Theft and Corruption at the Global Fund

In a January Foreign Policy column I explained how most of the malaria medicines donated to Togo by the Global Fund to Fight AIDS TB and Malaria (GF), had gone missing, stolen by that government's own procurement agency staff. I criticized the Fund for poor oversight and trying to do too much. What I wrote was obviously too much for the Executive Director of the Fund, Michel Kazatchkine and the Fund's Inspector General, John Parsons, who posted the following reply: "To imply, as Mr Bate does, that only foreign oversight can secure drug distribution is an affront to the vast majority of honest, hardworking pharmacists, doctors and nurses who are successfully and conscientiously delivering drugs to patients in many countries around the world."

The inference that I'm a bit of a racist stung, and for sure it is a useful ploy to discredit one's opponents this way. But it also set me wondering about what those who run the Fund consider an acceptable level of corruption. Rhetorically, like every other government and multilateral agency, the Fund claims to go after anyone shown to be engaging in illegal activity, but that doesn't mean they don't condone systemic fraud and failure.

After all, I've met many healthcare professionals in Africa who strike me as honest, diligent and caring, but so what? I've also visited five African Governments' Central Medical Stores (CMS), and all of them had serious management flaws. The results of this are obvious. My own research team's evidence showed that over a quarter of the gold-standard artemisinin combination therapies to combat malaria on sale in the private sector in eleven African cities, had been stolen from public sector supplies, most donated by western largesse. Theft from many CMS is not a rare occurrence: it is systemic.

What has awoken western media, however, is the financial thefts from the Fund, which have irritated the Swedish and German Governments enough for them to suspend payments to the Fund, totalling over $250m. But financial theft is only part of the problem. When is there enough evidence that CMS cannot be trusted to deliver donated drugs in order to make a general policy of not using them? From documents I've seen I know that at least 12 African Government CMS have been involved in corrupt activities with drugs bought with donor money (overwhelmingly money from the Global Fund). Not far off $100m in drugs has gone missing, most of it for malaria, some for HIV, and the Fund is fully aware that the following countries have major problems at their CMS--Burundi, Central African Republic, Malawi, Nigeria, Sierra Leone, Swaziland, Tanzania and Togo.

Indeed, some of these CMS are so poor that I can't imagine how Global Fund ever thought they were acceptable. I've seen better stock management techniques at the two student bars I worked at twenty years ago than in the worst CMS. In some CMS, physical security is so weak that they should never have been used by the Fund for that reason alone. Most of them need stock reconciliation, inventory management and supply chain training. When the US Government found persistent thefts in Angola CMS, it stopped using the Government Stores and established entirely different parallel distribution systems. Global Fund will probably do likewise in those countries listed above, or face a revolt from its donors.

But since the Fund is more transparent than any other multilateral donor, we know about more of its problems. What is most scary about the above-listed countries with failing CMS and distribution systems, is that the list does not include many of the worst examples of corruption, for which even the Global Fund has no idea how bad the situation has become.

The "recipient of last resort" for Global Fund money is the United Nations. In some countries where the private sector and governmental agencies are simply too corrupt or weak for even the increasingly lax Global Fund to use them, the UN Development Program steps in. Yet the UNDP won't provide its audit reports to the Fund even though the Fund has sent it over $1 billion in grants to 27 of the poorest and most corrupt countries around the globe.

The US Senate Foreign Relations Committee is likely to announce later this week that it will pressure US Government to prevent Global Fund from using the unaccountable UNDP, at least with US taxpayer funds. That is a good start. But more than that, the Committee must tell the Fund to go back to its core mission of buying commodities for countries which demonstrate they can be helped. The Fund was not established to be another inclusive UN agency which had to work with everyone, no matter how feckless, but that is what it has become.

The Fund is correct that the health systems in most locations are simply too weak to deliver the drugs--indeed, this is a key reason why good quality drugs are scarce. But it is not its job to train these people; such mission creep at the Fund is a major cause of its failure to prevent rampant corruption.

I hope the Fund's commendable effort to unearth corruption and improve its logistics will be an open process, which in the short run results in it bypassing many hopeless CMS and in the long run results in it funding fewer countries, dropping those consistently offending. But I fear money and drugs will continue to be donated to demonstrably corrupt actors--a major perversion of donor intent.

Roger Bate is the legatum fellow in global prosperity at AEI.

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