drag on economic growth for several reasons. ‘Corruption starves the state of the resources to develop infrastructure and talent.
Prevent: Economy of illegal Trade, Unlawful financial flows out of Region and Stop Corruption
By fighting illegal financial activity, the Commonwealth Africa Anti-Corruption Centre aims promote growth and stimulate investment in its members’ economies

It is well known that corruption undermines the economic competition that drives productivity improvements and leads to growth in emerging market economies, at the same time; it is also acknowledged that the perception of risk from corrupt practices affects a country’s attractiveness to foreign investment.

Corruption can be categorized in three types. Political Corruption – Political corruption is the use of powers by government officials for illegitimate private gain. Forms of corruption vary, but include bribery, extortion, cronyism, nepotism, parochialism, patronage, influence peddling, graft, and embezzlement.

It was a desire to address these issues in Africa the worst-performing region in Transparency International’s Corruption Perceptions Index that led to the creation of the Commonwealth Africa Anti-Corruption Centre (CAACC), with a forward to support member countries in fighting procurement irregularities, bribery, money laundering and other financial crimes.

The Botswana 2013. CAACC offers services to 18 Commonwealth countries its host country Botswana, plus members Cameroon, Ghana, Kenya, Nigeria, Rwanda, Tanzania, Lesotho, Malawi, Seychelles, Sierra Leone, South Africa, Swaziland, Mauritius, Mozambique, Namibia, Uganda and Zambia. A similar body bringing together anti-corruption authorities from 12 Commonwealth countries in the Caribbean region is set to launch initial training programmes from a new HQ in Grenada.Corruption in Nigeria:Political corruption is a persistent phenomenon in Nigeria. The rise of public administration and the discovery of oil and natural gas are two major events believed to have led to the sustained increase in the incidence of corrupt practices in the country.

Effect and Necessary skills
Corruption affects us all. It threatens sustainable economic development, ethical values and justice; it destabilises our society and endangers the rule of law Delays in infrastructure development, poor building quality and layers of additional costs are all consequences of corruption in the regions.

Anti-corruption units in the region have long grappled with a lack of capacity in skills and training to investigate corruption and secure prosecutions a gap that aims to help close.

Countries regarded as ‘clean’ find it easier to attract foreign investment. In those regarded as corrupt, ‘investors are worried about reputational risk and won’t come. eager to attract investment, several member countries have been making paces in tackling corruption. Fight against corruption has contributed to the improvement in economic situations.

Comment on the role of capacity-building in tackling corruption, the more important given the increasing complexity of corruption. ‘Technological advancements make it possible for corrupt persons to hide their proceeds faster and more carefully, sometimes beyond the reach of any one national anti-corruption agency.
The CAACC’s core work is instructing and training anti-corruption experts to enable them to fight crime in their home countries. The goal is to help member anti-corruption agencies support public education campaigns to stigmatize corruption, run active corruption prevention programmes, and investigate and prosecute corruption crimes. It has created focused courses that have so far trained 370 anti-corruption specialists from the 18-member countries. Many of these have attended multiple times for different courses.

An early programme targeted the heads of the anti-corruption agencies. ‘Most were judges or senior lawyers. ‘They were technically good but, in terms of organization management and leadership, they hadn’t got the capabilities or experience.

Need for Accreditation
Looking ahead, the center is seeking endorsement for its courses from the Botswana Qualifications Authority (BQA). ‘The CAACC is striving for financial independence, and such accreditation would help extend its services to countries beyond its founding members.

Currently, the Commonwealth Secretariat supplies £250,000 (US$340,000) annually, a sum that supplements member countries’ annual subscription fees, and in-kind assistance and financing from the Botswana government in the form of offices for the secretariat, manpower, vehicles and funding. Support has also come from the African Development Bank, Basel Institute on Governance, Interpol, Transparency International and the United Nations Office on Drugs and Crime, which provide trainers.

An independent evaluation of the center by financial management consultants conducted in 2016, found that ‘Commonwealth member states have benefited significantly from the programme and tangible capacity improvements have been realized by the anti-corruption agencies.’

Transparency is the basis of good governance and the first step in fighting corruption. It provides a universal basis for the provision of good records management systems, archives, and financial regulatory and monitoring systems.
In a survey of 65 anti-corruption agency officials, 80% said CAACC courses had significantly expanded their knowledge, 70% reported significant performance improvements, and 68% made significant subsequent changes in their work.

Despite these successes and positive feedback, corruption will continue to thrive in Nigeria and Africa Region if economic inequality persists. ‘Those who have money will be tempted to bribe to alter the outcome of a tender or a procurement process, buying voters card or to fast-track a payment. It has become a way of life, especially in procurement offices.

Nevertheless, hopeful that corruption will decline in Africa especially in Nigeria: There has been change. There have been improvements, as indicated by reports from advance counties, and this has given investors more confidence.
Given the central role of the finance function in measuring, reporting and managing the value of a company, it’s not surprising that the role of the CEO / CFO in managing and reporting on corporate sustainability is growing, although, some may argue at too slow a pace. There is strong link between sustainability performance and financial performance.
When asked about Top Management roles, however, only 43% were called upon as a matter of course to help set sustainability strategy, and only 45% were always involved in strategy execution. These results show a marked increase in involvement compared to the pass, in 2012 27% of CFOs were always involved in setting sustainability strategy, and 32% in its execution.

What might explain the reluctance on the part of finance chiefs to embrace sustainability reporting as their domain, first to recognize that the office of the CFO has a very broad and expanding range of accountability, aside from already having enough to do, the answer may lie in the fact that when it comes to standards for sustainability reporting, there are just too many cooks in the sustainability standards kitchen.

Originally, sustainability reporting meant ‘accounting for the environment’, beginning with estimating contingent liabilities associated with environmental damage. However, over the past 20 years, its scope has grown dramatically to include, social and human rights issues such as conflict minerals disclosure and diversity factors. KPMG has revealed in Carrots and Sticks, its latest review of environmental, social and governance (ESG) reporting, there has been a surge in sustainability reporting requirements, direction and frameworks, resulting in unevenly 383 different reporting instruments being practical in 64 countries in 2016, 248 of them mandatory and 135 voluntary. This compares with 35 mandatory and 25 voluntary instruments in 2006.

These instruments include regulation and policies like sustainability reporting requirements issued by governing bodies or governments, financial regulators or stock exchanges; self-regulation by industry following specific industry frameworks; guidance or recommendations for public reporting on a single topic like greenhouse gas emissions; voluntary standards and guidelines for sustainability reporting such as the Global Reporting Initiative (GRI) or the US Sustainability Accounting Standards; and standards on sustainability assurance.

Stock exchanges and financial market regulators have become increasingly active in issuing disclosure requirements, accounting for approximately one-third of all sustainability reporting instruments reported in the study. Between 2013 and 2016, the number of reporting instruments from this group has approximately doubled from 23 to 44. Overall one in three instruments apply exclusively to large publicly listed companies in UK and USA, and the remaining two-thirds apply to either all companies or governments/state-owned enterprises. This includes instruments like the Guidance Regarding Disclosure Related to Climate Change issued by the US Securities and Exchange Commission in 2010. Over the same period, the number of instruments specifying disclosure in the annual report had increased by almost 100%. This Africa Regions to emulate.

A research paper recently released by International Accounting Body/Climate Disclosure Standards Board (CDSB), mapping the sustainability reporting landscape: Lost in the right direction, congratulates many organizations weighing in on ESG reporting, but also reveals some unintended results.

Specifically, the report concludes: ‘The disparate reporting practices that have arisen from a multiplicity of reporting requirements dilute or impair the usefulness of information for readers, and may lead to distorted views of corporate performance, inaccurate valuation and difficult decision-making.

Some organizations complain that the many and various actions that are being taken to move corporate reporting into a new era have resulted in a crazy-quilt, labyrinth or jigsaw of reports, frameworks, protocols, codes and standards that impose sometimes conflicting and sometimes duplicative requirements on organizations but do not result in information that is any more useful for users, this presents them with undue reporting burdens and multiple dilemmas.’

While the ACCA/CDSB report helps to illustrate why many Top Management might want to give sustainability/ESG reporting a wide pass, there is growing evidence to suggest that it is indeed the finance Management function that has the most to contribute to the sustainability agenda.

It’s a collaborative effort to integrate the finance team to access the metrics that require being able to make changes to sustainability objectives. They are quite involved in working on the proposals for any type of new sustainability solution, basically know how this new solution or project will derive value over the life of the Stakeholders

Whether or not the standards-setters/framework developers are getting closer to a specific roadmap for sustainability reporting, the GRI is heading in the right direction, it’s on the right road, and it’s just a matter of not having rival processes or competing organizations when it comes to doing. Modernizing some of the existing standards that have been adopted by many industries right now is probably the focus that should be played out.’

With the creation of the Global Sustainability Standards Board (GSSB), an independent operating entity under the sponsorships of the GRI, work is in progress to transition from the G4 Sustainability and Reporting Guidelines to GRI Sustainability Reporting Standards (GRI Standards). What the GSSB hopes to accomplish is to make the transition from the G4 guidelines to an interrelated series of sustainability reporting standards.

Following an extensive public comments period, the GSSB issue that initial set of standards by the third calendar quarter in 2016. Concurrently, it is preparing to begin its sector standards work, which will draw on what the US Sustainability Accounting Standards Board (SASB) and others have done.

Ultimately, the GRI predicts a new format for sustainability data exchange using search engines. The next generation of reporting will be digital so access to this information will be much easier and users will be able to analyses it to make correlations and participate in discussions.

How coherence might be achieved in the ESG reporting territory, ACCA recommends ‘the development of a “model sustainability reporting convention”. In the same way that financial reporting approaches have been standardized as International Financial Reporting Standards through the work of the International Accounting Standards Board, an equivalent approach to the development of sustainability reporting standards might promote reporting coherence through convergence on shared reporting requirements, measurement approaches and policy objectives.’
Unlawful financial flows out of Africa deprive the continent of much-needed finance for development. Good governance and greater transparency must be part of the solution.

With as much as US$50bn disappearing from West African economies every single year through illegal financial flows (IFFs), it is not surprising that international agencies are paying ever more attention to the issue. As the African Development Bank put it at the publication of an Organization for Economic Co-operation and Development (OECD) report on IFFs: ‘excessive amounts disappear off the radar of the authorities and economic regulators every year, to leave Africa illegally for transfer to Europe or elsewhere in the world and these are financial resources that the countries involved cannot put to good use for the development of domestic investments.’

Although the US$50bn figure is contested the nature of IFFs makes accurate figures hard to calculate current analyses agree that it outstrips the amount of government aid or official development assistance to Africa. Such an economic impact reinforces the links between income inequality and criminal activity.

However, to understand the links between criminal activity and illicit trade, and therefore IFFs, it is important to understand the context. Therefore,organizations such as the OECD believe it is necessary to investigate the impact that globalization, despite its many benefits can have on the very poorest in many developing regions.

The Economy of Illicit Trade in West Africa, produced in association with the World Bank, the African Development Bank, the Intergovernmental Action Group against Money Laundering in West Africa (GIABA) and the New Partnership for Africa’s Development (NEPAD), the lawful and illegal are increasingly interwoven in West African economies. This is partly due to the sheer size of the informal economy, which is estimated to constitute up to 70% of total economic activity in the region. It is also the product of what the OECD calls the ‘elite protection networks’ connected to these flows.

Much attention has been on identifying the sources and volume of these flows, rather than looking more widely at the impact of evaporating revenues on the development prospects for African countries and regions. IFFs don’t just undercut economic growth and legitimate trade, they also counselor the associated tax revenue that governments use to fund public services and infrastructure.

Kemi Adeosun Minister of Finance Nigeria told the Platform for Collaboration on Tax conference earlier this year: The Nigerian government is taking responsibility for preventing illegal flows, but the ranges of measures used, and the sheer volumes, are such that recipient nations must also take measures to discourage the flows into their countries by asking more questions.In order to ensure that not only public corruption but also private corruption between individuals and businesses could be covered by the same simple definition: Corruption is the misuse of entrusted power by heritage, education, marriage, election, appointment or whatever else for private gain.

Flow of the Fund
The OECD wants to widen the anti-corruption network. It is not just the origin of the IFFs that needs investigation, but how that money is moved and where to: its origin transit and destination, hence the need for international cooperation, therefore, OECD talks about regions, rather than simply countries with ‘porous’ borders that may or may not be able to halt illegal trade on their own. The organization illustrate apoint that when a balloonis squeezed at one point, the air moves and pops up elsewhere.

The OECD report concludes that criminal and contraband economies produce IFFs that undermine the ability of nations to finance their development. As the organization reports: ‘Criminal economies and IFFs are a potent negative force that contribute to the poverty of livelihoods and ecosystems, undermine institutions, reinforce client list politics and enable impunity, in different ways across the region’s countries, bankers, lawyers Finance expat and other professionals, can be implicated in IFFs, as they may innocently provide the measure that lets the money flow out of a region. But if they are part of the problem, they can also be part of the solution.

Finance professionals have an important role in combating IFFs. ‘These finance professionals can promote further transparency and reduce the space within which criminal activities can develop. ‘Some progress has been made in improving financial transparency, but more needs to be done, especially as international banking can be used as one of the main channels for money laundering.
’
There is a further role for finance professionals one that could have an impact on corporate financial disclosure and financial regulation. ‘If finance professionals perform methodical due diligence on their clients and report suspicious transactions to the relevant authorities, this will contribute to reducing the scope of illicit financial flows.

Improved standards of governance generally are also part of the solution. Embedding fairness, transparency and accountability within Nigeria corporate structures will ultimately hamper these practices. ‘Indeed, corporate governance is the system of rules, practices and processes by which a firm is directed and controlled. Corporate governance essentially involves balancing the interests of a company’s many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community. So Political corruption is the use of power by government officials for illegitimate private gain. An illegal act by an officeholder constitutes political corruption only if the act is directly related to their official duties, is done under colour of law or involves trading in influence.

Finally
Finance professionals can also help combat financial exclusion, which is one of the leading drivers for IFFs. ‘Enhancing financial inclusion will help, point out that 80% of the population of West Africa lack access to the formal banking system. When access to the formal banking system remains out of reach for many, and money transfer operators are prohibitively expensive, transactions are carried out in cash, making the prevention and detection of IFFs difficult for governments and regulators. Although the OECD points out that the informal sector often provides valuable livelihoods, particularly for the poor. What happens informally allows criminal activity to flourish because it happens outside regulation and supervision.

It is also worth noting that the fight against IFFs is part of the wider agenda of sustainable development, as enshrined in the United Nations’ Sustainable Development Goals. This agenda includes the OECD’s Base Erosion Profit Shifting (BEPS) project: ‘Tackling global challenges requires reforms to happen on all sides.’
Corruption is dishonest behaviour by those in positions of power, such as managers or government officials. Corruption can include giving or accepting bribes or inappropriate gifts, double dealing, under-the-table transactions, manipulating elections, diverting funds, laundering money and defrauding investors.

• Dada Suraju Adefolami, Professor of Finance, School of Business Administration, UNEM University Costa Rica, is a Finance / Management Consultant and Certified Forensic Accountant. You can reach him via: [email protected]; 08052043855