Water Policy 9 Supplement 2 (2007) 69–81
The role of governance in countering corruption: an African
African Centre for Water Research, Suite 17, Private Bag X1, Vlaeberg 8018, Cape Town, South Africa.
The Trialogue model of governance includes relationships between three main actor clusters—government, science and
society—within which the quality of the relationships between the three actor-clusters “determines the extent to which
government can generate the incentives needed to develop society by allowing science to inform the decision-making
process”. Corruption, in the form of the bribery of a public ofﬁcial, diminishes the quality of the relationship between the
society cluster, usually in the form of private-sector business interests, and government. The drop in quality in this
relationship has a negative impact on the quality of the government—science interface, due to increased project costs, in
turn dropping the quality of the science—society interface, due to a drop in quality or increase in the price of services. Far
from being purely a morally detestable action, corruption has a direct impact on the level of development of both a society
and a country, undermining efforts to promote growth, equity and access to services. The asymmetries in power between
some of the large corporations and developing countries has led to a situation where corruption is taken as the norm and it is
assumed that there is very little that can be done about it. The case study of how Lesotho confronted corruption on the
Lesotho Highlands Water Project, leading to the prosecution of the Chief Executive of the Lesotho Highlands Development
Authority as well as three multinational corporations, provides an example of what can be done by a developing country to
promote good governance through tackling corruption. This paper investigates the impact of corruption, speciﬁcally on
large-scale water infrastructure development projects, and what measures can be taken to combat it.
Keywords: Anti-corruption measures; Corruption; Governance; Integrated water resources management
(IWRM); Lesotho Highlands Water Project; Trialogue
Good governance, sustainable development and public integrity, of both individuals and institutions,
are closely linked to one another, with each being dependent on the others. The close relationship
between these concepts was described by Mr Kofﬁ Annan, Secretary General of the United Nations, in
his opening address at the 9th International Anti-Corruption Conference in Durban on 10 October 1999:
q IWA Publishing 2007
70 A. Earle / Water Policy 9 Supplement 2 (2007) 69–81
It is increasingly recognised that integrity and good governance are essential building blocks for
meeting the objectives of sustainable development, prosperity and peace . . . Good governance and
integrity require the rule of law, effective state institutions, transparency and accountability in the
management of public affairs, respect for human rights, and the meaningful participation of all
citizens in the political processes and decisions affecting their lives. (Annan, 1999)
Simply deﬁned, corruption is “the abuse of public power for private gain” (Camerer, 2002).
Corruption in government contracting has a direct impact on the quality of services provided to citizens.
If the Millennium Development Goal (MDG) of halving the number of people without access to water
and sanitation is to be reached, corruption needs to be tackled. Transparency International, the global
corruption watchdog, estimates that bribery in government procurement amounts to $400 billion
annually worldwide (Eigen, 2004). It is increasingly realised by the international development
community that corruption has a negative impact on economic growth, with a drop of around one
percentage point in GDP growth annually being associated with those countries with high levels of
corruption (World Bank, 2003). The quality of services provided to citizens by government drops when
corruption is involved, along with possible increases in the prices of those services. This has a
proportionally greater impact on the poor and vulnerable in society, as they frequently cannot afford to
pay the increased costs or to pay a bribe to access these services. The wealthier individuals can access
other sources of water, at the very least securing drinking water supplies through buying bottled water.
The poor lack the luxury of being able to make such a choice. Corruption is sometimes referred to as a
“victimless crime” as there is no obvious victim, as exists in the case of assault (Penzhorn, 2004).
However, it is society in general that suffers, especially those who are already marginalised.
The Multinational Corporations (MNCs) are also losers in the corruption game. Corruption adds to
their costs of doing business, eating into their proﬁts and the dividends paid to their shareholders.
However, the managers in these MNCs will counter that, in order to do business in the developing world,
bribes have to be paid. If there is to be any hope of them securing an infrastructure development contract,
the right public ofﬁcial will need to receive the right gratuity. This is a reality in many parts of the
developing world. What is often omitted is the fact that it is a practice also prevalent in many parts of the
developed world. In the USA the Foreign Corrupt Practices Act (FCPA) of 1977 was passed after
employees of the aeroplane manufacturer Lockheed were caught paying bribes to Japanese government
ofﬁcials in the course of trying to sell the company’s aircraft. According to Transparency International’s
Global Corruption Barometer report of 2004, countries where corruption affects political life “to a large
extent”, i.e. rated as such by more than 50% of respondents surveyed, include developed economies such
as France, Greece, Italy, Israel, South Korea and Taiwan (Hodess & Wolkers, 2004).
There are two reasons why corruption is perceived to be more prevalent in developing countries.
The ﬁrst has to do with the large imbalances of power between the MNCs and the developing
countries. A country such as Lesotho is ranked 145th out of 177 in the Human Development Index of
the United Nations Development Programme (UNDP, 2004). Its annual GDP of $700 million pales
into insigniﬁcance alongside the over 300 hundred billion dollars in annual sales of the world’s largest
MNCs such as ExxonMobil, Wal-Mart Stores and Royal Dutch Shell (Forbes, 2006). The government
ofﬁcials in charge of handing out contracts on infrastructure development projects in developing
countries earn low salaries—in some situations making it necessary for them to augment their incomes
through other means. The honest will take on extra work or run a sideline business—the dishonest will
request bribes for carrying out their public duty. The second factor contributing to the perception of
A. Earle / Water Policy 9 Supplement 2 (2007) 69–81 71
corruption being more prevalent in the developing world is that, while most developed country
governments made local corruption a crime a long time ago, it has, until recently, not been considered
a crime to bribe foreign public ofﬁcials. This changed in 1999 with the introduction of the OECD
Convention Combating Bribery of Foreign Public Ofﬁcials in International Business Transactions.
Prior to this legislation, most European countries viewed bribe payments as a legitimate tax-deductible
expense (Earle & Turton, 2005).
This perception of corruption, coupled with the reality of high levels of corruption in many developing
countries, contributes to low levels of foreign direct investment in these economies. MNCs, foreign
governments and International Finance Institutions (IFIs) are often not willing to assume the extra risk
involved in doing business in a corrupt climate. As a consequence, these countries become increasingly
marginalised from the global economy and their infrastructure development suffers. It is thus important
to describe the successes which developing countries have achieved in combating corruption—such as
Lesotho’s achievement in the Lesotho Highlands Water Project. The southern African region is poised
for a period of large-scale infrastructure development in the water, transport and electricity sectors. If
these developments are to be completed successfully, with participation by the international business
community, local businesses and governments will need to show that they take a ﬁrm stand against
2. Corruption and governance
No matter how thin the pancake—it always has two sides—Dr Mamphono Khaketla, Lesotho Minister
of Natural Resources, at the 2005 Stockholm World Water Week.
The perception of corruption as being purely a developing-country problem is just that—a perception.
As the above quotation indicates, it involves a giver and a taker. A bribe is offered and a bribe is
accepted—in which both parties have committed a crime. Much like Integrated Water Resources
Management (IWRM), one can speak of a demand side, as well as a supply side, to the problem of
bribery. It is a reality that some public ofﬁcials around the world, in both developing and developed
countries, demand bribes. In some countries the practice may be more widespread than in others. But the
businesses offering the bribes to the government ofﬁcials are just as guilty as the ofﬁcials who receive
them. For the supply side of corruption to stop, effective implementation of anti-corruption (of foreign
ofﬁcials) legislation is needed. An indication of the effectiveness of such legislation is that American
ﬁrms have, over the past decade, complained that the provisions to which they have to adhere under the
US FCPA cause them to lose out on business internationally (The Economist, 2002). They are suffering
under the ﬁrst-mover disadvantage and will continue to do so until companies from other countries have
to start playing by the same rules.
The role which MNC construction businesses play in infrastructure projects in the developing world is
large. Much of the developed world has moved away from supply side solutions to water resources
management, i.e. the hydraulic mission phase, towards managing the demand for water through the process
of IWRM (Turton et al., 2005). Today most developed countries seldom embark on large-scale water
infrastructure development projects, with some, such as Sweden, placing a moratorium on the construction
of new dams. The large engineering and construction ﬁrms which built the water infrastructure in the
72 A. Earle / Water Policy 9 Supplement 2 (2007) 69–81
hydraulic mission years now either have to shift their ﬁeld of activity or to look for new markets. Much of
the developing world is embarking on its hydraulic mission to supply the domestic, industrial and
agricultural sectors with water, as well as electricity through hydropower generation—needing the skills
and expertise of the foreign large construction ﬁrms for their water resources development projects. In
many cases these projects in the developing world are funded through International Finance Institutions
(IFIs)—such as the World Bank. The funds available are large and represent a sizeable opportunity for the
construction and engineering ﬁrms. Commensurate with the potential rewards of being involved in these
large-scale infrastructure projects is the high level of competition between the various contractors.
Operating margins are usually tight, with little leeway for further cost-cutting. The technological
advantages of one ﬁrm over another are generally not large in the construction industry, with most ﬁrms
being able to adopt the latest methods of design and construction. The net result is that companies make use
of any small advantage possible, including building up a good working relationship with the public ofﬁcials
in charge of allocating funding to such infrastructure projects.
According to Stansbury (2005), the following features of infrastructure construction projects make
them particularly prone to corruption:
1. “Size of projects. While construction projects vary in scale, infrastructure projects in particular are
often huge. The costs of dams, power stations, industrial plants and highways can run into billions of
dollars. It is easier to hide large bribes and inﬂated claims in large projects than it is in small projects.
2. “Uniqueness of projects. The fact that many major construction projects are ‘one off’ makes costs
difﬁcult to compare, which in turn makes it easier to inﬂate costs or hide bribes.
3. “Government involvement. Most infrastructure projects are government-owned. Even privatised
projects require government approvals for planning or agreements to pay for end-product use. The
industry tends to be heavily regulated at both national and local government level. Numerous
permits are often required. Where there are insufﬁcient controls on how government ofﬁcials
behave, their power—combined with the structural and ﬁnancial complexity of the projects—makes
it relatively easy for ofﬁcials to extract bribes.
4. “The number of contractual links. While there are numerous variations to the individual project
structure, the contractual cascade could easily have more than 1,000 links, each depending on other
contractual links in the chain. Every single link provides an opportunity for someone to pay a bribe
in exchange for the award of a contract. In addition, work and services are exchanged for payment in
relation to every contractual link. Every item of work and every payment provide further
opportunities for bribes to be paid in return either for certifying too much work, certifying defective
work, certifying extensions of time or paying more expeditiously.
5. “The number of phases makes project oversight difﬁcult. Projects normally have several different
phases, each involving different management teams and requiring handovers of the completed phase
to the contractors undertaking the next phase. Even if a single contractor undertakes all the project’s
phases, it will normally subcontract different elements of the task to individual subcontractors,
which creates difﬁculties in control and oversight.
6. “The complexity of projects. Because of project complexity, the interrelationship between
contractors and events is often uncertain. People working together on a project frequently appear not
to know, or to disagree upon, the reasons why something has gone wrong, or why costs overrun. This
makes it easier to blame others and to claim payment, even when such claims are unjustiﬁed. Bribes
A. Earle / Water Policy 9 Supplement 2 (2007) 69–81 73
and inﬂated claims can easily be hidden and blamed on other factors, such as poor design or
7. “Lack of frequency of projects. Major projects come at irregular intervals. Winning these projects
may be critical to the survival or proﬁtability of contractors, which provides an incentive to
contractors to bribe.
8. “Work is concealed. Most components in construction end up being concealed by other components.
Structural steel may be concealed by concrete, brickwork by plaster, engineering components in
casings, and roof structures by cladding. The industry places an enormous dependence on the
individuals who certify the correctness of the work done before it is concealed; once an item is
concealed, it can be very costly or difﬁcult to check if it was completed to the required standard. This
cost and difﬁculty creates an incentive for contractors to do defective work or to use inferior materials,
and to bribe the relevant ofﬁcial to certify that the work was done according to speciﬁcation.
9. “A culture of secrecy. There is no culture of transparency in the construction industry. Costs are kept
secret even when it is public money that is being spent. Commercial conﬁdentiality takes precedence
over public interest. The routine inspection of books and records that might uncover malpractice
does not normally occur.
10. “Entrenched national interests. Local and national companies often have entrenched positions in
their own market. These positions have often been cemented by bribery. International companies
seeking to enter these markets may ﬁnd it impossible to win work unless they pay a bribe.
11. “No single organisation governs the industry. Construction brings together a wide range of
professions, trades and specialist contractors, leading to varying standards of skill, integrity and
oversight. The professions include architects, engineers, surveyors, accountants and lawyers; and the
trades include machine operators, scaffolders, bricklayers, electricians and plumbers. Each
profession or trade may have a different professional association, with different codes of conduct and
levels of enforcement of these codes. No single organisation has overall responsibility.
12. “Lack of ‘due diligence’. The scale of funds involved in major infrastructure projects places great
inﬂuence in the hands of the ﬁnancing bodies that determine whether a project goes ahead, and
which companies win the contracts. Commercial banks and global or regional development banks
provide most of the funds, while government-sponsored export credit agencies may underwrite risky
international projects. Their frequent lack of due diligence in regard to participants in construction
projects allows corruption to continue.
13. “The cost of integrity. It is striking how many people working in the construction sector either accept
the status quo, or makes no attempt to change it. Bribery and deceptive practices are so ingrained that
they are often accepted as the norm. Bribery is frequently a routine business cost, which many
companies expect to include in the contract price. The fact that so many businesses in construction
routinely pay bribes or engage in deception makes it very costly for any one company to act with
integrity, since that company would risk losing out to its less scrupulous competitors. As a result, many
companies ﬁnd themselves in a vicious circle in which they engage in corruption, often reluctantly, as a
defensive measure against the corrupt practices of other companies. Fortunately, some businesses and
industry associations are taking steps to change the status quo.” (Stansbury, 2005)
The result is that the MNC construction ﬁrms chase after a substantial source of income in the
developing world in great competition with one another. Add to this the power disparities between
the MNCs and the developing country governments, and their public ofﬁcials, and one has a recipe for
74 A. Earle / Water Policy 9 Supplement 2 (2007) 69–81
the abuse of public trust. Governments are meant to enlist the services of the private sector for a
particular project and the private sector is meant to use science, speciﬁcally engineering science in this
case, to provide infrastructure services for society at large (see Figure 1).
In this hypothetical situation there is bidirectional interaction between the various actors:
. Government and society—responding to a developmental need within society, such as water or
. Government, society and science—using engineering, physical and life sciences to develop a project
to serve society.
Fig. 1. Hypothetical governance interaction and negative interaction as a result of corruption.
A. Earle / Water Policy 9 Supplement 2 (2007) 69–81 75
. Government and society—this time using the private sector to carry out components of the project,
under the supervision of a public ofﬁcial.
. Science and society—leading to an improvement in the quality of life of people through the provision
of infrastructure services.
In the negative situation an element of corruption is introduced—whether by the public ofﬁcial or the
private sector, the effect is the same. The extra costs associated with corruption immediately have a
negative impact on the project at hand. This negative impact can be a drop in the quality of the
infrastructure project or it can add unnecessary costs to the project. If the quality level of the project is
dropped this can lead to health and safety problems for the community concerned, or can impact on the
sustainability of the infrastructure project. An increase in the costs of the projects will usually have to be
borne by the consumers—in the worst-case scenario, precluding the vulnerable in society from accessing
the service. A decrease in the level of service provision in a country will in turn lead to slower economic
growth, leading to lower government revenue, lower government expenditure and less income for the
For this vicious cycle to be broken there needs to be effective interfacing between the various sectors,
with each one playing a role:
. Government—through its rule-making, rule-application and rule adjudication roles.
. Society—through developing the voice of civil society through instruments such as a free press and
open debate as well as through the private sector developing a code of ethics and getting employees to
adhere to a code of conduct while doing business.
. Science—by establishing a ﬁrm mandate to operate in the service of society and for scientists to report
illicit activities which they may uncover.
3. Lesotho Highlands Case1
The Lesotho Highlands Water Project (LHWP) is the largest international water transfer scheme in the
world (Department of Water Affairs & Forestry (DWAF) 2004). This massive engineering project
involves the construction of a series of dams and tunnels in the mountains of Lesotho at altitudes above
2500 m. The project was initiated to provide water to the industrial heartland of South Africa, Gauteng
Province, including the city of Johannesburg (Earle et al., 2005). Phase One of the LHWP has resulted in
the transfer of around 750 million m3 of water per year from Lesotho to South Africa, earning Lesotho
enough in royalties (currently at around R220 million or US$30 million a year out of a GDP of $700
million per anuum) to cover all its foreign debt (Earle & Turton, 2005). The project was initiated in 1986
when the Treaty on the Lesotho Highlands Water Project between the Government of the Republic of
South Africa and the Government of the Kingdom of Lesotho (hereafter referred to as the Treaty) was
signed between South Africa and Lesotho. This Treaty created three public institutions:
The case study is based on public records, such as court proceedings and judgments as well as interviews with individuals
consenting to being cited.
76 A. Earle / Water Policy 9 Supplement 2 (2007) 69–81
. The Lesotho Highlands Development Authority (LHDA)—tasked with the implementation,
supervision and maintenance of the LHWP in Lesotho.
. Trans-Caledon Tunnel Authority (TCTA)—responsible for the components of the project located in
. Joint Permanent Technical Commission (JPTC)—comprising two delegations (one from each
country) and tasked with overall project oversight.
Masupha Ephraim Sole was appointed the ﬁrst Chief Executive (CE) of the LHDA in November 1986.
In 1993 an internal audit into the ﬁnances and management of the LHDA revealed mismanagement on
his part and unearthed sufﬁcient grounds for him to be dismissed in 1995. The uncovering of Mr Sole’s
corrupt activities started with the disciplinary inquiry at the LHDA into the way he charged private
expenses to the project, abused the housing scheme of the project and provided family members with
jobs (Earle & Turton, 2005). During his subsequent appeal of his dismissal it emerged that he had
mismanaged parts of the contracting process, causing ﬁnancial losses to the LHDA. The civil
proceedings which the LHDA brought against Mr Sole to recover the funds unearthed a complex web of
Swiss and South African bank accounts with a range of payments into them (Penzhorn, personal
communication, 2005). The Lesotho prosecution managed to gain access to the Swiss banking records—
largely due to changes in Swiss banking law providing for a greater degree of transparency. Efforts to
obtain the Swiss banking records were challenged in the Swiss Court of Appeal by the various MNCs on
the project, with the Swiss authorities handing the banking records over to Lesotho in 1997—a key point
in the case. From these banking records the Lesotho prosecution was able to develop cases against
Mr Sole and several of the MNCs on the project.
Finally, in 1999 criminal charges of bribery were brought against Mr Sole by the Lesotho prosecuting
authority. In 2002, he was convicted on 11 charges of bribery and two of fraud, and then sentenced to
18 years’ imprisonment, which, on appeal, was reduced to 15 years. He received bribes from various
intermediaries, including representative agents in the employ of some of the MNCs involved on
the project, through a complex process of international ﬁnancial transfers using his Swiss
and South African bank accounts (Rex vs. Acres, 2003). These agents included Mr Jacobus
Michiel Du Plooy (a South African), Mr Zalisiwonga Bam (Lesotho) and Mr Max Cohen (French) (Rex
vs. Sole, 2002).
The prosecution of Mr Sole unearthed a nest of corruption involving up to 19 international
construction and consultancy ﬁrms, all members of various consortia involved in construction work on
the LHWP. The prosecution succeeded in showing that the agreements between the MNCs and the
representative agents were nothing more than facades to provide an impression of legitimacy. The
companies were paying the agents at above-market rates for services which they did not require.
Included in the agreements was the “no duck—no dinner” clause—frequently an indicator of corrupt
practice (Earle & Turton, 2005). This clause states that payment will only be made by the company to the
agent on the successful award of a contract (Penzhorn, personal communication, 2005). The payments
made by the MNCs to the agents were consistently and rapidly followed by pro rata payments from the
agents to Mr Sole—usually at a ﬁxed proportion of the original amount.
The JPTC was reconstituted as the Lesotho Highlands Water Commission in 1999, with much the same powers and modus
operandi as before.
A. Earle / Water Policy 9 Supplement 2 (2007) 69–81 77
Three of the MNCs have been found guilty of bribery and sentenced to the payment of various ﬁnes,
which have since been paid:
. Acres International (Canadian): ﬁned M15 million3.
. Lahmeyer Consulting Engineers (German): ﬁned M12 million.
. Spie Batignolles (French): ﬁned M10 million.
Cases against the other MNCs are still pending (see the Appendix for a summary of the trials). In
2004, Acres was debarred by the World Bank from bidding on Bank-funded projects for a period of three
years. Such debarment holds out a credible threat to MNCs, as a large portion of their work depends on
these projects. Furthermore, the South African government has instituted legal proceedings against the
convicted companies to recover the amounts they paid to Sole as bribes, the argument being that those
costs were added to the total project cost and would have to be covered by the consumers of water from
The LHWP trials established several important points of precedent which will, in future, assist similar
prosecutions in other parts of the world. Lesotho, one of the poorest countries in the world, managed to
achieve a “ﬁrst”: never before had an MNC been successfully convicted of bribery outside of its home
jurisdiction (Darroch, 2003). This is an important point as it shows that developing countries are not
powerless in their efforts to counter corruption. In the absence of a judicial process bringing the MNCs to
book in their home countries, there is a lot which can be achieved by developing countries themselves.
Lesotho managed to bring about the initial convictions with no outside ﬁnancial assistance. For the
subsequent trials, project funds are being used to cover the costs, on the understanding that these will be
repaid from the ﬁnes successfully levied against the defendants.
Two of the most important points to emerge from the trials are the legal concepts of “jurisdiction”
and “bribery”. The judge at Mr Sole’s trial, Acting Justice B Cullinan, settled these points early
on in the proceedings, and they have had a bearing on all the subsequent trials (Darroch, 2003). He
. Jurisdiction—should the case be tried in Lesotho or another country? The defence argued that the
High Court of Lesotho did not have jurisdiction to try the matters, as it could not be proved where the
agreement to make and accept a bribe had taken place. The payments were made mainly in
Switzerland—outside the Lesotho High Court’s jurisdiction. To settle this issue, Cullinan AJ gave a
review of several cases where jurisdiction was an issue, one of these involving a collision between a
French and a Turkish ship in international waters, and another involving a case of a blackmail letter
posted in England to a person in Germany. He decided that, even if payment was made outside
Lesotho, it was made with the expectation that Mr Sole would exercise his inﬂuence in Lesotho in
favour of the contractor. Thus the impacts of the bribery would be felt in Lesotho, no matter where the
agreement or the payment was made, and therefore the Lesotho High Court did indeed have
jurisdiction over the cases.
. Bribery—what are the elements of the offence, which have to be proved by the prosecution? Bribery,
in the Roman—Dutch law of South Africa, which is also followed in Lesotho, is a common law
offence. Thus there is not one clearly spelled-out deﬁnition of bribery—previous cases and
The Lesotho Maloti trades at direct parity to the South Africa Rand. 1 US$ ¼ M6.5 (2005).
78 A. Earle / Water Policy 9 Supplement 2 (2007) 69–81
judgements have to be studied for guidance on how to handle the case at hand. For this purpose,
Cullinan AJ referred to a 1919 deﬁnition of bribery in the South African Criminal Law and
It is a crime at common law for any person to offer or to give to an ofﬁcial of the State, or for any such
ofﬁcial to receive from any person, any unauthorised consideration in respect of such ofﬁcial doing or
abstaining from or having done or abstained from, any act in the exercise of his ofﬁcial functions.
Furthermore, Cullinan AJ deemed that, for the crime of bribery to be proved, the following elements
needed to be found, common to both briber and bribee:
3. a state ofﬁcial,
4. offering or agreeing to give or take any consideration,
5. in return for action or inaction by the bribee in an ofﬁcial capacity.
Defence council for Mr Sole argued that, while working for the LHDA, he was no longer a public ofﬁcial
and thus should not be the subject of bribery charges. Cullinan AJ ruled, however, that as he was seconded
by the Minister to perform duties representing the state on a parastatal, he was indeed still acting as a public
ofﬁcial. He also ruled that the offence of bribery had been committed once the agreement had been made.
Thus, no action or inaction was necessary to prove that bribery had in fact taken place—the mere offering
and accepting of a sum of money was sufﬁcient. The offence is committed by both the briber and the bribee
and they are thus both liable to prosecution. This makes the proof of bribery considerably easier, as it is
notoriously hard to prove the existence of an illicit agreement.
Cullinan AJ also ruled that both the briber and the bribee (bribe-taker) were equally responsible and
liable for prosecution. Thus, prosecutions did not end with the judgement against Sole, a national of
Lesotho, but went on successfully to convict the international companies which offered him bribes
(Earle & Turton, 2005).
High-proﬁle court cases such as those of the LHWP have a direct impact on the demand side
of bribery. Several commentators have since mentioned that the Lesotho public organisations, NGOs and
businesses they deal with have become more attuned to preventing bribery. According to the CEO of
Letsing Diamonds, which operates in the Lesotho Highlands close to the LHWP, doing business in that
country has become considerably easier since the trials started, and public ofﬁcials now carry out their
duties in an efﬁcient and transparent manner (Whitelock, personal communication, 2005).
Good governance begins at home. Power disparities between MNCs and developing countries, along
with the characteristics of the infrastructure construction industry, make corruption more likely to occur.
Corruption has a direct impact on society at large and, in the long run, leads to underdevelopment.
The absence of international norms on combating corruption—notwithstanding recent moves to remedy
A. Earle / Water Policy 9 Supplement 2 (2007) 69–81 79
this situation—makes evading prosecution in the MNC’s home country easier. By using the governance
tools available to it, including rule-making/application and adjudication, as well as by being prepared to
make a ﬁnancial sacriﬁce, the government of Lesotho was successful in making a contribution to good
governance in the water sector of that country. The key starting point in that case, and indeed any other,
was the generation and maintenance of political will. The Lesotho prosecution authority enjoyed the
highest level of government support and was free from interference by other parties. South Africa sought
to support Lesotho at the highest political level—promoting the trials domestically and internationally,
as well as providing a range of technical support services (Croucamp, 2005). This is not always the case,
and this is where the international community—IFIs and NGOs, together with local civil society—can
play a role in encouraging the governments of developing countries to take seriously the threat posed by
corruption and to initiate processes to combat both the demand and the supply side of the situation.
Partnerships need to be formed between various sectors; science, government and society. An example
of such a partnership is the King Report on corporate governance in South Africa, the provisions of
which large corporations voluntarily implement in a bid to improve transparency and accountability.
Such initiatives need to be mobilised at the international level, since much of infrastructure development
involves international actors such as IFIs, MNCs and governments.
Annan, K. (1999). Global integrity in a changing world. Speech delivered at the 9th International Anti-Corruption Conference,
Durban, South Africa, 10 October. Available at: http://www.transparency.org/iacc/9th_iacc/papers/day1/plenary/
d1pl_kannan.html (Accessed 3/10/05).
Camerer, L. (2002). The Consequences of Corruption. Available at: http://www.odiousdebts.org/odiousdebts/print.
cfm?ContentID ¼ 6213 (Accessed 3/10/05).
Croucamp, W. (2005). Personal telephonic communication on 8 August, 2005 with the Director of Infrastructure Services,
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Appendix. Summary of the LHWP corruption trials.
Company or Country Trial status/outcome Size of bribes Size of ﬁne Area of project related to parties Fine
individual name of origin trial involved paid?
Acres Canada Convicted on 2 counts of Count 1: CAD M22,058,091 Contract 65 (granted Sole, Mr Y
bribery—reduced to 1 on 493,168.28 Reduced to 1991)—provision of Bam, Ms
appeal (15 Aug. 2003) Count 2: CAD M15,000,000 on services for the Bam
188,255.48 appeal establishment and
implementation of the
construction of Katse
dam and associated
A. Earle / Water Policy 9 Supplement 2 (2007) 69–81
Lahmeyer Germany Convicted on 9 counts M2,3000,000 M10,650,000— Contact 46—construction Sole, Mr Y
of bribery. Appealed increased to of Lesotho delivery tunnel Bam, Ms
(26 Mar. 2004) M12,000,000 on Bam
Lahmeyer Germany Trial in progress M1,000,000 Contract 51—Muela Reatile
(alleged) power project Mochebele
Spie France Pleaded guilty to 16 counts M16,000,000 M10,000,000 Contracts 124/5/6, and Sole, Y
Batignolles of bribery (Feb. 2004) Contracts 129A/B Cohen
(now Schneider (Muela Dam and Muela
Electric) Power Station civil works)
HWV—Impregilo Italy Trial in progress $1,100,000 Contract 123— Sole, Du NA
(alleged) construction of Katse Plooy
ABB Sweden Admission of guilt Contract 134 Sole, Ms NA
Masupha Sole Lesotho Found guilty on 11 counts M8,058,877 M8,900,000 Including contracts: 123, Bam, Ms Y
of bribery and 2 of fraud 129b, 117, 123/4/5/6, Bam, Du
and sentenced to 15 years 134, 46, 65, 104, 104, Plooy,
imprisonment (on appeal) 59/9, Cohen
Jacobus Michael South Africa Pleaded guilty (Sept. 2003) $1,139,000 M500,000 Contract 123 Sole Y
Margaret Bam Lesotho Charges dropped? Sole NA
Max Cohen French? Absconded FFR 2,802,237 29, 124/5, 45, 111, 129b Sole NA
NB: The above represent the trials which have either been completed or are proceeding through the judicial process. Omission from this list does not imply that
charges have not been brought against a speciﬁc party.