The impact of corruption and lost $15 billion on Zimbabwe’s economy

2017-03-21 12:49

Transparency International Zimbabwe (TIZ) reported in October 2016 that Zimbabwe is losing at least $1 billion annually to corruption, with police and local government officials being among the worst offenders. Despite the high level of corruption in Zimbabwe, there has been a paucity of empirical studies on its impact on the economy. A lot of corruption scandals are reported through newspapers and it seems the stories just end there. Economists have not quantified the effect of corruption on Zimbabwe’s economy. There are issues like the $15 billion diamond money which was reported as missing but we have not had any quantitative studies of the impact of such leakages on Zimbabwe’s economy.

I will explain here the impact and consequences of corruption on Zimbabwe’s economy and in general. Corruption is a threat to foreign investment because it is an extra cost to business operations. Developing countries need to attract foreign direct investment and corruption in Zimbabwe has distorted the economic and financial environment, therefore the country is losing on investment. Corruption is a significant contributor to Zimbabwe’s economic growth which is currently at very low levels, inefficiency in provision of public services, and has massive inequalities in resource distribution. A comparison of the kind of houses being built in Harare’s leafy suburbs and the poverty on the other side of town testifies of such unjustifiable inequalities. Zimbabweans are consistently exchanging photos on Whatsapp and other social media platforms of houses being built by some top government officials in the country. Some of the houses make one marvel whether it is just a house or some form of a hotel given the outlook and the number of bedrooms reported. It would be to society’s advantage if such resources were allocated to the building of factories and industries which benefits society through employment. A 1% increase in the corruption level reduces the growth rate by about 0.72% (Pak Hung Mo, 2000). I have stated these figures here so that we can better appreciate the impact of corruption on growth rate.

Corruption hurts innovative activities because innovators need government-supplied goods, such as permits and import quotas, more than established producers do. Corruption in Zimbabwe therefore affects both domestic and diaspora investments. Zimbabweans in the country and abroad see corruption as a disincentive to invest. Corruption in Zimbabwe has also affected human capital development; precisely people’s talent and effort is allocated to rent-seeking activities instead of productive investments.  Moreover, corruption favours a particular class of people and creates inequality in opportunities.  For instance, traffic police have better opportunities than teachers or non-traffic police, etc. Current corruption levels are unfavourable to development as the lack of infrastructural development is largely attributed to corruption and governance issues in the country. Corruption at local government level, for example, leads to inefficiency in service delivery and poor allocation of resources. Gully-like potholes, poor drainage systems, typhoid, water shortages and a general decay in infrastructure have now become common phenomena in Zimbabwe. Inefficient and non-responsive of government service delivery due to corruption and inequality lead to frustration and socio-political instability.

If it wasn’t for corruption the economic growth rate could have been a double digit figure and not a negatively growing one. Zimbabwe lost $15 billion realised in diamonds since 2009 and has been losing $1 billion every year since dollarization. Has corruption not been a cancer eating into the country’s revenue since 1980 probably Zimbabwe could be averaging $100 billion per year in government revenues. This is a far cry from the current revenues standing at only $4 billion annually and has been labelled ‘a supermarket budget’ because it is just equivalent to the 2015 revenue of Pick n Pay Supermarkets.

The words of Karl Kraus; an Austrian writer and poet, have become very true in as far as the ethics and moral values vis-à-vis corruption are concerned in Zimbabwe. Karl Kraus said: ‘Corruption is worse than prostitution. The latter might endanger the morals of an individual, the former invariably endangers the morals of the entire country.’


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