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Effective governance can reduce corruption in Africa

Business
Governance and corruption are controversial issues of great significance for sustainable development. Fostering structural transformation requires more than a national policy and strategy in order to operate effectively in an increasingly globalised world. It is arguable that the greatest challenge to Africa’s structural transformation agenda is not corruption of the sort that has come to light in corporate and public sector scandals — issues of fraud and bribes can be effectively tackled with improved supervision and more stringent enforcement of governance rules.

Governance and corruption are controversial issues of great significance for sustainable development. Fostering structural transformation requires more than a national policy and strategy in order to operate effectively in an increasingly globalised world. It is arguable that the greatest challenge to Africa’s structural transformation agenda is not corruption of the sort that has come to light in corporate and public sector scandals — issues of fraud and bribes can be effectively tackled with improved supervision and more stringent enforcement of governance rules.

BY Kudzai Goremusandu

Corruption deprives the poor of welfare-enhancing, life-saving public goods and services, such as clean water, prenatal care for pregnant women, primary education, police protection, shelter and basic health care
Corruption deprives the poor of welfare-enhancing, life-saving public goods and services, such as clean water, prenatal care for pregnant women, primary education, police protection, shelter and basic health care

It is now widely recognised that a crucial determinant of a country’s economic performance is the quality of its institutions of governance. Although there have been significant improvements in governance in some African countries during the last two decades, most African nations have not succeeded in reforming their governance systems into instruments of peaceful coexistence, wealth creation and economic growth, and social development. Unfortunately the prevalence of corruption still remains one of the continent’s most difficult obstacles for development. The ability of Africa to sustain high rates of economic growth in 2017 will depend, to a great extent, on how well its countries are able to transform their governance systems, especially as it pertains to fighting corruption.

Effects of poor governance in Africa

For Africa, the cost of poor governance is enormous. Household and business surveys by various reputable organisations, such as the World Bank’s Governance Indicators, rank virtually all African countries among the worst performers in terms of governance. According to Transparency International’s 2010 Corruption Perceptions Index, Africa is the most corrupt region of the world. Poor governance, especially the prevalence of extremely high levels of corruption, will undoubtedly continue to have negative impacts on Africa’s wealth creation and economic growth in 2011.

Poor governance can manifest itself in many ways. Corruption, rent-seeking, public financial malfeasance, and the arbitrary and capricious allocation of public goods and services are just some of the ways in which poor governance manifests itself in African economies.

For the poor, corruption is an insidious institution that strips poor people of their human dignity and deprives them of access to public goods and services that could enhance their ability to dig themselves out of poverty. In many African countries, civil servants often allocate public goods and services capriciously, favouring those who are willing and able to pay bribes. This process of service allocation. Not only increases inefficiency and discourages productive activities in the economy, but it also subjects a large part of the population to cruel and unnecessary suffering, the poor end up deprived of welfare-enhancing, life-saving public goods and services, such as clean water, prenatal care for pregnant women, primary education, police protection, shelter and basic health care.

In addition, poor governance creates uncertainties in the economy, which discourages investment in productive capacity. Market participants are not likely to willingly invest in such economies for fear that they would not be able to have access to the fruits of their investments. Thus, poor governance can drive away foreign investors and force domestic investors to seek refuge in economies with more efficient and stable institutional arrangements. In addition to capital flight, poor governance has also been instrumental in forcing many of Africa’s scarce human capital resources to flee.

The African Union has estimated that during the 1990s corruption was costing African economies about $148 billion annually, or about 25% of the continent’s total output. Other reports show that in one year corrupt African politicians and civil servants diverted amounts in excess of $30 billion in development aid to foreign bank accounts. But the impact of corruption is especially costly to the poor with estimates showing that low-income households in Africa spend as much as 2-3% of their income on bribes. Deepening and sustaining governance reforms

The quest for economic growth and development in Africa must focus on good governance in its broadest sense — a concept that includes good corporate, economic and political governance. Specifically, good governance, at the very least, entails:

  • transparency and accountability in both the public and private spheres;
  • maintenance of the rule of law;
  • provision of all market participants with incentive systems that enhance their involvement in productive activities;
  • protection of the person and property of individuals;
  • enforcement of property rights and freely negotiated contracts; and
  • the maintenance of an institutional environment conducive to mutually beneficial free exchange and peaceful coexistence.

One of the most important policies to ensure the continent’s economic growth is to fast-track Africa’s war on corruption. Although most African countries have set up elaborate anticorruption units, these bodies are largely ineffective and some have even been compromised by the appointing authorities. In some African countries, the war on corruption has been derailed by selective allegations and prosecutions largely influenced by ethnicity, while in others the judiciaries have been overly compromised.

There is a pressing need for national governments and development partners to prioritise the strengthening of autonomous anticorruption bodies and the reforming of national judiciaries. Those countries in Africa that succeed in the war on corruption will win handsome returns by way of economic growth in 2017 and beyond.

Kudzai is a strategic and innovate business consultant. He offers consultancy services to local and international investors. Contact: [email protected]. He currently works with Coover Bottlers, a new beverage company based in Harare