Corruption, ethics and technology

Insider Advantage
One of the biggest issues affecting most people that very few talk about in African tech is the problem of corruption. It exists, and we cannot wish it away. It’s hard to prove or reveal, and most people would rather be silent. The prevailing attitude is; “things are already complicated enough as it is and there is no point in making new enemies”. I believe however that it is an issue that needs addressing.

Early in the 1990s, before Internet growth in Nigeria and technology knowledge became ubiquitous, people took advantage of customer ignorance to make massive fortunes from the sales of computer hardware. Margins of over 100% and even more were very common. Selling technology equipment was quite a profitable venture, and it created new millionaires. Technology then was some commodities trading business with software as an afterthought. These millionaires kept things secret until the Otigba traders got involved in the hardware and consumables business. Competition forced sellers to publish hardware prices in newspapers, and a lot of companies who were taking advantage of consumer ignorance were wiped out.  The market became aware. These initial market forces helped to shape the future of Nigerian technology and create more opportunity. A lot of people would not have been able to afford their first devices or acquire software if competition didn’t exist to make things reasonably priced.

Early in our business, we bid for a contract with a teaching hospital for a computerisation project, and we were called to withdraw our proposal because it was too low. We had marked up our cost by 100% yet we discovered later that the closest bid was ten times higher than ours. The tender committee didn’t believe we could supply the devices and complete a project at that cost. We showed them our costs and proved that we could. We made several enemies as we had ruined a perfect insider deal. Someone even approached us to buy our letterhead paper for one hundred thousand Naira for each page if we would drop our bid. We stuck to our proposal and ethics, and the entire bidding exercise got halted. They started a new process, collected fresh tenders, and didn’t invite us. While we may have had a cost advantage as a startup, we did not have any “insider advantage”.

Another personal experience with corruption was with one of our very first clients. We were being forced to review our pricing for a project because the manager in charge of the project wanted to take a huge chunk of the fees for himself. Luckily for us, the client had a British Managing Director who had a lot of experience in dealing with local corruption.  We complained, he investigated and was on our side; the manager lost his job. We faced a lot of threats and opposition internally from the manager’s colleagues after that incident.  We suffered because we were truthful. We however persevered and were guaranteed almost a monopoly in providing services to the client as long as our prices were reasonable. We declared our markup openly and remained with that client for another seven years.

That client has never had a Nigerian Managing Director as the foreign majority shareholders have been wary of the risk of losses due to insider corruption by locals. Their experience kept reinforcing the stereotype. One of the CEOs told me that it would take a Nigerian Saint to oversee so much cash paid out to suppliers and still rely on their salaries.

A lot of other technology people are not as lucky as we were. It is very common to find people working as fronts for their friends or bosses who are insider employees of their clients. As expected, very few people will be open about this. Disclosure of interests is exceedingly rare. Extortion happens both in the public and private sector. I can even dare say that is the norm rather than the exception.

There are very few Nigerian companies with strict supplier gift policies to prevent inducement. A lot of people have not known any standards. We were lucky we started working for Global organisations early, and they set the standards for us to follow. Those companies have strict policies against bribery and insider deals.  Working with them shaped our approach to issues concerning bribery and corruption. We enforced zero tolerance to corruption internally not just because our clients have the same policies but also to maintain our professionalism and integrity.

Insider deals are a very slippery slope for technology companies. They start seemingly harmless until there is full dependence. When technology service firms depend on insiders for business, standards start falling, and mediocrity creeps in. Insider corruption is probably why our technology industry never took off after the boom of the 90s. There was no incentive for professionalism or excellence. Large technology companies eventually resembled public sector bureaucracies, and the rest of the world left us behind.

Outsider Corruption
When stakes are high, people do almost anything to get projects. Unsolicited inducement is a huge problem. When internal organisation processes are weak, external players take advantage of it. Huge margins almost guarantee brutal competition. I have been chased by assassins and almost killed for being a barrier to fraud as a client side consultant. I have been offered trips abroad to exotic locations, and my colleagues threatened. It was one of the reasons we decided to leave the Information Security Consulting business altogether. We also rarely accept public sector assignments because of the risks from lack of transparency.

The importance of ethics
Our technology industry is now gaining global attention. One of the things foreign investors now do during due diligence is to check if the company they plan to invest in or their stakeholders have ever had any indictment for corrupt acts or if there is a risk of exposure. I believe it is one of the reasons external startup accelerators insist on fresh offshore incorporation even for existing businesses.

Fraud and corruption are not Nigerian words. They exist in other places where the public and private sector have managed to tame them. Local companies with high ethical standards exist. The first Harvard Business School case I read on an example of an ethical company in this part of the world was on Guaranty Trust Bank (now GTBank). They have consistently maintained the highest moral standards from their very inception. The Guardian newspaper was also founded on the principles of ethical journalism. We need more ethical role models, and technology companies now have the chance to continue the trend.