Does It Matter for Africa with Whom It Trades? Estimations of the Impacts of Africa’s Trade with the EU and China on Corruption

ABSTRACT

This research builds upon theoretical assumptions regarding the relationship between openness to international trade and corruption. It seeks to answer the question of whether it matters for Africa with whom it trades. Specifically, our goal is to estimate and compare the impacts of Africa’s trade with two key entities: the European Union (EU), its traditional primary trading partner whose share in Africa’s bilateral trade has recently declined, and China, its emerging trading partner whose share in Africa’s bilateral trade has been steadily increasing. This assessment will be focused on impacts on corruption. Our research utilizes a panel dataset comprising twenty-eight African countries for the period spanning from 2002 to 2016. We employ regression models including pooled OLS, fixed effects, and random effects, drawing upon data from the International Trade Centre, International Country Risk Guide, and the World Bank. Our findings suggest a weak but positive correlation between Africa’s rising trade activity and corruption. However, this correlation is more pronounced in the case of trade with the EU, where the impact is estimated as positive, as opposed to trade with China, where it is estimated as negative. Additionally, while higher natural resources rents tend to have a negative impact on corruption in Africa, our results indicate that this is not the case of rents derived from trade with the EU.

KEYWORDS:

• Africa
• China
• corruption
• EU
• natural resources rents
• trade

Acknowledgments

The authors thank the Editor-in-Chief and reviewers of The Journal of the Middle East and Africa for their constructive comments and suggestions which have significantly improved their manuscript.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Guardian Nigeria, “$140bn Yearly Loss to Corruption can Address Africa’s Power Challenge,” The Guardian Nigeria News, Dec. 8, 2020, https://guardian.ng/business-services/140bn-yearly-loss-to-corruption-can-address-africas-power-challenge/.

² “African Union Convention on Preventing and Combating Corruption | African Union,” n.d., https://au.int/en/treaties/african-union-convention-preventing-and-combating-corruption.

³ Christian Keulder, “African See Growing Corruption, Poor Government Response, but Fear Retaliation if they Speak Out,” Afrobarometer Dispatch No. 488, https://www.afrobarometer.org/wp-content/uploads/migrated/files/publications/Dispatches/ad488-pap2-africans_see_growing_corruption-afrobarometer_dispatch-4nov21.pdf.

⁴ Al Jazeera, “S Africa: Ramaphosa Admits Rampant Graft During Time as Zuma VP,” Corruption News, Al Jazeera, Aug. 11, 2021, https://www.aljazeera.com/news/2021/8/11/s-africa-ramaphosa-admits-rampant-graft-during-time-as-zuma-vp.

⁵ News 24, “State Capture Inquiry finds SAA ‘Racked by Corruption and Fraud’ Under Dudu Myeni,” News24, Jan. 4, 2022, https://www.news24.com/fin24/companies/just-in-state-capture-inquiry-finds-saa-racked-by-corruption-and-fraud-under-dudu-myeni-20220104.

⁶ Tafi Mhaka, “Corruption: Africa’ Undeclared Pandemic,” Al-Jazeera, July 2, 2022, https://www.aljazeera.com/opinions/2022/7/2/corruption-africas-undeclared-pandemic.

⁷ See for instance Federico Bonaglia, Jorge Braga de Macedo, and Maurizio Bussolo, How Globalization Improves Governance, Technical Papers vol. 181 (Paris: OECD, 2001); Omes Gokcekus and Jan Knoerich, “Does Quality of Openness Affect Corruption?” Economics Letters no. 91 (2006): 190–6; and Lorenzo Pellegrini and Reyer Gerlagh, “Causes of Corruption: A Survey of Cross-Country Analyses and Extended Results,” Economics of Governance no. 9 (2008): 245–63.

⁸ See for instance Bonaglia, de Macedo and Bussolo, How Globalization Improves Governance; Nathan Nunn, and Daniel Trefler, “Domestic Institutions as a Source of Comparative Advantage,” Handbook of International Economics 4 (2014): 263–315; and Omer Gokcekus, and Yui Suzuki. “Mixing Washington Consensus with Beijing Consensus and Corruption in Africa,” The Singapore Economic Review 61, no. 2 (2016): 1640029.

⁹ See for instance Vito Tanzi, Corruption Around the World: Causes, Consequences, Scope, and Cures (Washington: International Monetary Fund, 1998), 559–94; and Daniel Treisman, “The Causes of Corruption: A Cross-National Study,” Journal of Public Economics 76, no. 3 (2000): 399–457.

¹⁰ Yoshiaki Hisamatsu, “Does Foreign Demand Affect Corruption?” Applied Economics Letters 10, no. 1 (2003): 1–2.

¹¹ See for instance Anne Krueger, “The Political Economy of the Rent-Seeking Society,” The American Economic Review 64, no. 3 (1974): 291–303; Pushan Dutt, “Trade Protection and Bureaucratic Corruption: An Empirical Investigation,” Canadian Journal of Economics/Revue Canadienne d`Economique 42, no. 1 (2009): 155–83; and Ivar Kolstad, and Tina Soreide. 2009. “Corruption in Natural Resources Management: Implications for Policy Makers,” https://www.cmi.no/publications/3479-corruption-in-natural-resource-management.

¹² International Trade Centre, “Trade Map,” n.d., https://www.trademap.org/Index.aspx (accessed March 15, 2022).

¹³ See Transparency International, “Global Corruption Barometer Africa 2019,” https://www.corruptionwatch.org.za/wp-content/uploads/2019/07/GCB-Africa-2019-Full-report-WEB.pdf; Keulder, “African see growing corruption, poor government response, but fear retaliation if they speak out”; International Country Risk Group, “International Country Risk Data,” https://www.prsgroup.com/explore-our-products/international-country-risk-guide/ (accessed March 15, 2022).

¹⁴ See for instance James Robinson, Ragnar Torvik, and Thierry Verdier, “Political Foundations of the Resource Curse,” Journal of Development Economics 79 (2006): 447–68; Xavier Sala-i-Martin, and Arvind Subramanian, “Addressing the Natural Curse: An Illustration from Nigeria,” Journal of African Economies 22, no. 4 (2013): 570–615; Jean-Francois Maystadt, Giacomo De Luca, Petros Sekeris, and John Ulimwengu, “Mineral Resources and Conflicts in DRC: A Case of Ecological Fallacy?” Oxford Economic Papers 66, no. 3 (2014): 721–49; Vincent Onodugo, and David Olufemi Isijola, “Natural Resources, Fuel Exports and Corruption Policy in Africa,” Corvinus Journal of Sociology and Social Policy 11, no. 1 (2020); and Åse Gilje Ostensen, and Mats Stridsman, Shadow Value Chains. Tracing the link between corruption, illicit activity and lootable natural resources from West Africa (Anticorruption Resource Centre, 2017), https://www.u4.no/publications/shadow-value-chains-tracing-the-link-between-corruption-illicit-activity-and-lootable-natural-resources-from-west-africa.pdf.

¹⁵ Hisamatsu, “Does Foreign Demand Affect Corruption?”; Jan Knoerich, “International Trade and Corruption: The Influence of Trading Partners” (Seton Hall University Dissertations and Theses, 2004) (ETDs), 682.

¹⁶ International Trade Centre, “Trade Map,” n.d., https://www.trademap.org/Index.aspx (accessed March 15, 2022).

¹⁷ Transparency International, “Where are Africa’s Billions?” https://www.transparency.org/en/news/where-are-africas-billions.

¹⁸ Joshua Meservey, Chinese Corruption in Africa Undermines Beijing Rhetoric About Friendship with the Continent (The Heritage Foundation, 2017), https://www.heritage.org/global-politics/report/chinese-corruption-africa-undermines-beijings-rhetoric-about-friendship-the.

¹⁹ Transparency International, “Exporting Corruption. Progress Report 2020,” https://files.transparencycdn.org/images/A-slim-version-of-Exporting-Corruption-2020.pdf.

²⁰ Omer Gokcekus, and Yui Suzuki, “Intensity of Trade with the EU and Corruption in Africa,” Journal of Economic Integration 28, no. 4 (2013): 610–30.

²¹ Gokcekus, and Suzuki, “Mixing Washington Consensus with Beijing Consensus and Corruption in Africa.”

²² See for instance Vincent Taiwah, Jeleta Kebede, and Anthony Kiyu, “Corruption, Chinese Investment, and Trade: Evidence from Africa,” Journal of Emerging Market Finance 21, no. 1 (2022); Razim Quazi, Vijay Vemuri, and Mostafa Soliman, “Impact of Corruption on Foreign Direct Investment in Africa,” International Business Research 7, no. 4 (2014); Christopher Culver, “Chinese Investment and Corruption in Africa,” Journal of Chinese Business Economic and Business studies 19 no. 2 (2017): 119–45; and Wenjie Chen, David Dollar, and Heiwai, Tang, “Why is China Investing in Africa? Evidence from Firm Level,” World Bank Economic Review 32 no. 3 (2018): 610–32.

²³ Taiwah, Kebede and Kiyu, “Corruption, Chinese Investment, and Trade: Evidence from Africa.”

²⁴ Ann-Sofie Isaksson, and Andreas Kotsadam, ”Chinese Aid and Local Corruption,” AidData Working Paper no. 33 (2016). https://docs.aiddata.org/ad4/pdfs/wps33_chinese_aid_and_local_corruption.pdf.

²⁵ Hisamatsu, “Does Foreign Demand Affect Corruption?”

²⁶ Jan Knoerich, “International Trade and Corruption: The Influence of Trading Partners” (Seton Hall University Dissertations and Theses, 2004) (ETDs), 682.

²⁷ Gokcekus and Suzuki, “Intensity of Trade with the EU and Corruption in Africa”; Gokcekus and Suzuki, “Mixing Washington Consensus with Beijing Consensus and Corruption in Africa.”

²⁸ International Trade Centre, “Trade Map.”

²⁹ International Country Risk Group, “International Country Risk Data,” n.d., https://www.prsgroup.com/explore-our-products/international-country-risk-guide/ (accessed March 15, 2022).

³⁰ World Bank, “World Development Indicators,” n.d., https://databank.worldbank.org/source/world-development-indicators (accessed March 24, 2022).

³¹ See for instance Bonaglia, de Macedo and Bussolo, How Globalization Improves Governance; Omer Gokcekus and Jan Knoerich, “Does Quality of Openness Affect Corruption?” Economics Letters 91 (2006): 190–6; and Lorenzo Pellegrini, and Reyer Gerlagh, “Causes of Corruption: A Survey of Cross-Country Analyses and Extended Results,” Economics of Governance 9 (2008): 245–63.

³² See for instance Bonaglia, de Macedo and Bussolo, How Globalization Improves Governance; Nunn and Trefler, “Domestic Institutions as a Source of Comparative Advantage”; and Gokcekus and Suzuki, “Mixing Washington Consensus with Beijing Consensus and Corruption in Africa”

³³ Daniel Treisman, “The Causes of Corruption: A Cross-National Study,” Journal of Public Economics 76, no. 3 (2000): 399–457.

³⁴ Tanzi, “Corruption Around the World: Causes, Consequences, Scope, and Cures.”

³⁵ Krueger, “The Political Economy of the Rent-Seeking Society.”

³⁶ Dutt, “Trade Protection and Bureaucratic Corruption: An Empirical Investigation.”

³⁷ Roberta Gatti, Corruption and Trade Tariffs, or A Case for Uniform Tariffs, vol. 2216 (Washington: World Bank, 1999).

³⁸ Muhammad Tariq Majeed, “Corruption and Trade,” Journal of Economic Integration 29, no. 4 (2014): 759–82.

³⁹ Carlos Leite, and Jens Weidmann, Does Mother Nature Corrupt? Natural Resources, Corruption and Economic Growth, WP/99/85 (Washington: International Monetary Fund, 1999).

⁴⁰ Kolstad and Soreide, “Corruption in Natural Resources Management: Implications for Policy Makers.”

⁴¹ See for instance Jeffrey Sachs, and Andrew Warner, “The Big Rush, Natural Resource Booms And Growth,” Journal of Development Economics 59, no. 1 (1999): 43–76; R. Auty, Resource Abundance and Economic Development (New York: Oxford University Press, 2001); Thorvaldur Gylfason, Tryggvi Thor Herbertsson, and Zoega Gylfi, “A Mixed Blessing: Natural Resources and Economic Growth,” Macroeconomics Dynamics 3 (1999): 204–25; Thorvaldur Gylfason, “Natural Resources, Education, and Economic Development,” European Economic Review 45 no. 4–6 (2001): 847–59; and Sala-i-Martin and Subramanian, “Addressing the Natural Curse: An Illustration from Nigeria.”

⁴² Hisamatsu, “Does Foreign Demand Affect Corruption?”

⁴³ Knoerich, “International Trade and Corruption: The Influence of Trading Partners.”

⁴⁴ International Trade Centre, “Trade Map.”

⁴⁵ Majeed, “Corruption and Trade.”

⁴⁶ Sala-i-Martin and Subramanian, “Addressing the Natural Curse: An Illustration from Nigeria.”

⁴⁷ Hausman, “Specification test in econometrics,” Econometrica 46, no. 6 (1978): 1251–71.

48 See for instance Joscha Legewie, and Thomas DiPrete, “School Context and the Gender Gap in Educational Achievement,” American Sociological Review 77, no. 3 (2012): 463–85; and Thomas Hinz, and Hermann Gartner, “Geschlechtsspezifische Lohnunterschiede in Branchen, Berufen und Betrieben,” Zeitschrift für Soziologie 34, no. 1 (2005): 22–39.

⁴⁹ See for instance Pellegrini and Gerlagh, “Causes of Corruption: A Survey of Cross-Country Analyses and Extended Results”; Bonaglia, de Macedo and Bussolo, How Globalization Improves Governance, and others.

⁵⁰ Gokcekus and Suzuki, “Intensity of Trade with the EU and Corruption in Africa.”

⁵¹ Hisamatsu, “Does Foreign Demand Affect Corruption?”

⁵² Knoerich, International Trade and Corruption: The Influence of Trading Partners.

⁵³ Frederik Van der Ploeg, “Natural Resources: Curse or Blessing?” Journal of Economic Literature 49 (2011): 366–420; Keisuke Okada, and Sovannroeun Samreth, “Corruption and Natural Resources Rents: Evidence from Quantile Regression,” Applied Economic Letters 24, no. 20 (2017); and Anthony Venables, “Using Natural Resources for Development: Why Has It Proven so Difficult?” Journal of Economic Perspectives 30 (2016): 161–84.

Additional information

Funding

The research has been supported by a research grant from the Association for the Study of the Middle East and Africa, Washington, D.C.

Notes on contributors

Tereza Němečková

Tereza Němečková earned her Ph.D. degree from the Prague University of Business and Economics in Czechia. In 2022, she achieved an associate professorship in international economic relations from the same university. Her expertise encompasses the world economy, international development, and international trade and development, with a specific focus on Africa. Currently, she serves as the head of the African Studies Centre Prague, the sole research center in the country dedicated to examining current economic and geopolitical dynamics in Africa. Alongside her research responsibilities, she also conducts lectures at the Metropolitan University Prague and the University of Hradec Kralove.

Arshad Hayat

Arshad Hayat holds M.A. degrees from the International Islamic University Islamabad (Pakistan) and Czech University of Life Sciences (Czechia), and a Ph.D. degree from Charles University Prague (Czechia). Until 2023, he served as an Assistant Professor in the Department of International Business at Metropolitan University Prague and as a research fellow at the African Studies Centre Prague. His research interests include exploring the impact of international trade and foreign direct investment on institutional quality, as well as investigating the interplay between foreign direct investment, natural resources, and economic growth.

Lea Melnikovová

Lea Melnikovová holds a master’s degree from the Prague University of Economics and Business (Czechia) and a Ph.D. from the Czech University of Life Sciences (Czechia). Currently, she serves as an Assistant Professor in the Department of International Business at Metropolitan University Prague (Czechia). Her expertise lies in the world economy, international development, and international trade, with a specific focus on Russian economic development and the post-Soviet region. In her role as a research fellow at the African Studies Centre Prague, she concentrates on examining the growing economic engagement of Russia with Africa.