What Do Scandals in Brazil and South Africa Tell Us About the Link Between Transparency and Corruption?

by Paolo de Renzio, International Budget Partnership— Feb 01, 2016

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There’s a comment we have heard many times after the results of the Open Budget Survey are published. It goes something like this: “How can countries where corruption is rife score so well on your budget transparency index? Surely there must be something wrong with it…” Proponents typically point to countries like Uganda, Malawi, South Africa, and Brazil, which have seen their scores for transparency improve substantially or remain high over the years while making headlines for corruption scandals.

Shouldn’t corruption be lower in more transparent countries? In reality things are more complicated. Transparency, it seems, is a necessary but long from sufficient condition for successfully addressing the problem of corruption.

Without budget information it would be almost impossible for people outside government to spot and denounce cases of mismanagement and corruption. That’s why countries lacking transparency also tend to perform poorly on corruption indicators and, more generally, governance-related ones. As our research has shown, governments have a variety of motives for disclosing fiscal information that have little to do with the fight against corruption. And, for transparency to help tackle it, a number of additional factors need to be in place — from an active civil society, to an independent media, to effective oversight and accountability institutions.

Take South Africa. It has consistently ranked at the very top of the Open Budget Index (OBI) while repeatedly hitting the news for blatant cases of corruption and mismanagement, from procurement of school textbooks, to improvements of presidential residences, to mismanagement at state-owned South African Airways. While transparency may have helped to bring these issues to light, and outcry has been evident in media reports and popular protests, the government has done little to address underlying problems. Given the weakness of existing accountability mechanisms, and the grip that the African National Congress has on political power and state institutions, this should come as no surprise.

A different, more encouraging picture is emerging in Brazil, where some of the missing links are gradually being established.

The Brazilian federal government has made impressive gains in putting budget information in the hands of citizens and other interested actors. Its two main budget information portals, Orçamento Federal and Portal da Transparência, provide ready access to comprehensive budget documents going back 25 years and daily updates on all items of government spending. As a consequence, Brazil occupies a well-deserved sixth place on the latest global OBI ranking, ahead of many OECD countries.

This positive result was well-received by the authorities, which in recent months have come under fire from many fronts. The state oil company Petrobras has been engulfed in a massive corruption scandal involving senior politicians and managers, and the Treasury has been heavily criticized for using accounting tricks to hide the real state of public finances (the so-called “pedaladas fiscais”). Some of the allegations behind fiscal mismanagement have been used to start an impeachment proceeding against Dilma Rousseff, Brazil’s second-term president.

March 2015 anti-corruption protest in São Paulo. Credit: Radio Interativa/Flickr
March 2015 anti-corruption protest in São Paulo. Credit: Radio Interativa / Flickr

In fact, the Folha de São Paulo, a leading Brazilian newspaper, reported the latest OBS results with the headline “Despite accounting tricks, Brazil improves in budget transparency ranking,” casting doubt on the degree to which high levels of transparency made any real difference, given all of the other problems that were surfacing at the same time.

Yet what few people stop to consider is that it is exactly because of Brazil’s high levels of fiscal transparency that the accounting tricks used by the Treasury were detected. In fact, it was a non-governmental organization called Contas Abertas (Open Accounts) that uncovered discrepancies in the figures made available by the government at the end of 2013. This led them to highlight questionable “creative accounting” practices in a letter to the Audit Court (you can see the original letter in Portuguese here) and call for an investigation. Confirming the allegations and uncovering further evidence of dodgy accounting, the Audit Court took the very unusual decision to call on Congress to reject the 2014 year-end accounts. While a final decision has yet to be made, the executive has already taken corrective action by promising to stop using similar accounting tricks in the future.

This story is an important reminder of how powerful a weapon fiscal transparency can be when coupled with civil society organizations using and analyzing publicly available information and independent oversight institutions taking action to hold the executive to account. While transparency by itself may not necessarily lead to change, it creates the conditions for change to come about by enabling citizen engagement and independent scrutiny to work in favor of budget accountability.

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