US embassy cable - 05ACCRA2425

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, corruption 
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. 
 
--------------------------------------------- ---- 
Balancing the Ghana Picture: Corruption Pervasive 
--------------------------------------------- ---- 
 
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). 
 
------------------------ 
Opportunistic Corruption 
------------------------ 
 
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. 
 
------- 
Comment 
------- 
 
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. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BRIDGEWATER