Sharpening fangs to fight corruption

Sharpening fangs to fight corruption

MASERU – A little country with big problems.
That is a fair description of Lesotho in relation to its perennial challenges to clamp down corruption.
The Directorate on Corruption and Economic Offences (DCEO) Director General, Borotho Matsoso, told thepost in an interview this week that corruption is choking Lesotho’s economic growth.
Unless something urgent is done, we risk staying in a rut for generations to come, he said.

The DCEO is now readying to undertake a study on the extent of corruption in Lesotho.
The study will seek to analyse the extent to which Lesotho has lost money through illicit financial flows (IFFs).
The study is expected to inform the strategy that the DCEO will adopt in the next few years to recover lost funds.
Matsoso said international indexes like Transparency International have revealed that the country is corrupt “but no study has been done to measure the scale of corruption locally and funds lost through IFFs”.

A 2011 study by Kar Dev says despite established institutions and legal framework, Lesotho was ranked one of the top three exporters of illicit capital between 1990 and 2008, registering cumulative outflows of US$16.8 billion after Bangladesh (US$34.8 billion) and Angola (US$34.0 billion).
The article was called, Illicit financial flows from the Least Developed Countries.

Matsoso says millions of Maloti have been siphoned out of the country especially by foreign investors.
He however says they do not know how much was lost through corruption and illicit financial flows.
“Because of weak systems and controls, investors from developed countries have found it easy to siphon money from this country,” Matsoso says.
He says these investors, in collaboration with locals, draw off money either through tax evasion, trade mis-invoicing or transfer pricing.

“You would find that foreign employees would only get paid a small portion of their salary that would be taxed here and then the bigger share is repatriated to their home countries without being taxed,” Matsoso says.
“For a long time this was practised by most factories titled under tax incentives,” he says.

He said a Chinese national is currently in court for allegedly flouting the Money Laundering Act.
“Money has been made and siphoned out, fake companies were set up using fraudulent IDs,” he said.
“It makes one wonder what kind of a job one is doing when he or she gets M20 000 a week. Do they even pay taxes?”

According to Matsoso a lot of money leaves the country during periods of political instability, “when we are busy fighting, investors siphon out a lot of money”.
“Some even promise politicians some sort of support during elections.” He said these foreigners take advantage of their business relationships and strike deals shrouded in secrecy.
“There is no transparency and that makes it easy to siphon out money.”

He said in his budget speech in February, Finance Minister Moeketsi Majoro expressed concern after some multinational companies failed to pay dividends to the government for years.
One of the companies Majoro cited was Lesotho Flour Mills. “If you look closely at the Flour Mills-Seaboard situation it is basically trade mis-invoicing. They say that they buy grains at a hefty price hence they are not able to make profits. The question is why are they buying it from oversees, why can’t they buy from locals who grow maize?”

Matsoso said there is no way the company did not make profits for that long. He said logic says they made their profits on the other side of their deals but in the process robbed the government of money that could have been used to develop this country.

He explained that trade mis-invoicing is a method that is used to move money illicitly across borders. It involves the deliberate falsification of the value or volume of an international commercial transaction of goods or services by at least one party to the transaction. He indicated that some steal money and hide it in South Africa and it becomes a struggle to get it back.

“Even in the mining industry you will see that the mines are being run from Ficksburg and Bethlehem.” He said unfortunately “when you fight corruption it fights back and it is well financed through proceeds of crime and has good connections and the minute you pounce on them you start getting calls from higher powers”. “But we never succumb to pressure,” Matsoso said.

He said those who benefit from these shady deals are often reluctant to support the DCEO in its fight against corruption. They are also quick to accuse the agency of threatening investors.
He said the “state capture” issue is not only in relation to Lesotho but the entire continent.  “Africa is a virgin continent and everyone wants to take advantage when time still permits.”

He said after the passing of the Money Laundering Act of 2017, that allows for the forfeiture of assets, the DCEO will now be able to recover money that was acquired through illegal means.
“The state of our economy is alarming. If we do not come together as a nation and realise that corruption and IFFs are not in anyone’s benefit, we will regret it,” he said.
“IFFs and corruption are already chocking us. Government is unable to fund necessary infrastructures like roads and hospitals.”

A 2015 report by the High Level Panel on Illicit Financial Flows headed by former South Africa president, Thabo Mbeki, says at least US$50 billion is lost through illicit financial flow every year.
That amount is double the amount that is officially sent to Africa in development aid every year.

l “This story was produced by [thepost]. It was written as part of Wealth of Nations, a pan-African media skills development programme run by the Thomson Reuters Foundation. More information at” .

Lemohang Rakotsoane

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