CORRUPTION IN GHANA I: PERVASIVE PROBLEM

C O N F I D E N T I A L SECTION 01 OF 04 ACCRA 002425

SIPDIS

STATE PLEASE PASS FOR TREASURY LUKAS KOHLER
USTR FOR LAURIE-ANN AGAMA
USDOC FOR MARIA RIVERO
MCC FOR ROD NORMAN

E.O. 12958: DECL: 11/15/2015
TAGS: EAID ECON GH PGOV PHUM PREL
SUBJECT: CORRUPTION IN GHANA I: PERVASIVE PROBLEM

REF: A. A) ACCRA 1386


B. B) ACCRA 1505

Classified By: Ambassador Pamela E. Bridgewater for reasons 1.5 (D) AND
(E)


1. (C) Summary: Corruption in Ghana is not as bad as in
many other African countries but it is pervasive and
increasingly sophisticated. That said, The GOG is committed
to democracy and rule of law and Ghana has a lively media and
civil society. The President faces accusations of conflict of
interest and abuse of power in a hotel purchase. Those close
to him are frequently implicated in corrupt practices.
Allegations of corruption span from land contracts and timber
concessions to shipping, public procurement and the
judiciary. Corruption is hurting U.S. companies, undermining
economic and democratic development, and undercutting our MPP
goals. This is the first of a two-part series that looks
in-depth at (part one) the nature of corruption in Ghana and
(part two) what is being done about it. End summary.

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Balancing the Ghana Picture: Corruption Pervasive
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2. (C) Ghana has a well-deserved reputation for its
commitment to democracy, the rule of law, and political
stability. It also has a lively, generally free media, which
is active in exposing corruption. President John Kufuor
espoused a "zero tolerance" policy on corruption in his first
inaugural address and in 2001 he fired his Youth and Sports
Minister for corrupt practices. Ghana ranks 65 out of 159
countries listed in Transparency International's 2005
Corruption Perceptions Index. On the African continent, only
Botswana, Tunisia, South Africa and Namibia were perceived to
have less corruption. In fact, Ghana's corruption score is
the best between the Sahara and the Kalahari. Its score is
now the same as in 2000, when President Kufuor swept into
power in part on a pledge of zero tolerance for corruption.


3. (C) Nonetheless, corruption in Ghana is pervasive and
perceived to be growing. Per ref b, in a recent survey of
three major Ghanaian cities done by the Ghana Integrity
Initiative (the local affiliate of Transparency
International) 92% of respondents considered corruption a
serious problem in Ghana. During a November 15 World
Bank-sponsored seminar on fighting corruption, prominent
Ghanaian economist and Executive Director of the Center for
Economic Policy Analysis Joe Abbey offered his list of the
top ten most corrupt GOG institutions: the police, the
Ministry of Education, the customs service, the judiciary,
the civil service, the health services, politicians, the
electricity company, the Internal Revenue Service, and the
Immigration Service.


4. (C) Ghanaians in the GII study and a similar study by
the Center for Democratic Development (CDD),published in
July 2005 (ref a),perceived corruption to be increasing. In
the CDD survey, the perception that corruption is commonplace
increased between 2002 and 2005 for every public institution
covered. The NEPAD African Peer Review report (which we have
seen but has not yet been published) also finds that
corruption is a growing problem and "remains prevalent in all
spheres of Ghana". Over the past six years (including the
last two years of former President Rawlings' PNDC),Ghana's
Corruption Perception Index score has stagnated at the bottom
third of the Transparency International list, with scores
ranging between 3.3 and 3.9 (the 2005 score of 3.5 was a
slight dip from 3.6 in 2004 and worse than the 3.9 score in
2002).

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Opportunistic Corruption
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5. (C) Our contacts allege many examples of large-scale
corruption, many of which focus on the President's office
(including Chief of Staff Kwado Mpiani),the President,s
family, and a few key insiders. While verifiable information
on corrupt practices is almost impossible to obtain, below
are some credible examples:

Land Deals: In 2004, then-Minister of Environment Kasim
Kasanga told former PolChief about an extensive practice in
which GOG ministers, and friends, relatives and business
associates of the President and other top officials are
given, without charge, legal title to choice urban parcels in
Accra and regional capitals. After receiving title to the
parcels, recipients generally sell the land on the local real
estate market at enormous profits. Many other contacts have
confirmed this practice. While government allocation of land
to private persons is common and legal throughout Africa, it
is also a type of cronyism used to build and sustain
political power.

Timber Concessions: Kasanga said he had canceled 42 timber
concessions upon assuming office as Lands and Forestry
Minister in 2001 because they were done by the previous
government in violation of timber laws. In 2003, after
Kasanga was transferred out of the Ministry, the concessions
were reallocated, with the choice concessions awarded to GOG
insiders, he said. According to Kasanga, President Kufuor
was aware of these practices but left the details to
subordinates in the Presidency. A Dutch diplomat recently
told Poloff that when the Dutch pressed for greater
transparency in timber leases, the president's office called
the Deputy Minister of Finance instructing him to resist for
"national security" reasons.

Public Contracts: GII Director Batidam estimates that public
procurement accounts for 70% of corruption in Ghana.
According to the CEO of Ghana's Public Procurement Board, 25%
of the $750 million channeled through the GOG's public
procurement system in 2004 (i.e. $188 million) was lost due
to "mismanagement." GII studied Ghana Telecom procurement in
depth and found 2.2 billion cedis ($244,000) of losses due to
corruption in one contract alone. The editor of the Enquirer
newspaper alleged to PolChief that the former Information
Minister padded a Ghana Broadcasting Corporation contract by
$6 million, circumventing procurement rules. Defense
Minister Kwame Addo Kufuor, one of the President,s brothers,
enriched himself in the procurement of helicopters and South
African arms, using business ties involving family members.
The editor of a major daily told PolChief several companies
offered $20 million in bribes to obtain contracts to build a
stadium for the Confederation of African Football games in
Accra in 2008. The president,s staff was complicit, he
said, although the president's role is unclear. In November
2005, an accountant at the Department of Urban Roads in
Kumasi was caught diverting 4.3 billion cedis (around
$480,000) of public contracts into his personal account.

The U.S. team of Ghana's new national air carrier, Ghana
International Airways (GIA),told econoffs they had been told
they could reduce the ill will of some members of the
President's staff by awarding contracts to certain companies
that had been affiliated with the now-defunct Ghana Airways,
specifically the French ground service provider Aviance. GIA
managers speculate their first flight was delayed at least
six months by their refusal to consider any such deals.
Alcoa, currently negotiating with the GoG over their proposal
to build an integrated aluminum industry, reports that GoG
interlocutors asked for $3 million to fund an internal public
relations campaign to promote the industry within the various
ministries involved in the negotiations. When Alcoa
officials asked for a line-item budget to justify the cost,
their interlocutors could not produce one. When GoG
negotiators complained about not having personnel experienced
enough to fully evaluate Alcoa's proposals, Alcoa submitted a
list of consultants recognized industry-wide for their
competence and offered to pay for any work contracted. GoG
officials refused, but submitted a list of Ghanaian experts
(all GOG officials) and asked that Alcoa pay them instead.
Alcoa refused the proposal.

Party Politics: According to the Ghana section of the
National Democratic Institute's 2005 publication "Money and
Politics", "Either because of campaign debts or simply
because they have the opportunity to do so with impunity,
public officials are widely rumored to collect a 10 percent
cut in exchange for awarding various government contracts.
It is believed that those funds benefit both individuals and
political parties." In a scandal currently dominating the
news, the independent daily The Enquirer claims to have taped
recordings of the ruling NPP party chairman discussing with
the President and his officers how the presidency provides
funds to the party (in bags of cash left in the trunk of the
chairman's car) derived from kickbacks from government
contracts. (Comment: PolChief has discussed this allegation
with the author of the article and other journalists and
finds the story credible. End Comment.)
Shipping: Over/under invoicing, petty bribes, and falsified
duties and bond documents are commonplace at Ghana's ports
and customs offices. Customs officials have reportedly
established a color-coded system for suitcases of cash to
ensure they get properly distributed. The Serious Fraud
Office is investigating the NEPAD Minister's assistant for
misusing funds at the Free Trade Zone. Recent visits by US
Customs and Border Protection and the Coast Guard to port,
airport, and border stations found uncontrolled public access
to inspection areas and shoddy records. The Embassy has
offered to fund an internal investigatory unit for Ghana's
Customs, Excise, and Preventative Services (CEPS). CEPS
claims it cannot find the funds for office space needed for
the unit. CEPS officials responsible for investigating
corruption have indicated confidentially to Poloffs that CEPS
senior officials are not eager to establish a unit which
would reduce corruption.

The HIPC fund: The $200 million in funds made available
annually through the Highly Indebted Poor Country Initiative
(HIPC) are reportedly a source of significant corruption.
Senior Minister Mensah (brother-in-law of the president)
controls the HIPC funds, and uses these resources to fund the
GOG's patronage network. Deputy Minister of Finance and
Economic Planning Akoto Osei recently admitted to reporters
that he could not account for 27.6 billion cedis (just over
$3 million) of HIPC funds dispersed through his Ministry in
2004, listing the expenditures in his report to Parliament as
"other." Accountability of HIPC funds should improve under
the 2006 budget, which increases Finance Ministry control
over the funds and improves transparency in their allocation.

Education Sector: Assistant Director of the Serious Fraud
Office A. Tetteh Mensah told Poloff that the Ministries of
Health and Education have the greatest misallocation of funds
in the GOG, especially from schools and clinics that were
paid for but never built, and the inclusion of thousands of
"ghost" employees on their payrolls. (In 2001, the Minister
of Finance reported that "ghost names" on public payroll
alone cost the state an estimated $33 million -- 300 billion
cedis -- in financial losses annually. The GOG has made some
effort to address this but there is still not a functional
system for tracking all GOG employees on the payroll.) In
the GII study, the Ministry of Education was perceived as the
second most corrupt government entity. On September 2,
police revealed that 200 million cedis ($22,000) had been
embezzled by a Ghana Education Service employee in Upper East
Region. In October, 2005, the media reported on the Ministry
of Education,s decision to sole source a $28 million
contract for books without seeking the required prior
approval from the Public Procurement Board.

The Kufuor Hotel: In May, 2005, an Iraqi-American named
Gizelle Yajzi claimed she had tapes proving that President
Kufuor purchased a $3.5 million hotel near the presidency,
using his son as a front man. This case dominated media
attention for weeks, raising criticisms of conflict of
interest and abuse of power. (The President has denied
involvement in the deal.)

The judiciary: Supreme Court Chief Justice Kingsely Acquah
admitted to Ambassador Yates in her farewell call that
judicial corruption is a "big, terrible problem". He noted
that police recently discovered a judicial clerk embezzling
funds using duplicate stamps. In July, the Judicial Council
charged two High Court judges with stealing 115 million cedis
($13,000) deposited as fines.

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Comment
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6. (C) While Ghana has good democratic credentials, it has
some serious governance challenges. We should not be
surprised that corruption is prevalent and that there are top
officials involved, as happens elsewhere in the world. At
the root of the petty corruption are low public sector
salaries, poverty, weak institutions and a cultural tolerance
for spreading patronage that will not be changed quickly.
This is especially the case in a climate of relative impunity
in which opportunistic corruption is tolerated. The
dominance of the public sector, combined with a burgeoning of
donor funding (estimated at over $1.2 billion in grants and
loans for 2006),continues to create greater opportunity for
corruption. With those around the President realizing that
he cannot be returned to office in 2008, and that
opportunities for personal enrichment are relatively
short-lived, and with the constant requirement for campaign
funds at lower levels, official corruption is likely to
continue at a high level. Ghana's free media has also gotten
somewhat better at making us aware of corruption. While this
has increasingly stirred public debate, so far it has not
spurred the GOG to make a convincing effort to tackle
corruption. We do not doubt that Ghana is among the best in
sub-Saharan Africa in terms of corruption, but its presence
here as a very serious problem should be an indication of the
long-term difficulties in bringing Western-style development
in the near future.



























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