Chinese Companies in Africa proliferate by Corruption


Way back in 2017, the global consulting major Mckinsey in a report had cited corruption as the largest pain point to be addressed to make the China-Africa partnership sustainable in the long run.

According to the report, 60% to 87% of Chinese firms revealed they had paid bribe or a "tip" to obtain a license in connection with business transactions in Africa. The report noted that the corruption problem is a "vicious cycle in these countries - one fed by perceptions on both the African and the Chinese sides."

Things seem to have changed little since then and Chinese firms continue to indulge in corruption and underhand deals to win bids and licenses for projects and business in Africa. Evidence of Chinese companies indulging in corruption in South Africa was mentioned in the Zondo Commission Report (Part-2), a Judicial Commission of Enquiry in South Africa.

The Commission, headed by Justice Raymond Zondo, found China North Railway (CNR) and China South Railway (CSR) involved in corrupt practices for winning the project bids. The case pertains to a 2015 tender bid for the supply of railway locomotives to South Africa.

Zondo Commission Report disclosed that the China Railway Rolling Stock Corporation (CRRC), an offshoot of CNR and CSR, gave kickbacks to Transnet authorities and political leaders. Transnet SOC Ltd is a large South African rail, port and pipeline company headquartered in Johannesburg. Transnet had been formed in 2018 by restructuring into business units of the operations of South African railways and harbours. 

The kickbacks, according to the Zondo Commission report, were routed through CRRC's local subsidiaries, CNR Rolling Stock, South Africa. The report also mentions some other Chinese companies associated with the kickback deal, namely, CNR (Hong Kong) company Limited, CRRC (Hong Kong Limited) and CNR Dalian Locomotive and Rolling Stock Company Limited. The Chinese Ambassador in Pretoria conveyed his displeasure to the South African Foreign Office about the Zondo Commission report and its acceptance by President Ramaphosa, alleging that it diminished the image of his country.

The Judicial Commission of Inquiry into Allegation of State Capture, Corruption and Fraud in the Public Sector including organs of a state is popularly known as Zondo Commission or State Capture Commission. The Public Inquiry Commission was established in January 2018. The four parts of Commission’s reports have been published during January-April, 2022.  According to terms of reference, the Commission was to make an inquiry into corruption charges in the awarding of contracts and tenders by the 21 major state-owned entities listed in Schedule 2 of the Public Finance Management Act. The Commission’s 2nd report pertained to the state-owned rail monopoly Transnet.

Following a series of extensions, the Commission concluded its hearings in August 2021 with testimony from President Ramaphosa and subsequently another 3-month extension was given to it in the wake of expiry of Commission’s term in December 2021. Part-2 of the Commission report published on February 01, 2022 pointed out the complicity of CSR, CNR, General Electric and Bombardier Transportation in corruption pertaining to procurement of 1259 locomotives. The findings of enquiry also revealed that Jacob Zuma, former President sought to have Siyabonga Gama appointed as CEO who served as a “willing enabler” of corrupt practices at Transnet.

Protests and marches against the Chinese companies and employees occur relatively frequently in major cities of South Africa, notably Johannesburg and Pretoria. There is a wide-scale perception in South Africa that internal compliance framework and sensitivity on labour issues of Chinese companies is weak and therefore, they are more inclined to indulge in corruption and exploitation of locals.

Chinese companies are known to have resorted to corrupt and underhand practices to win tenders in African countries. However, very few of them come to light as African anti-bribery enforcement involving Chinese companies doing business in Africa is virtually non-existent. Some African countries including Kenya, Mozambique and South Africa have amended their bribery laws. In spite of these promising developments, enforcement of existing laws across the continent remains weak.

Chinese investment in Africa was USD 5.4 billion in 2018, which declined to USD 2.7 billion in 2019, to again bounce back, despite Covid-19 pandemic, to USD 4.2 billion in 2020. According to an estimate, there were 140 medium-sized or large Chinese companies operating in Africa with a combined investment of USD 13 billion employing around 30,000 South Africans in 2016.

The increasing presence of Chinese companies in South Africa would continue to be seen with suspicion as long as their compliance to local laws is not ensured. This would also require that the South African officials do not buckle under Chinese pressure or allurements.

Source : defferent agencies

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