Fraud, graft cost businesses millions

Malawi continues to lose millions through fraud and corruption, affecting business and national meaningful development, a local consultancy firm has said.

Business Development Facility (BDF) says the malpractices continue to be areas of concern as it is reported that organisations lose at least five percent of their revenue to fraud.

In an interview early this week, BDF lead consultant, Gabriel Kamanga said white collar fraud and corruption have become rampant in public and private sectors.

“It is has become highly risky to grow such an economy like this, not only at professional level but also at business and national levels because corporate fraud and corruption are connected to social-economic well-being of the population and its effects are long-term.”

According to Kamanga, commitment by various stakeholders to root out fraud and corruption is faced with a number of challenges, some of which include lack of comprehensive methods for and specific fraud prevention strategies, support to whistle blowers and lack of public-private partnerships to deal with the vices.

Malawi Confederation Chambers of Commerce and Industry (MCCCI) president Newton kambala also admitted that corruption and fraud have become rampant and firmly rooted in doing business in Malawi.

He said some companies budget for bribes, which has led the private sector to face reduced quality of service and pricing challenges as consumers have to pay for the money lost through the malpractice.

“Companies that don’t practice corruption suffer a lot as they may not get orders or they will not easily get paid in time for their services. Borrowing from banks is also a big challenge as corruption has also become part of whether a bank can lend somebody or not,” he said.

Meanwhile, BDF has this month organised a second annual intensive and practical conference aimed at combating the malpractices under the theme ‘protecting clients, businesses and Malawi’s reputation’.

The Malawi’s 2013 Malawi National Integrity System Assessment Report—which was funded by the UK’s Department for International Development, but produced by African Institute of Corporate Citizenship, Malawi Economic Justice Network and Transparency International—noted that the business sector in Malawi is not entirely independent of government and political interference, with the perception that governing politicians “interfere with the business operations by influencing award of contracts as well as soliciting money to finance political activities including electoral campaigns.”

The report further observed that ruling politicians or parties tend to have their own preferred business entities who support their cause which may fuel corruption.

It also quotes a World Bank enterprise survey as having showed that bribery depth in Malawi is at 8.4 percent since most public transactions require a ‘gift’ or an informal payment is requested by the government officials.

“For example. 11.4 percent of firms were expected to give gifts in meeting with tax officials; 2.8 percent of firms were expected to give gifts to secure government contract; 3.5 percent of firms were expected to give gifts to get an operating license; 4.9 percent of firms were expected to give gifts to get a construction permit; and 12.6 percent of the firms were expected to give gifts to get an electrical connection.

“Furthermore, 12.8 percent of the firms identified corruption as a major constraint when a firm is trying to start a business in the country. The practice has become so common by the government officials that up to 10.8 percent of the private sector firms have accepted the tendency of handing out gifts to the public officials ‘just to get things done’.

“…in a survey of typical patterns of corruption 20 percent of business respondents reported that businesses offer bribes while 31 percent reported that it is government officials who ask for bribes. Data from the public sector respondents show that 38 percent reported that businesses offer bribes while about 34 percent reported that it is government officials who ask for bribes,” reads part of the report.