The Effects of Bureaucratic Corruption on Economic Development: The Case of Sub-Saharan Africa


By John O. Ifediora, JD, Ph.D.
Director Director
James Ibori Center for Policy Studies,
Madison, Wisconsin
Introduction

This article examines the incidence and causes of bureaucratic corruption in Sub-Saharan Africa, and the attendant consequences on economic development. While bureaucratic corruption, to be defined shortly, is not an exclusive domain of black Africa (Braibanti, 1962), it is however, one of the enduring peculiarities of the sub-continent that has perennially subdued economic development.

A host of factors accounts for the notoriously abysmal economic growth rate or the absence of it in Sub-Saharan Africa; few are immediately obvious: underdeveloped human and natural resources, extremely low levels of productivity, inability to attract and sustain direct foreign investment, continuous mismatch of capital and needs, and deplorable infrastructures (Klitgaard, 1990). But prominent amongst these is corruption, a system of graft and venality that has thoroughly pervaded both social and economic strata of constituent countries(Andreski, 1968). Bureaucratic corruption, in its popular sense, is the misuse of the power of public office for personal gain in breach of laws that govern public servants and moral principles. In its basic form, it takes place when a government official demands and accepts bribes or kickbacks in performance of normal duties called for by the office. Bribery, which can be direct cash payments, gifts, or the promise of reciprocity in future transactions, is usually paid either: (1) to gain access to scarce government services, or (2) to avoid the cost of a government service. In less common instances, bribes may be paid to deny rivals access to a government service or to impose inordinate cost on such rivals.

Bureaucratic corruption can, of course, be found in developed as well as developing nations (Onyango-Obbo, 1996); however, its consequences are particularly more troublesome for developing nations with inadequate or poorly formed socio-political structures and weak economic institutions. Because of its distortionary effects on resource allocation, entire economies are often severely weakened and debased as important decisions are guided not by prudent public policy but by ulterior agenda. In countries like Nigeria, Mobutu's Zaire (now The Democratic Republic of the Congo), Liberia, and Kenya, bureaucratic corruption accounts for the unabating capital flight, and the precipitous decline in real income in the past decade. In the same period, Africa's share of world trade had declined from 5 percent in the early 1980s to 2 percent in the 1990s (World Bank, 1997).

The differential effects of corruption on the economies of developed and developing nations are well documented (Barro, 1991; Mauro, 1995). In developed nations like Italy or the US, gains from corruption are generally recycled in the internal economy, thus mitigating initial distortionary effects. In underdeveloped nations of Africa, however, ill-gotten gains tend to be hidden in foreign banks (Switzerland) or invested in the economies of developed nations, or spent on conspicuously useless imports. Such outflows of needed capital account for the devastating effects of graft in sub-Saharan Africa.

Causes And Evidence Of Bureaucratic Corruption
The incidence and extent of bureaucratic corruption is everywhere a function of prevailing levels of political and economic competition. In well-developed democracies with heightened political competition, corruption is relatively rare, and in cases where there is strong evidence of it, the effects are often economically insignificant. This is because corruption is bred and nurtured in secrecy; where there is openness in government coupled with political competition, the rule of law is closely observed, and corruption reasonably contained (Werlin, 1973). This observation aside, there is, however, ample evidence of bureaucratic corruption in advanced democracies such as the US; anecdotal evidence of this need not determine us here. Of import, however, is the observation that corruption invariably flourishes in autocratic and despotic regimes where, because of their inherent characteristics, the apparatus and mechanisms for venality are properly matched to the important requirements for bureaucratic corruption: unaccountability, intransparency, and suppression of political competition. The liberating ideals of Confucianism, and religion's modulating effects (Buddhism, Islam) notwithstanding, the noxious effects of corruption are equally present in developing countries of Asia. Shortly after the ouster of President Suharto of Indonesia in 1998, The Economist (1998) made this observation:

"….[N]ow some of the sins laid at the doors of the region's economic system looks suspiciously like Asian values gone wrong. The attachment to the family becomes nepotism. The importance of personal relationships rather than formal legality becomes cronyism. Consensus becomes wheel-greasing and corrupt politics…… Goenawan Mohamad, an Indonisian writer, tells a story of his country during President Suharto's last months in office. A young journalist came across some traffic policemen engaged in the odd pursuit of drying out banknotes at the roadside. On inquiry, it emerged the money came from bribes routinely paid by bus and lorry drivers. To shorten procedure, they stuffed the cash in cigarette packs and threw them from their cab windows. The bank notes were wet because first they would spit on them."

In much of Africa, the cultural milieu is such that nepotism, bribery and theft by public servants do not have the social stigma needed to contain their incidence. Thus, aspiring civil servants see positions in government as means to enrich themselves, their immediate and mediate families, and proceed accordingly to maximize their efforts in this regard (Apter, 1963). They see nothing wrong with this behavior because both their predecessors and contemporaries have practiced the same behavior to near perfection. In these societies it is considered impolitic if one is not pre-disposed to nepotism, for, as often argued, what good is a public office if one's relatives remain wanting given the potential to improve their economic lot. For this reason, many writers (Smith, 1965; Tignor, 1971) have attempted to link corruption to cultural and ethical failings, and have suggested that what may be regarded as corrupt in western countries may be regarded as benign customary practices in other cultures. But this is dangerous reasoning, for it provides an excuse for a social phenomenon whose incidence is not culturally dependent, except for the degree of pervasiveness.

Under conditions of extreme income inequality and absolute poverty, there is always a strong tendency for systemic corruption and subversion of public resources (De Soto, 1989). Civil servants, unable to subsist on their ever-decreasing real wages, resort to highly irregular uses of their offices. In many Sub-Saharan African countries, the following account by Andreski(1968) applies with unmistakable cogency:

"I have known hospitals where the patients had to pay nurses to bring them a chamber pot; where the doctors, who were receiving a salary from the state and were supposed to treat the sick free of charge, would only look at those patients who had given them money, and saw those first who had paid most, regardless whose condition was most urgent. Those in charge of the dispensary stole the medicaments and then sold them either to the patients on the premises or to the traders. The doctors did the same, taking the medicaments for use in their private consulting rooms. Patients unable to pay got injections of coloured water. Many who did pay were cheated and got exactly the same."

Recent inquiries into the causes of bureaucratic corruption in Africa have made the connection to early revolts against colonial exploitations (Ekpo, 1979), poverty (Scott, 1969), and cultural dispositions (Braibanti, 1962). In most developing countries of sub-Saharan Africa recently freed from colonial subjugation, bureaucratic corruption is commonly rationalized as an expression of disaffection with prevailing political systems and governing structures that are completely alien to the culture of those governed. Graft and outright theft are thus rationalized as effective means of marginalization (Andreski, 1968). The government and its agencies are consequently seen, not as vital and integral parts of society but as foreign entities or superstructures erected to exploit and suppress the natives. Thus, for example, it is often the case that a driver in Nigeria or Ghana, when stopped by the police for traffic infractions, questions the social values of traffic laws, and wonders out loud if such laws are not further avenues for official exploitation.

The misuse of office by government functionaries is relatively common in areas of public procurement, revenue collection, land zoning, government appointments and contracts, licensing and permits. In these areas of specialty, graft and venality are readily executed through anyone of the following activities:

1. The civil servant receives from a private contractor a fixed percentage of awarded government contracts; the kickback may be in kind, such as free education for the children in foreign institutions, or in cash, paid directly or to an offshore bank account.

2. Police or other law enforcement agents use the threat of sanctions to extort bribes in lieu of official fees or taxes. But paying bribes to avoid taxes or fees is equally damaging to society since governments depend on such revenues to provide public goods. The relative absence of revenues from taxes and fees also means less compensation for civil servants, which leads to more corrupt practices. One of the reasons adduced by low- level government employees for demanding bribes is the infrequency of their monthly salary. Government employees in essential services, e.g. law enforcement, electric power supply, telecommunication, in Nigeria, Kenya, Cameroon, and Ghana have been known to go for two or three months without pay. In the interim, these workers must subsist on bribery and theft of public funds. The law enforcement community, because of their unique duties, now has, as it were, a license to extort money from the hapless public. Heilbuth and Bulow(1997) advanced this observation:

"If you want to see how corruption can cripple a society, go to Zaire. There, public workers, even the police and the army, have not been paid for months. Many of them grow food in their back yards, but their most important source of income is a personal service charge. They compensate for their salary by demanding an amount from the citizens who come to them as their public officials."
3. Customs agents insist on payments above the official rates or side payments before providing requisite services to both importers and exporters. In Nigeria, Ghana, and Kenya for example, customs officers are patently endowed with a wide scope for graft. For nominal sums, they willingly wave inspections and duties, or levy substantially reduced duties. Those unwilling to pay bribes stand the chance of losing their merchandise through forfeiture or theft.

4. Civil servants award large contracts to companies owned by relatives or partners, and in return receive an agreed upon fee or lavish hospitality.

5. Officials responsible for permits and licenses demand extra payment for services ordinarily called for by their office; in cases where expediency is requested, a great deal more is demanded to speed-up the process.

But what occasions or prompts these behavior traits from civil servants? Reasons abound. While some are immediate, most are relatively mediate:

1. A weak and underdeveloped sense of citizenship or extensive apathy to national interests: The mistaken belief that the national government is a superstructure designed to control and exploit, separate and disconnected from the governed, stems from debilitating colonial experiences. Current African leaders and heads of government agencies have immediate experiences of colonialism and the struggle for independence. In colonial times, it was fashionable to regard the government and its agencies as foreign institutions that must be thwarted, and marginalised by theft and other abortive measures. The British, French, Belgians, and other erstwhile colonialists have since left, but this old perception of government has not: an alien superstructure, and a "cash-cow" that must be stolen from indefinitely. The failure to correct this perception has sustained bureaucratic corruption by removing the social stigma normally associated with theft and dishonesty.

2. The absence of sustainable commitment to civil service, and a complete lack of understanding of the demands of public office: Many senior government officials in black Africa may be excused of their official misconduct partly on the grounds that their formal education is more often than not devoid of studies in civics and the basic principles of democracy and good governance. In countries such as Nigeria, Ghana, and Mobutu's Zaire, where military dictators have monopolized the government since independence, levels of corruption have remained consistently high with devastating consequences. Leaders and advisers are in many instances poorly educated, and lack the requisite background for effective leadership.


3. The lack of professionalism and expertise in the ranks of civil servants: For all nations, but especially for developing nations, socio-economic development requires a committed effort to put in place qualified and dedicated professionals in positions where society can benefit from their abilities and expertise. In Africa, important official positions are often assigned on the basis of ethnicity, political support or traded for pecuniary rewards.

4. In post-independence Africa, the military emerged as a political force with pervasive and distortionary influences on resource allocation: The military, whose traditional role is to protect a nation's interests from foreign aggression, and to provide internal security, is by nature apolitical. But in Africa, the military has completely abandoned its customary role in society. Since the early 1960s when most African states became independent, 35 out of 48 countries in Sub-Saharan Africa have experienced military dictatorships (Adedeji, 1998). Prominent among them are Ghana, Nigeria, Uganda, Ethiopia, Liberia, and Zaire. In contrast to those without the experience of military regimes (Zimbabwe, Djibouti, Namibia), these countries have also experienced relatively high levels of corruption and mismanagement of public resources. Because military dictators are not constrained by the dictates of democratic principles such as transparency of conduct and accountability, and since public resources may be used to coax society into conformity with preferred behavioral traits, dictatorial regimes are ipso facto corrupt. In pursuit of their objectives, perhaps socially desirable, but more likely self-serving and opportunistic, these regimes often find it expedient to employ compensatory or condign power to facilitate outcomes (Galbraith, 1983). To these regimes, shameful means are often necessary to achieve noble ends; but what if the end is shameful? What then?


For reasons particularly relevant to sub-saharan Africa (wide income inequalities, abject poverty, perception that public service is the primary means of wealth enhancement, and a poorly developed sense of citizenship), corruption presents a difficult challenge in the sub-continent. In the spirit of the pronouncements by Denis-Jean Baptiste (1854), it is, perhaps, better said that foreign investors intent on trade in black Africa should go in with three ships; one filled with presents for venal government officials, another filled with merchandise, and yet another filled with patience. But the first ship should no longer be encouraged, for it takes more than one party to effect corruption. If foreign investors were to cease offering bribes, and stop regarding it as tax deductible business encumbrances, the impetus for corruption may be reasonably constrained.

Economic Consequences Of Bureaucratic Corruption
The fault, wrote Shakespeare (1599), is not in our stars but in ourselves. If he were addressing the ills of corruption, he would have been partly right. For corruption, like most other human foibles, is conditioned, not so much by the immoralities and cogent character flaws of participants, as by the social and economic system in which it exists. It is therefore better, as a course of public policy, to focus less on prevention, and more on ways and means by which the prevailing socio-economic system can be modified to encourage the ingredients that promote political and economic competition, accountability and transparency in government. Since corruption is essentially a rent-seeking behavior, it will remain in force so long as governments maintain a significant presence in private enterprises.

The destructive force of bureaucratic corruption emanates from the simple fact that its perpetrators are guided primarily by personal motives rather than the welfare interest of society. However, the extent and severity of the economic effects of corruption depend largely on the developmental stages of the various socio-political institutions in a country. In underdeveloped nations of Sub-Saharan Africa, corruption is more damaging to development and economic growth than in industrialized countries where social and economic institutions are better developed, and illegally derived proceeds are more likely to be invested domestically. In contrast, profits from corruption in sub-saharan Africa usually end up in foreign banks or spent on deplorable activities with nugatory effects on domestic productivity. This leakage of vital investible funds, without equal and compensating inflows, drains the developing economy of its vitality through negative multiplier effects.

When a country's resources are continually misallocated by corrupt government officials bent on maximizing their short-run selfish interests, development is severely hindered through a multitude of social and economic dislocations: Sub-standard goods and services are produced and offered to the public at prohibitive prices, choices of public projects are determined not by utility but by the opportunities they present for bribery and graft, inefficient entrepreneurs are superficially sustained at the expense of economic efficiency, and so forth. This point was succinctly expressed by a project manager for The Africa Leadership Forum, Ayo Aderinwale (1995): "It results in making Africa, in most cases, a cemetery of abandoned projects or what we call ‘Cathedrals in the Desert.' You find that wrong projects have been pursued at exorbitant prices, and at the end of the day, these projects in themselves benefit nobody but the person who perverted the priorities."

This reality is remarkably damaging. In 1980, for instance, the combined total GDP for sub-sahara African countries totaled US$292.6 Billions (World Bank, 1997), with some individual countries experiencing negative economic growth rate, and the rest averaged an annual growth rate of less than 3 percent. The economy of Nigeria, the second biggest in Sub-saharan Africa, provides a striking illustration. In 1980, the country's GDP of US$93.1 Billion accounted for 31.8 percent of the combined GDP of sub-saharan Africa. But with three successive administrations that ushered into power some of the more venal civil servants in the history of the country, GDP declined precipitously to US$27 Billion in 1995.

Regardless of the level of economic development, bureaucratic corruption is always and everywhere detrimental to economic growth, albeit with different degrees of impact. For the underdeveloped nation, the lack of transparency in public administration, and the absence of the rule of law and accountability make for a corrupt public sector that invariably contaminates private sector activities. This view, however, is not universally shared. Some studies (leff, 1964; Kennedy, 1997) have proposed that the effects of corruption depends, among others, on four factors: the efficiency of the prevailing economic system, the organizational structure of corruption, how the benefits from corruption are utilized, and if corruption encourages market reforms. Corruption is therefore said to promote economic growth and efficiency if the prevailing economic system was inefficient to begin with, the organizational structure of corruption mimicks a free-market, benefits from corruption are reinvested in productive activities, and corruption encourages market reform efforts (Kennedy, 1997). The salubrious impact of corruption, it is further suggested, is effected through the "grease effect," i.e. bribing a bureaucrat may be an expedient way to by-pass stifling red tape, and may serve as added incentive to enterprising civil servants to become more productive (Leff, 1964).

Like a coin, this argument has two sides. Most other studies, in contrast, conclude that corruption is harmful to investment, growth and economic stability (Klitgaard, 1991; Mauro, 1995). Shleifer and Vishny (1993), in their seminal work, demonstrated the negative economic effects of corruption as practiced in developing countries. In one of their models for the study, government agencies, acting independently, are allowed to sell complementary goods such as permits or licenses. But since their objective is to maximize bribe proceeds independent of the activities of other agencies, they ultimately realize lower returns and diminished demand for government services.

The empirical analysis of the effects of corruption by Mauro (1995) suggests that countries with high levels of corruption tend to have correspondingly low ratios of total investment to GDP. In the context of the classical growth model, this effect can be traced to misdirected consumption and production activities consequent on corruption. Specifically, when national consumption habits are distorted, the effects are invariably reflected in equally perverted production processes and investment choices.

The dislocative cost of corruption is similar, to a certain extent, to that of taxation, but with one remarkable exception; corruption is illegal, and must be conducted in secrecy. This need for secrecy necessarily makes corruption more distortionary than taxation (Shleifer and Vishny, 1993). Because venal government agents must expend resources to conceal their activities, the accompanying inefficiency broadens the dead-weight loss to society. In many African nations contracts for military goods provide the best margins of returns for venal officials; correspondingly, allocations for military goods continue to get the lion share of each country's annual national budget even where there are clear indications that such expenditures are wasteful, and redundant. Given the level and extent of abject poverty in sub-saharan Africa, this behavior sheds further light on why countries in this sub-continent insist on maintaining a standing military when logic and reason suggest it is a luxury they cannot afford.

The substitution effects of corruption further explain why the African continent remains the poorest, in spite of her human and natural resources. Bureaucrats, in their efforts to maximize personal gains, discourage investment in human resources by allocating funds away from education, vocational training, and health where opportunities for graft are scant, and towards military and other wasteful procurements (Osoba, 1996; Klitgaard, 1988). The result is a product and service mix that does not conduce to economic development.

In Africa, a significant portion of a nation's GDP is spent by the military on both military and nonmilitary activities, while education, infrastructure, telecommunication, energy, and other sectors necessary for socio-economic development remain neglected and starved into redundancy. In the 1960s and early 1970s for example, Nigeria had a functional and progressive educational system that enjoyed excellent national support and international acceptance. By the late 1980s, the educational system was all but destroyed, and now recommends a sad commentary on the effects of bureaucratic inefficiency, corruption, and mismanagement of public resources.

This end result, unfortunately, is all too familiar. An entrepreneur seeking government contracts is invariably required to bribe the awarding government official. In most cases, however, the percentage paid as bribe is such as to jeopardize the successful completion of the project. As is often the case, the contractor either provides a sub-standard product or abandons the entire project for lack of funds. Since the government official that awarded the contract has been properly compensated, the contractor remains assured that he will not suffer any penalties for non-performance.

Conclusion

Undoubtedly, the cultural setting of a country is a primary cause of corruption, for in societies where the stigma of venality and graft is progressively attenuated by native habits, custom and tradition, the moral threshold of civil servants becomes remarkably compromised. But while cultural relativism may partly explain the principal causes of corruption in sub-saharan Africa, it certainly does not justify it. The fact that both developed and developing nations have laws against bureaucratic corruption suggests a universal indictment of this extra-legal practice.

But condemnation of, and laws against bureaucratic corruption are not enough to contain its practice. Since corruption is essentially an opportunistic behavior exercised by rent-seeking civil servants and entrepreneurs, a genuine effort to stem it must begin with practical reforms of existing laws, rules of conduct, custom and tradition that govern socio-political and economic relations. For any change to be effective, it must be understood that the rules of conduct and institutions that govern behavior in many African countries are primarily defined by custom and tradition, and these in turn proscribe individual and group activities. If this collective social and cultural apparatus is weak and conduces to corruption, then reform is necessary to constrain the behavior of civil servants and entrepreneurs. It will, therefore, not suffice to simply provide law enforcement agencies with more prosecutorial powers since some ranking members of these agencies are themselves corrupt, and because the rules have not changed, the outcome will remain the same (Mbaku, 1996).

Public policies that govern economic relations in most African countries are also suspect, and require substantive changes. In most of East Africa (Nyerere,s Tanzania, Kenya), and West Africa (Nigeria, Cameroon, Senegal), the economic policies of statism, as adopted after independence, was based on the mistaken assumption that a big government is necessary to sustain socio-economic development. This meant pervasive government presence in all essential industries, i.e. telecommunications, transportation, energy, and medical services. The outcome was inevitable; the socialization of basic industries only led to gross mismanagement, inefficiency, and pervasive corruption. Everybody's business became nobody's business! For, no matter how well-intentioned the government may be, corruption and inefficiency will remain present when government infiltrates all economic spheres of human endeavor (Becker, 1994). And so will poverty; but abject poverty begets social and political immaturity, and where all three exist, the rule of law is seldom observed, and neither is development.



1
Guest posted on 10-11-2005, 14:13:35 PM

Excellent piece !
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