After taking power, President Emmerson Mnangagwa announced an amnesty for the return of funds which had been transferred outside the country. Those who would have refused to heed the call would be named and shamed.
The amnesty was presented as part of efforts to deal with corruption which had become rampant under the Mugabe administration. It was warmly received as a pragmatic step. There was some fear that it could be all bark and no bite but given the euphoria of the time, many were prepared to give it a chance. Now that it has run its course, however, it is important to analyse the measure and ask if the administration has achieved its objectives.
When the three-month amnesty period expired at the end of February, Mnangagwa extended it by a further two weeks. He explained that the RBZ had advised in favour of an extension to get more to comply. After the expiry of the deadline, the government published a long list of alleged offenders on 19th March 2018. Many have found the list rather underwhelming.
Naming and shaming
The action taken by the government is essentially a punitive measure known in regulatory parlance as “naming and shaming”. It is designed, as the name reveals, to shame named persons into compliance with a particular set of standards. The fear of being named and shamed is supposed to be an incentive for compliance with desirable standards.
Naming and shaming is a measure that is often used in the area of human rights, with serial violators being named and shamed by human rights watchdogs. In the area of corruption, the most corrupt states are also named and shamed by corruption watchdogs. It is also a popular tool in financial regulation, where it is used as a form of punishment for offenders. The hope, in all such cases, is that these the non-compliant states, companies or individuals would be driven into compliance by the desire to avoid being named and shamed. Its effectiveness is based on the assumption that states, companies or individuals care for their reputations and they have a sense of embarrassment.
In this case, the Zimbabwean government adopted naming and shaming as a tool to drive those who stashed funds outside the country to return them to Zimbabwe. Apparently, at the time of the deadline, $591 million had been returned, but the bulk of externalized funds - $827 million - remained outstanding. Diamond firms have been named among the biggest offenders as they allegedly failed to repatriate export proceeds. Interestingly, the government has a stake in some of these diamond firms which makes it intriguing that businesses in which government had an interest refused to heed the amnesty.
Another significant feature of the list of the named and shamed is that there are many Chinese nationals. It remains to be seen how China responds to its nationals being named and shamed for not repatriating funds to Zimbabwe. It has been said that China was not pleased with Mugabe after he effectively nationalized Chinese-owned diamond companies a few years ago. To his credit, Mnangagwa has not protected the Chinese, which suggests that they are not regarded as sacred cows.
An issue which may arise from the naming and shaming is the role of Bilateral Investment Promotion and Protection Agreements (BIPPA) where foreign nationals are involved. If a foreign country has a BIPPA with Zimbabwe, there are certain protections of investments which ought to be respected. In that case, naming and shaming ought to be approached with caution lest it upsets the current drive to attract investment and the “Zimbabwe is Open for Business” mantra.
Many have not been impressed by the list of the named and shamed. This is partly because most people expected to see high profile names, including senior politicians. After all, most people believe politicians are among the most corrupt individuals in the country and are likely to be among culprits who externalized funds. Some suspect that the political class is protecting its members and that the anti-corruption drive is too selective.
Another reason is that there was excessive drama around the announcement of the amnesty and the threat of naming and shaming, which generated excitement and high expectations. The two-week extension added more drama, intrigue and suspense to the story. As it happened, most people were disappointed when people did not see any high profile casualties on the list. To them, much had been promised but little was delivered. The outcome did not seem to match the words.
Of course, it may be that the absence of high profile names is simply because the threat to name and shame actually worked so that the high profile offenders did comply with the amnesty. It is difficult to know for sure whether this is the case because the list of those who complied cannot be made public without undermining the whole exercise. The success of the amnesty was based on the protection given to those who complied. It would defeat the use of naming and shaming in future if those who complied are named regardless of their compliance. So it is unlikely that we will ever know who actually complied unless there is a leak. The risk is that those who complied partially will get away with the bulk of their loot.
Another reason is that the actual identity of offenders may be hidden behind the companies on the list. It is trite that a company is a person which is separate from its shareholders. Many individuals who are involved in corrupt practices and illicit financial flows usually make use of corporate vehicles. This helps them to “hide” behind the corporate personality of those corporate vehicles. Corporate personality is often referred to metaphorically as the “corporate veil”. You would have to lift or pierce the corporate veil in order to identify the actual individuals behind it – those who have actual control of the corporate vehicle.
This is why efforts to fight corruption and money laundering are more effective where laws require the disclosure and collection of information on the beneficial ownership of corporate vehicles. This is the information that is missing from the list. If the beneficial ownership of the companies on the list is revealed, it would be easy to identify the individuals. Indeed, some of them may be high profile individuals that people are keen to see on the list.
This leads to the next issue: what next after the naming and shaming? Is this the end?
Named but are they ashamed?
It would be counter-productive if this is the end. The partially-compliant would have tested the system and seen that it is all bark and no bite. It won’t stop them doing the same thing in future. Naming and shaming work if there are real consequences for those who are named. Indeed, the named must actually be capable of feeling ashamed. It is the fear of being shamed that must drive them to avoid being named and by implication, it drives them towards compliance. If such incentives do not exist, they will not alter their behaviour, however many times they are named.
In a regulated profession such as law, medicine or accountancy or trade such as plumbing or electrician naming and shaming usually works because of the damage it would cause to one’s professional standing and business. But where there are no consequences beyond being named, one could easily shrug it off, bite their teeth and carry on. In that case, naming and shaming is a useless and counter-productive tool.
The problem is worse where one is able to “hide” behind a corporate veil, which means they avoid being named directly. In that case, there is no incentive for them to comply because the naming and shaming have no direct effect. This is why it is important for the government to go beyond the current list and lift the corporate vehicle in order to disclose the beneficial owners of those corporate vehicles. Failure by government to go beyond the corporate veil will actually give an incentive for future offenders to simply form corporate vehicles and continue with their behaviour.
If the government does not collect information on beneficial ownership of corporate vehicles, this should jolt it into action to amend the laws and change systems so that this information is disclosed and updated regularly. Without data on beneficial information of corporate vehicles, the fight against corruption is much diminished.
Having said this, the government has to be careful in the use of naming and shaming because it has human rights implications. As already stated, naming and shaming is a punitive measure. Its use against citizens is based on the assumption that due process would have been followed. This means before a person is named and shamed, they would have been advised of the offence they are accused of and given an opportunity to be heard and to defend themselves. These rights are set out in a number of constitutional provisions including the right to human dignity (section 51); rights of accused persons (section 70) and right to administrative justice (section 68). These are critical rights which if violated could give rise to legal action against the government. Did the government give notice to the listed persons before they were named and shamed? Were they given a chance to explain and defend themselves before the naming and shaming?
Some people might take the view that government is right to name and shame alleged offenders and that the issue of their rights is secondary. But it is important to understand that whatever the government does and however noble its intentions may be, it must act in accordance with the law and the constitution. The substantive notion of the rule of law demands that human rights must be upheld at all times. Constitutionalism sets outs the limits of governmental power and in this case, human rights are areas in which governmental interference is limited by the constitution. The alternative to constitutionalism and the rule of law is arbitrary rule, which is a great danger to the nation. The government must never be allowed to use arbitrary power because it’s a bad habit.
Government is not a court of law which has the power to judge and pronounce guilt after hearing both sides. Naming and shaming alleged offenders might be popular with the public but it must be remembered that they remain alleged offenders enjoying the presumption of innocence until they have had their day before an impartial tribunal or court. The right to a fair hearing is enshrined in the constitution for a good reason. Thus in naming and shaming alleged offenders, the government may have acted with too much haste, particularly if they have named and shamed otherwise innocent parties. This could expose government to very expensive litigation should such parties seek to vindicate their rights.