Tackling Corruption in Sub-Saharan Africa – IMF F&D
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Bibliographic details
- Authors: NELSON SOBRINHO, VIMAL THAKOOR
- Published: September 1, 2019
Overview
- Sub-Saharan Africa stands to gain more from reducing corruption than any other region.
- New political leadership in parts of the region has expressed renewed commitment to fighting corruption, recognizing good governance as key to growth and economic development.
- Corruption tends to undermine economic growth, “behaving more like sand than oil in the economic engine.”
Key findings and quantified impacts
- The governance dividend for countries in sub-Saharan Africa is “two to three times larger than for the average country in the rest of the world.”
- “Bringing sub-Saharan Africa’s governance to the world average could increase GDP per capita by an estimated 1 to 2 percentage points a year.”
- On the 2017 International Country Risk Guide governance index, only “2 of the 30 countries from the region included” scored above the average for the rest of the world.
Case examples from the region
- South Africa: State capture made “various segments of the South African government apparatus and institutions” subservient to a select group. Since 2018, the government has engaged in measures to improve procurement, fight smuggling, and rebuild capacity in the revenue authority and anti-corruption agency.
- Angola: Billions of dollars from a sovereign wealth fund were siphoned off through complex transactions through offshore financial centers. The new government elected in 2017 changed management, placed previous management under investigation, and recovered the fund’s assets for reinvestment for the benefit of the Angolan people.
- Persistent problems: Kickbacks in allocation of uncompetitive oil and gas contracts, expropriation of private assets, and attacks on central bank independence remain in some cases, undermining property rights, the rule of law, investment, and growth.
How governance is measured (dimensions emphasized)
- Major governance indicators with significant economic ramifications include:
- Corruption (abuse of public office for private gain)
- Government effectiveness (quality of public policies and services)
- Regulatory quality (ability to formulate and implement business-friendly policies and regulations)
- Rule of law (respect for contract enforcement, property rights, and law enforcement)
- Aggregating subjective measures into a single indicator is challenging and may not capture on-the-ground realities; perceptions of corruption are often a main component but broader measurements are useful proxies.
Conventional policies and institutional reform
- Basic economic principles that can boost governance include:
- Strengthening laws
- Improving government effectiveness
- Shoring up fiscal and anti-corruption institutions
- Successful country experiences (Botswana, Chile, Estonia, Georgia) combined:
- Political will
- Measures to reduce corruption opportunities (cutting red tape, lowering trade barriers)
- Measures to constrain corrupt behavior (independent judicial system, strong anti-money laundering framework)
- Improved fiscal institutions with greater transparency and controls
- Building expertise and empowering employees in anti-corruption institutions improves prosecution capability; many corruption prosecutions fail when governments lack adequate legal capacity.
- Enhancing corporate governance and checks and balances, particularly governance for state-owned enterprises, will help.
Digitalization as an anti-corruption tool
- Digital platforms open new ways to fight corruption by facilitating government engagement with citizens and entrepreneurs and promoting transparency and accountability.
- In taxation:
- Electronic processing of tax submissions, refund payments, and customs declarations saves time, lowers costs, and reduces corruption opportunities.
- Data analytics enable risk-based auditing and faster processing of tax claims.
- In spending and social delivery:
- Biometric technologies and electronic payment systems cut bureaucratic inefficiencies, better target people in need, produce fiscal savings, and facilitate delivery of benefits.
- Use of digital payments (for example, for school fees) reduces scope for fraud by bypassing public officials.
- In procurement:
- Digitalization and centralized procurement can reduce conflicts of interest and abuse at national and subnational levels, including in state-owned enterprises.
Concrete benefits for citizens and development
- Expected effects of better governance and less corruption:
- Enhanced revenue collection through improved tax compliance; customs and revenue authorities better combat smuggling and illicit flows when officials adhere to strong governance principles.
- More efficient government spending via stronger budgetary processes; good governance reduces risk of harmful spending shifts toward items subject to graft.
- Improved developmental outcomes and social inclusion: more revenue allows greater spending on health and education; improved governance is likely to benefit the poor disproportionately.
- Demographic and technological context: a young population with access to real-time information and open-access data is demanding transparency and accountability; adherence to good governance is necessary to attract foreign investment and integrate with the global economy.
Policy implications and challenges
- Improving governance is difficult because beneficiaries of corruption often fight back; success requires strong political commitment.
- Institutional reform takes time, but “more rigorous enforcement of existing regulations would be a step in the right direction.”
- Irrespective of the path chosen, the governance dividends in sub-Saharan Africa are significant and worth pursuing.
Tackling Corruption in Sub-Saharan Africa – IMF F&D.
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