ZAMBIA: Corruption allegations against president's allies underscore medium-term compliance risks

ZAMBIA: CORRUPTION ALLEGATIONS AGAINST PRESIDENT’S ALLIES UNDERSCORE MEDIUM-TERM COMPLIANCE RISKS

An investigation by US-based Environmental Investigation Agency (EIA) in early December 2019 alleged that the local production and overseas trade of ‘mukula’ logs was being facilitated by corrupt officials, including family members and close allies of Zambian President Edgar Lungu. The investigation prompted Corruptionwatch – the South African chapter of Berlin-based Transparency International – to call for a thorough investigation into the allegations made in the report. But the calls will have little impact on local and transnational networks involved in the international trade of the mukula, mainly due to legal ambiguity, poor governance in Zambia, and political and economic influence of Chinese traders.

Box. 1 – The problems with classifying mukula

Mukula is a loosely defined tree species which some amalgamate with the Zambian variant of African rosewood, while others point to a more arbitrary definition. Its trade in Zambia, as well as in parts of neighbouring countries Democratic Republic of the Congo and Malawi, has exploded since 2012 and is showing clear signs of accelerating local deforestation. It is primarily sold on markets in China, mostly for the production of hongmu – a type of imperial-style wooden furniture which is prized by China’s burgeoning middle class. The trade practices associated with its production, sale, and shipment, are also affected by fraud and bribery across its value chain.


The EIA alleged that senior ministers, including the ministers of land and justice, as well as President Lungu’s daughter, Tasila, had facilitated and orchestrated trafficking of the commodity for years, with ‘conservative estimates show that on average over 50 40-foot containers have been exported monthly from June 2017 to May 2019 […] in breach of export bans’. Furthermore, the US agency claimed that state-owned entities such as the Zambia Forestry and Forest Industries Corporation (ZAFFICO) was heavily implicated in the fraudulent issuance of export licences, such as through ZAFFICOI ‘special permits.’

These permits were established for the licit export of confiscated mukula logs, seized during periods over the past five years when Zambia banned the logging and trade of the wood.

Timber has historically transited through the port at Walvis Bay, Namibia, but over the past two years, suppliers have been forced shift the supply-chain to Durban port in South Africa. This is in part due to deteriorated bilateral relations with Namibia, in parallel with a clampdown on corrupt supply-chain practices in Tanzania which has increased cargo inspections.

Not only is this sometimes-illicit activity costing the government USD3.2 million in lost annual revenue and is threatening local mukula stocks and their wider habitats, it is also undermining recent international agreements to protect wildlife. In 2016, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (better known by its acronym CITES) granted the mukula a legal protection status.

The findings underscore supply-chain risks in Zambia. These are likely to primarily concern businesses in Western countries looking to source their wood in less-developed markets. The risks will mainly increase the compliance burden in home markets, as political opinion there is shifting towards becoming less damaging to the environment, likely compelling companies to apply higher supply-chain risk management standards over the next five years.

In turn, this also has third-party implications on international logistics operators using ports in southern Africa. This is because international regulations and compliance standards are increasingly driven by a risk-based approach, whereby operators are required to prove that they have assessed the direct and indirect risks to their operations.

THIS ARTICLE FIRST APPEARED IN THE January EDITION OF THE SUB-REGIONAL INTELLIGENCE MONITOR FOR EAST & SOUTHERN AFRICA

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