PwC’s Contract empowers “The Smartest Guys in the Room” in Somalia
Two weeks ago, in the midst of tragic deaths, destruction, and massive displacement of people caused by the fighting of two forces marketed as “terrorists-local and International” and “apostates with crusaders”, Somali websites reported without details the signing of contract between the Ministry of Finance of the Transitional Federal Government of Somalia (TFUG) or Mogadishu Government and PricewaterhouseCoopers (PwC) - Audit, Tax and Consultancy Firm. The deal has attracted attention because it involves public resources management, an issue so critical for conflict resolution and peacebuilding. Furthermore, many observers of Somalia were curious about the contract for being depicted as an effort to promote accountability and to prevent corruption.
By contrast, the deal has deepened public distrust in TFUG because of the previous illegal agreements, the doubt about the possibility of PwC working in Mogadishu at a time members of Government, employees of UN and Humanitarian organizations fled Mogadishu, and the secret use of domestic revenue. In an interview with VOA, the Minister of Finance of TFUG gave truncated vague answers. He said that PwC will implement government instructions.
In the absence of National Institutions able to exercise oversight on Government activities, the Financial Times has investigated the scope of the contract for public interest and published informative article broadcasted by BBC. It is ironic that TFUG wants to claim an act of transparency when it keeps secret the content of the contract.
PwC confirmed that it has been appointed to hold and manage the pledged and allocated funds for institutional and capacity building and development in Somalia. Donors pledged about $213 millions.
It is clear that the Ministry of Finance has outsourced the responsibility of public resource management shared by the Parliament, Council of Ministers, General Accountant, Auditor General, Central Bank and Paymaster to an international private company-PwC. The contract bypasses all except the Ministry of Finance.
The Senior Advisor to the Minister of Finance, Abdusalam Omer has said that the [management] process will begin with PwC informing the relevant Ministries when funds arrive. PwC will verify that their [Ministries] spending plans match donor objectives, release funds and ensure they get into the hands of intended recipients. If the money is for salaries it will be transferred to the Somali employees and PwC will get receipts and signatures to show they got it.
The above described process presupposes a government under trusteeship. The Parliament is deprived of the right to approve and scrutinize the allocation and expenditure of donor funds. The Minister of Finance or his designated appointee(s) would liaison with PwC. Based on available information, no accountable public official involved in the process has been mentioned.
Apart the PwC’s work in Somalia appears in conflict with its core audit and consultancy services, the contract is lucrative, free from ligation and physical risks. Local agents would be local remittances who will take all risks on their own. The agreed percentage commission of 2-4% of funds disbursed would approximately generate an income of 2.2 to 8.5 million dollars. Understandably, both PwC and TFUG have great incentive in quick disbursement of donor funds.
The domestic revenue estimated to be 6 million dollars per month and other unaccounted cash paid by different supporters remain under the exclusive control of the Ministry of Finance since all other constitutional institutions are non-functional. It is absolutely impossible to determine the effectiveness of the budget plan publicized three months ago.
It is naïve or delusional to assume that the hiring of PwC addresses the lack of confidence in TFUG. The use of new computer system and electronic ledgers for tracking money disbursements to be carried out by staff stationed in Nairobi, Kenya will not prevent frauds and malpractice given the insecurity and institutional failure in Somalia. Somalia is a failed State. UNDP and other donors have been using similar financial management system since the collapse of the Somali state.
In all probability, PwC contract empowers “The Smartest Guys in the Room” in Somalia and could encourage sophisticated corruption practices and abuses of power. Contrary to the prediction of Ahmedou Ould-Abdalla, UN Envoy to Somalia, PwC contract will most likely generate windfalls for personal benefits. Client Confidentiality is a very handy defense for any abuse of power and misappropriation of funds.
Transparency International (TI) has reported that giving contracts are source of power to those who give them out and targets of ambition for those who may receive them, making public contracts particularly prone to abuse at the expense of public needs. The risk of corruption in public contract exists before and after the awarding of a contract. In 2008, payments to high ranking politicians and use of personal or familiar relationships to win public contracts have been the two major sources of corruption.
The priority should be to stop the war and create a government system rooted in constitutional checks and balances with strong public support. Present climate favors corruption and malfeasances that start with the recruitment of security forces, employees and selection of vendors/suppliers.
Mr. Mohamud M Uluso