NEWS: Corruption stops the natural laws of an economy functioning freely

The Corruption Perceptions Index (CPI) collated by Transparency International ranked SA 61 out of 168 countries in 2015 with a score of 44 out of 100 (100 being the least corrupt), down from 45 in 2010, 50 in 2000 and 56 in 1995.

Bonang Mohale says corruption should not be allowed to be part of South Africa's heritage

Corruption is a form of dishonesty or criminal offence undertaken by a person or organisation entrusted with a position of authority, to acquire illicit benefit or abuse power for one’s private gainInternational Anti-Corruption Day has been observed annually on December 9 since 2003, in recognition of the UN Convention against Corruption signed in Mexico.

The day provides an opportunity for anticorruption advocates, the private sector, nongovernmental organisations, the media, citizens, political leaders, governments, legal bodies and lobby groups to join forces against corruption, raise public awareness and engage the public to effectively fight corruption, fraud, bribery, stealing and cheating in communities.

Precisely because public policies and public resources are largely beneficial to poor people, it is the poorest of the poor who suffer the harmful effects of corruption most grievously as they are the ones most dependent on government for housing, health care, education, security and welfare. They are most vulnerable to corruption since it stalls service delivery, results in delays in infrastructure development, poor building quality and adds unnecessary layers of additional costs, especially to “middlemen”.

Many acts of corruption deprive our citizens of their constitutional and human rights. Corruption and international perceptions of corruption in SA have been damaging to the country's reputation and have created obstacles to local and foreign direct investment, flows to the stock market, global competitiveness and economic growth. Often goods and services are not delivered, quality is reduced and the cost of doing business rises, killing competition, reducing international competitiveness, stifling entrepreneurship, hampering planned and preventive maintenance of critical infrastructure, and reducing local savings, which has distorted the development and upliftment of our people.

There is evidence that corruption reduces private investment in a country, particularly foreign direct investment, and has dampening effects on the competitiveness of firms and innovation. A 2009 study found that a single point increase in the corruption level (as measured by the International Country Risk Guide Index) leads to a reduction in per capita FDI inflows of about 11%. Public money, taxes collected, bonds issued, income from government investments and other means of financing government expenditure are meant to go to social grants, education, hospitals, roads, the supply of power and water and to ensure the personal security of our citizens.

The Corruption Perceptions Index (CPI) collated by Transparency International ranked SA 61 out of 168 countries in 2015 with a score of 44 out of 100 (100 being the least corrupt), down from 45 in 2010, 50 in 2000 and 56 in 1995.

Alarming studies have directly linked corruption in certain countries to increasing levels of poverty and income inequality. Because corruption creates fiscal distortions and redirects money allocated to income grants, eligibility for housing, pensions and so on, it weakens service delivery and it is the poor who suffer most. This means there are fewer state resources available to fulfil the socioeconomic rights guaranteed in the SA constitution, including the right to basic education, the right to health care, food, water and social security, and the right to housing.

The constitution recognises that the state cannot fulfil those rights exhaustively, and that they are limited to the extent that the state has available resources to address them. Nonetheless, redirecting even a portion of the current levels of wasted state resources would undoubtedly contribute to the economic and social development of the poorest.

Economies that are afflicted by a high level of corruption cannot prosper. Corrupted economies are not able to function properly because corruption prevents the natural laws of the economy from functioning freely. As a result, corruption in a nation's political and economic operations causes its entire society to suffer. Income inequality has increased in most countries experiencing high levels of corruption.

In SA the fight against corruption is one of the major priorities of both the public and private sectors. Adherence to good governance creates an environment where corruption struggles to flourish. Failure to adhere to the practices of good governance means stakeholders increasingly demand accountability.

Mass action and strikes are organised in protest as citizens begin to lose faith in the ability or will of their elected officials. Political instability increases. Investment declines. The sale of shares by investors decreases the value and rating of companies. Their regulators can deny them licences, a stock exchange listing or the ability to sell products and services. Other organisations refuse to do business with them. And donors or economic organisations grant fewer loans or aid to nations whose governance is murky.

Tackling corruption would have a positive effect on SA’s economic output by strengthening institutions and creating a virtuous cycle of trust in the state and investment, ultimately contributing to GDP growth and reducing unemployment and income inequality. If the state could tackle some of the current costs of corruption, this would have substantial positive effects on the economy and support the progressive realisation of our citizens’ socioeconomic rights.

To those who wish this country well, even though corruption is deeply rooted in SA’s past, it must not be allowed to be part of our heritage and certainly not must not become part of our DNA.

This opinion piece was written for Business Day by Bonang Mohale the Chancellor of the University of the Free State