Implication of corruption on economic growth in South Africa

By: Adebimpe Ofusori

The word corruption is coined from the Latin word “corruptus,” which connotes “corrupted”. Legally, it is referred to as abuse of a trusted position with the purpose of illegally obtaining material benefit for personal or other uses. There are many major factors responsible for the decline in economic growth in South Africa. Top on the list is corruption.  Corruption has been a major economic setback to so many African countries including South Africa. In fact it is often regarded as “the evil” that negatively affect the developmental strides in public administration as well as in the political system. Corruption has been with us for ages and rather than been driven to obscurity, the perpetrators are quick to evolve new tactics to keep “the evil” going and to cover up their antics.  For developing countries, the influence of corruption on economic growth cannot be overemphasized as the general perception about its detrimental effects is so enormous. In recent years, the government of BRICS countries has been confronted with lots of task on how to abate corruption. The acronym ‘BRICS’ represents a grouping of emerging economies comprising Brazil, Russia, India, China and South Africa. Out of these countries, Russia has the highest corruption perception compared with other BRICS member countries.

South Africa has also, started to experience a gradual increase in the corruption perception in recent times. According to information documented in The Conversation, South Africans are not the happiest people due to continuous increase in the level of corruption and public sector incompetence. This has led to protest one time or the other in the country due to the negative economic impact on the citizens. Rather than having a decline in the rate of corruption, there has been a continuous increase which is perceived to be due to mild or nonexistence of consequence management to serve as deterrent to others; this has further emboldened the perpetrators. South Africa is the third-most miserable economy on earth according to Bloomberg’s Misery Index, which ranks major economies by inflation and unemployment expectations. South Africa’s worse economy is behind that of Venezuela and Argentina.  Although there seem to be improvement in the inflation rate of around 2.2% being the lowest in 15 years, the unemployment rate as announced officially is put at 30% which is the highest in a decade. Estimation by the government suggest that between 3 and 7 million people could lose their jobs this year. This negative effect will be largely bore by the poor within the society and it is unlikely this economic hardship will reverse soon due to the current global pandemic (COVID-19) which has further plunged the South Africa’s ailing economy into distress.  Even in the midst of COVID-19 pandemic, corruption was still been perpetrated as reflected in the misappropriation of the relief funds which were meant to procure PPE and alleviate the sufferings of vulnerable households, farmers and small businesses. This actually became worrisome to President Cyril Ramaphosa who had earlier vowed to fight against every form of graft in the country.

Corruption thrive depending on morality, professional ethics political and economic environment. Observation from various quarters have shown that corruption is very harmful not only to humans but also to the society due to its effect on other pressing Sustainable Development Goals (SDG) agenda developed by the United Nations. This SDG agenda which is made up of 17 goals, is designed to protect the planet and improve the living conditions of its inhabitants. Corruption escalate into unemployment, reduction in tax revenue, decline in business operation and ultimately, collapse of the economy. Statement credited to Marianne Merten in Daily Maverick emphasized on the negative impact of State Capture and grand corruption in South Africa before and after the Zuma-Gupta presidency. Particular reference was made on the fact that a third of South Africa’s R4.9-trillion gross domestic product has been wiped out thus culminating into lack of job creation and poor delivery of essential social programmes and services. This is particularly of concern if resources meant for important sectors such as health and education are compromised. This will affect the quality of health, learning and social wellbeing of the people most especially the low-income earners.

Effect of different types of corruption on economic growth in South Africa

• Nepotism: This occurs when important sectors in the society are staffed with unqualified close associates or party members (as a reward for loyalty) at the expense of highly trained and qualified personnel. In some cases, bribes are taken from poor masses for poor service delivery. Service delivery which is the ultimate goal for buoyant economy are often compromised and played down. Studies showed that nepotism leads to unfair treatment, bias in decision-making, and also hinders competition and innovation in the long term. Some are of the opinion that family members and friends are the best people to be trusted than anyone else who could easily betray them but what they failed to realize is that nepotism also closes the door of opportunity to others who could perform better and enhance the growth of the economy. A research conducted and reported by The Conversation stated that about 73% of respondents condemned the actions of public officers who favour their own families at the expense of others who are more resourceful and competent. All these shenanigans surrounding nepotism culminate into poor economic growth with the low and middle class of the society bearing the brunt the most due to lack of adequate resources needed for the improvement of the living standards of the masses.
• State Capture: This is a new corruption term in South Africa that explains how few people in government “capture” the State apparatus and redirect it to serve private interest. Of specific note is the role played by the Gupta family and their relationship with the former president, Jacob Zuma. The organs of the State such as the police, the tax collection service, the prosecution authority responsible protecting the country against corruption are also compromised. The direct and indirect effect of State Capture was so enormous on South African economy thus leading to cruel condition of leaving by the low income earners in the society. Journalists learnt that former president, Jacob Zuma, used public funds to pay for lavish upgrades to his personal estate in Nkandla, a town in rural KwaZulu-Natal (Zuma’s eastern home province). The effect of State capture on South African economy was so significant that it extended to the scandals involving contracts for coal supply and power-plant construction of which Eskom, the state-owned electricity utility, was at the center of the corruption. All these affected the socioeconomic status of the society and also increased the rate of crime. During this period of State Capture, there was lack of transparency and public officers seldomly give account of their stewardship there by plunging the country’s economy into further distress.
• Petty corruption: This involve giving of bribes in the form of gift, favour or money for service delivery or possibly to avert being fined or punished. It is very rampant in South Africa’s public sector. A survey recently conducted showed that more bribes are likely to be paid to traffic officials, followed by police officers and officials in employment offices. The effect of this type of corruption on economic growth is often underestimated because it is probably believed that it does not affect the economy as much as grand corruption. Investigation has shown that petty corruption in the form of bribery can cost companies up to 2.5 to 4.5 per cent of their sales which represents about 20 per cent of labour costs for average manufacturing companies. Petty corruption has a negative toll on the tax revenue of the country as willing citizens are discouraged to pay. It also leads to tax evasion by the rich in the society who can bribe their way through. This eventually leads to a biased tax system that confers favouritism to the rich at the expense of the poor and middle class in the society there by negatively affecting the growth of the economy.

Some of the Implications of Corruption on Economic Growth

The implication of direct effects of corruption on economic growth are enormous. They include but not limited to:

• Unemployment/underemployment: Corruption has been well documented to have a ripple effect of the socioeconomic status of the citizens. This is because the resources meant to improve the lives and wellbeing of majority is being sabotaged or diverted and utilized by just a few in the society. Continuous depletion of the country’s resources can lead to economy collapse and the consequence ranges from loss of job, unemployment or underemployment. Unemployment statistics among the youths in South Africa is mind blowing. Out of 36 million working age population, the youth between the ages of 15 to 35 constitute 55%. It is also worrisome to note that out of about 19.7 million youths, only 6.2 million are gainfully employed. 3.6 million are unemployed while 1.53 million have stopped searching for job according to The Conversation. Corruption has been linked to GDP, the higher the incidence of corruption in a country, the lower the level of GDP.
• Poverty: Poverty is a product of corruption. When a country mismanaged the resources meant for majority as a result of corruption, jobs will be difficult to create with scares resources while the available jobs will be under threat due to decline in financial obligations by the employer of labour. The masses whose employment are at risk during financial recklessness by any country are the low income earners which constitute a high percentage of the total population in South Africa. Approximately 49.2% of the adult population were living below the upper-bound poverty line (UBPL). These set of people are usually kept unaware of their rights and privileges and as such, are socially excluded or marginalized. Embezzlement and petty corruption have been noted as a type of corruption that directly affect the low and middle class in the society. Most of the times, bribes are offered by these classes of people before services can be delivered.
• Increase in crime rate: Crime rate has been linked to collapsed economy. A country that divert the resources meant for wealth creation and improvement in the social wellbeing of its citizens has set the pace for anarchy. Eight-in-ten South Africans see crime rate as one of the big challenges the Country is facing. Crime in South Africa remains a big threat and involves activities such as rape, ATM robbery, murder, property theft etc. In fact, South Africa remains one of the country with the highest rates of rape in the world. If crime rate must reduce in South Africa, there must be reduction in the rate of corruption. If the resources of the country are judiciously used to cater for the generality of the people, then wealth creation and standard of living will improve which will ultimately boost the economy of the country.

In conclusion, for any country such as South Africa to have a robust economy, there must be a reorientation of the mind by everyone regarding corruption. Now that we have known the terrible effects of corruption on the South African’s economy, we all must be willing to sacrifice and do our best for the betterment and future of our dear country irrespective of the position we occupy in the society. Giving or taking of any form of undue gratification in the form of bribe should be seen as unlawful and discouraged in its entirety. Public officer should realize that the position they occupy is a position of trust and should not be abused. The anticorruption framework should be strengthened and backed up by enabling laws to ensure proper enforcement. Also, whistleblowers should be adequately protected and rewarded to ensure prompt report of any form of corrupt practices.  All public officers must be made to account for their stewardship after serving their terms and anyone found culpable should be promptly prosecuted and if possible banned from holding any public office in future.

Dr. Esther Adebimpe Ofusori is a researcher at the School of Chemistry and Physics, University of KwaZulu Natal, Durban, South Africa.