IBM, South African Business Fight Corruption by Refusing to Pay Bribes

Posted by: Jack Ewing on October 29

Talk to some multinational companies, and they’ll tell you that paying bribes is the only way to do business in parts of Africa and other emerging markets. That attitude is what got Germany’s Siemens into so much trouble, leading to a bribery scandal that cleaned out several layers of top management and forced new CEO Peter Löscher to impose strict anti-corruption rules. So, while visiting Johannesburg on a reporting trip, I’ve been interested to hear how some South African business people deal with the problem. They simply refuse to pay.

That method takes resolve. Executives at Massmart, a South African retailer with stores around sub-Saharan Africa, told me they have sometimes let inventory sit in ports for weeks rather than pay off customs officials. IBM, which runs its sub-Saharan operations from a Johannesburg suburb, also takes an uncompromising approach, according to Mark J. Harris, managing director of IBM South Africa.

If companies make it clear that they won’t bow to local corruption, eventually government officials and business partners get the message. “We try to impress on them that that’s the way IBM [operates],” says Harris. “The more of us that take that approach, the quicker things will change.” Contrary to the stereotype, many African officials and business people want to eliminate corruption because of the corrosive effect it has on development, Harris says. “We’re starting to see governments realize that good governance is fundamental to a strong economy.”

In fact, corrupt rulers have probably been the biggest impediment to African stability and living standards in the decades since countries became independent. Companies that refuse to make payoffs may lose some business in the short term, but long term they help make Africa a much better place for commerce.