Over the years, the City of London and its Stock Exchange have won a hard-earned reputation as a bastion of commercial probity, able to attract investment from every corner of the globe, and offering a reliable, rules-based exchange where business is conducted transparently and honestly.
As it has grown, it has provided security and stability, not just to Britain, but for the global economy.
The reputation of the City creates markets for our financial and professional services industry. Our open commercial climate, so carefully nurtured and regulated over centuries, is an asset we can ill afford to lose. Despite the blips, people still want to do business here – although some, sadly, for the wrong reasons.
But if investors sense that UK policy in the City is governed by short-termism and opportunism rather than the rule of law, we will all suffer. Entry to the City of London must be hard-earned in the eyes of the world, because otherwise there will be lasting damage to the UK’s economy. It cannot be seen as a way of legitimising dubious practices.
The Prime Minister’s admirable focus, with the rest of the G8, delivered the recent G8 declaration on transparency, accountability, fair and proper taxation and honesty in companies’ ownership. It is a huge step forward. It is essential, for our own businesses and for the developing world that these declarations become law and practice as soon as possible.
There must also be a renewed effort to ensure that our own institutions and those in other countries live up to the expectations we have of responsible and equitable enforcement of the rule of law.
Readers of the business pages will know of the recent travails of ENRC, the Central Asian-controlled mining giant which listed on the London Stock Exchange in 2007. After a host of opaque, complicated and hugely lucrative mining deals were signed with little or no regard to the requirements of, for example, the Extractive Industries Transparency Initiative, the Serious Fraud Office has finally launched an investigation. I have been leading the calls for those investigations, and am very pleased that they are now happening.
But it shouldn’t take six years, billions in dodgy deals and exploitation, and MPs getting involved, for the rule of law to be upheld.
We need to make sure that regulations are upheld as transparently as possible because it is to the benefit of resource-rich nations and the City. It is good, too, for the people of poor but resource-rich nations to know that someone, somewhere, is standing against shady dealing that sucks wealth away from them.
As an example of this, here is a test of our commitment. A controversial Zambian bank has expressed its desire to float in London. Finance Bank Zambia was, in 2008, taken over by the country’s central bank, and its main shareholder, Dr Rajan Mahtani, arrested and put under investigation by the country’s anti-corruption commission.
FirstRand Bank of South Africa then won a lawful tender to purchase the bank, but following his September 2011 election victory, President Michael Sata immediately reversed the sale and handed it back to Dr Mahtani, a close political ally.
President Sata, who has nationalised a host of foreign-owned firms and launched prosecutions against political foes since coming to power, also quashed Dr Mahtani’s corruption investigation. Dr Mahtani is, the key financial backer of the President’s Patriotic Front party, and largely bankrolled his campaign. He is now executive chairman of the bank and has set his sights on a London flotation for the bank next year.
I make no judgement on whether or not Finance Bank Zambia should be allowed to list in London – that is for the regulator – but I do call for our authorities to make sure they are not again offering a stamp of approval for controversial and exploitative practices.
It is of course vital that London continues to be the place that companies want to list, and that we enable a competitive and successful regulatory regime that ensures equitable access for all to the opportunities that a listing on the LSE offers. But we must also ensure that we too abide by the rule of law, and support its expansion around the world.
Pauline Latham OBE is MP for Mid Derbyshire, a Vice-Chairman of the Africa All Party Parliamentary Group and a member of the International Development Select Committee