Mon séjour en Afrique du Sud (Cape Town)

Lesotho holds a unique reputation in the international annals of corruption busting.

The Lesotho Highlands Water Scheme is a plan through which the apartheid government sought to increase water supplies to Johannesburg – and to counter the growing banking sanctions campaign during the 1980s.

About 40% of the water in the Senqunyane River basin is to be diverted to the Vaal Dam, south of Johannesburg. The officially estimated cost of the project, which is due for completion in 2020, is $8.7 billion (R62.3 billion).

The World Bank was prevailed upon to finance what was then the world’s largest dam construction project, to be built by a consortium of major international civil engineering companies. According to Transparency International, dam construction runs second only to the arms trade for its propensity towards corruption.

With European government agencies and banks, the World Bank connived to launder payments through a London trust fund to disguise the reality of South African involvement.

Bribes were soon being paid to Lesotho officials to cast a blind eye to major environmental and other problems.

The World Bank, in turn, pressured the Lesotho government to block investigation into these allegations, insisting that that would delay the project and result in cost overruns.

The South African National Defence Force invaded Lesotho in September 1998.

Its mission ostensibly was to restore law and order but, in reality, the SANDF was there to protect dam construction. Maseru was left in ruins, and about 17 people were killed in the vicinity of the Katse Dam.

By September 1999 even the World Bank could no longer contain the scandal. The Lesotho government insisted on prosecuting both the foreign construction companies and local officials for corruption.

Swiss banks – still sensitive about collusion with Nazi Germany to rob Jews of their assets during the World War 2 – were prevailed upon to co-operate in the forensic auditing of bribery payments. The foreign construction companies were incensed that an upstart, third world minnow such as Lesotho could press charges against them.

The court in Lesotho in 2002 decided that, irrespective of whether the contracts were drawn in Canadian, German, English or Italian law, the harm done was to Lesotho, and therefore Lesotho would take jurisdiction. The court also decided that in corruption cases there must be at least two parties to a bribery transaction – both a briber and a bribee, and that both were guilty.

Even now, the World Bank continues to impede demands that its clients who engage in bribery should automatically be disbarred from future contracts.

At last there is growing recognition that corruption undermines democracy and good governance, and that the poorest people in poor countries are its major victims.

But it remains alarming that government agencies in rich countries, such as Britain’s Export Credit Guarantee Department (ECGD), are complicit in bribery by British corporations.

BAE Systems, which is by far the ECGD’s largest client, has a reputation for creating front companies and bank accounts in offshore banking centres such as the Cayman Islands, the Channel Islands or Liechtenstein to launder bribes to politicians and political parties.

The ECGD is one of the major vehicles through which the British government heavily subsidises arms exports.

Those subsidies are estimated at £852 million (R12.3 billion) annually. No other industry receives such financial support, calculated at more than £13 000 (R188 000) a job, again making nonsense of claims that selling weapons is economically lucrative. A two-year investigation by a British organisation for social justice, the Corner House, released in February 2003, found that 95% of third world debt owed to the United Kingdom was owed to the ECGD. Its report declared:

Of the £4 billion (R57 billion) to £5 billion (R72 billion) of British exports and overseas investment that the ECGD backs each year, large percentages go to defence equipment (30%-50%), power plants (25%) and oil and gas projects (15%).

Projects in these sectors have consistently been controversial and often environmentally damaging, and been shown to be the worst offenders when it comes to corruption.

The investigation has found that the ECGD has been pervaded by an institutional culture of negligence when it comes to corruption. Given the sectors and countries that the ECGD works in, this institutional culture is disturbing. Throughout the 1990s and into the early 2000s, the ECGD consistently supported projects which were over-priced and plagued by corruption allegations, such as the Lesotho Highlands Water Project.

Corruption is not a victimless crime. Corruption undermines democratic accountability and increases poverty.

In poor countries, it can have a particularly devastating effect, diverting scarce resources away from crucial areas such as health and education. Projects that are riddled with corruption, meanwhile, are often poorly designed and perform badly.

They are normally overpriced not least because companies that pay bribes seek to claw back the money by inflating costs.

These costs are usually passed on to the consumer or taxpayer in some form.

While the money of UK taxpayers has been used to support such projects, it is the people of the third world who usually foot the bill.

The ECGD seeks to recover losses from the government of the country where the project takes place. This explains why 95% of third-world debt owed to the UK is owed to the ECGD.

The fact is that some of this debt is for projects from which the people of the third world have seen little benefit, and which were not in their interests in the first place.

q Extracted from Eye on the Money by Terry Crawford-Browne, a personal account of one man’s fight against South Africa’s controversial multimillion arms deal.

A former banker, Crawford-Browne resigned from his job with Nedbank to work with the Western Province Council of Churches in the fight against apartheid.

After the advent of democracy, Crawford-Browne wondered why a free South Africa with no enemies needed sophisticated arms. His answer was simple: the huge commissions paid to those who make governments buy weapons.

For almost 10 years Crawford-Browne would challenge the arms deal in court until the final battle where he would lose everything he owned when a Cape High Court awarded costs against him.

Eye on the Money tells the story of this battle, the personalities he triumphed against and those who ruined him.

Published by Umuzi, an imprint of Random House, Eye on the Money goes on sale on Wednesday at a recommended selling price of R175.