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<p>These days the talk of the business world is about corruption, state capture and how South Africa can reinforce the rule of law to render certainty in business. One of the biggest drains on the economy has been money haemorrhaging from state coffers via the tax collection agency. How did this happen? CNBC Africa&#8217;s Aviwe Mtila caught up with a man who wrote a book about just that, investigative journalist Jacques Pauw. He also has some interesting views on the change of the guard at the National Prosecuting Authority.</p>


Jacques Pauw on Silas Ramaite’s appointment as NPA head

<p>Kenya is perceived as one of the world’s most corrupt countries. It ranked <a href="https://www.transparency.org/news/feature/corruption_perceptions_index_2017">143 out of 180</a> countries on Transparency International’s 2017 corruption perception index. The only African countries that scored worse – among them Somalia, South Sudan, Libya, Eritrea, Burundi, and Zimbabwe – were either politically unstable or in conflict.</p>
<p>This poor showing shouldn’t come as a surprise. Kenya has been plagued by a long list of corruption scandals. One of the more infamous was the <a href="https://www.nation.co.ke/news/How-Goldenberg-scandal-was-hatched-and-executed-/1056-1628532-8k2yos/index.html">Goldenberg heist</a> which occurred in the 1990s during then President Daniel Moi’s tenure. The government was found to have subsidised exports of gold far beyond standard arrangements by paying a company called Goldenberg International 35% more in Kenyan shillings than their foreign currency earnings.</p>
<p>More recently, in 2014 <a href="https://www.standardmedia.co.ke/business/article/2000221706/where-the-eurobond-money-trail-goes-cold">millions of dollars were misappropriated</a> from funds that were secured by the government through a Eurobond, which is an international loan that was secured from foreign investors. A <a href="https://www.businessdailyafrica.com/markets/capital/Kenya-says-fresh--2bn-Eurobond-oversubscribed-seven-times/4259442-4315350-14pr01l/index.html">second Eurobond</a> was secured in 2018 and <a href="https://www.the-star.co.ke/news/2018/03/05/eurobond-cash-treasury-cagey-on-how-amount-will-be-spent_c1724415">questions have been raised</a> here as well.</p>
<p>Yet, the looting of public coffers is more commonly reported in recent times and the amounts involved are growing. During May and June 2018, <a href="https://www.theelephant.info/data-stories/2018/06/05/a-visual-history-of-corruption-scandals-in-kenya-2013-2018/">reports about grand corruption</a> have dominated Kenyan news. This haemorrhaging of public funds will do enormous damage to the country’s already struggling economy.</p>
<p>The scourge of corruption in Kenya must be urgently addressed otherwise it could be bring the economy to its knees. As things stand, Kenya is already <a href="https://www.nation.co.ke/business/Kenya-s-public-debt-crosses-Sh4-5trn-mark/996-4320928-bit76az/index.html">struggling to pay its debts</a>.</p>
<h2>The economic cost of corruption</h2>
<p>The role of human capital on economic growth has <a href="http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.551.4862&amp;rep=rep1&amp;type=pdf">long been established</a>. So when human capital takes a hit the impact is also felt on economic development and growth.</p>
<p>Let’s take Kenya’s <a href="http://erepository.uonbi.ac.ke/bitstream/handle/11295/102511/Kimani_The%20Social%20Economic%20Impact%20of%20National%20Youth%20Service%20%28Nys%29%20on%20Urban%20Communities%20%20the%20Case%20of%20Kibera%2C%20Nairobi%20County.pdf?sequence=1&amp;isAllowed=y">National Youth Service</a> as an example of a public organisation where corruption is believed to be rife. In 2015, <a href="http://allafrica.com/stories/201609300282.html">approximately USD$17 million</a> was stolen from its coffers by a network of companies that supplied goods and service at inflated prices.</p>
<p>And this year <a href="https://www.nation.co.ke/video/news/4146788-4561084-essehdz/index.html">billions of shillings</a> earmarked for the service were embezzled by a shadowy network of dubious service providers.</p>
<p>This money was all earmarked for youth vocational training. The theft not only jeopardises the country’s short-term skills provision objectives: it also portends irredeemable long-term opportunity costs.</p>
<p>Corruption compromises people’s futures and their development. It also costs a fortune. Rampant corruption will drain any economy of the resources needed for projects like infrastructure development.</p>
<p>To illustrate, let’s take a look at the misuse of funds from the Kenya government’s 2014 Eurobond, which was believed to be <a href="https://www.ft.com/content/4397a32a-f572-11e3-be21-00144feabdc0">Africa’s largest such issuance</a> at the time.</p>
<p>Reports indicate that some of the money may <a href="https://www.standardmedia.co.ke/ktnhome/video/watch/2000102079/raila-odinga-eurobond-money-did-not-come-into-the-country">not have been deposited into the national Treasury</a>. In economic parlance, this would qualify as an illicit financial “outflow”: an illegal cross-border movement of money or capital. The illegal transfer of funds out of African countries is a <a href="https://www.uneca.org/sites/default/files/PublicationFiles/iff_main_report_26feb_en.pdf">recognised constraint</a> on the continent’s economic development because it denies local populations the use of that money for national development.</p>
<p>The Global Financial Integrity <a href="http://www.gfintegrity.org/wp-content/uploads/2017/04/GFI-IFF-Report-2017_final.pdf">report</a> estimates that from 2005 to 2014 Africa lost between USD$36 billion and USD$69 billion in illicit financial flows. This represents about 74% of all financing required (approximately USD$93 billion per year) to develop infrastructure to service Africa’s growth needs.</p>
<p>In Kenya’s case, the Eurobond swindle was more than just a missed opportunity to expand the country’s inadequate and dilapidated infrastructure. It also led to a <a href="https://www.nation.co.ke/business/Moody-s-downgrades-Kenya-rating-over-rising-debt/996-4304706-urmche/index.html">sovereign rating downgrade</a> on the basis of its increasing inability to service ballooning public debt.</p>
<p>A sovereign rating is a measure of a country’s creditworthiness. And a downgrade signals that the country has not optimally invested money borrowed on capital projects, such as infrastructure. Capital projects typically increase national income and better a country’s ability to repay its debts.</p>
<h2>Finding solutions</h2>
<p>Given these observations, what measures can Kenya take to stem the debilitating theft of public resources?</p>
<p>First, a national ethos that inculcates the value of work as the only means to wealth accumulation must be built. A possible way of achieving this is for education policy makers to emphasise social ethics as a compulsory subject right from primary school all the way up to the university.</p>
<p>Second, Kenya’s legal system must make corruption expensive and unattractive for perpetrators by the imposition of stiff fines, and mandatory jail sentences. Another step in the right direction would be to grant both the auditor general and the ethics and anti-corruption commission prosecutorial powers.</p>
<p>Third, the law could be reviewed to ensure that those convicted of economic crimes suffer lasting embarrassment and the greatest possible financial loss. To achieve this, all the proceeds from corruption must be repossessed by the state and channelled back to public use. Convicts would then be barred from holding public office or doing business for several years after their release.</p>
<p>Fourth, strict standards of ethical conduct could be imposed for anyone seeking public office. This would entail full disclosure on the sources of campaign funds, public declarations of wealth and lifestyle audits, and enforcement of voter bribery legislation.</p>
<p>Fifth, the national fight against poverty, ignorance and disease must be intensified to improve quality of life, and empower citizens to perform their civic duties, such as the choice of legislative representatives, in a more meaningful way.</p>
<p><img loading="lazy" decoding="async" src="https://counter.theconversation.com/content/98255/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" />Finally, it would be worthwhile for the national public prosecutor to sign treaties with “tax haven” countries to block or repatriate illicit financial outflows from Kenya.</p>
<p><a href="https://theconversation.com/profiles/odongo-kodongo-165242">Odongo Kodongo</a>, Associate professor, <em><a href="http://theconversation.com/institutions/university-of-the-witwatersrand-894">University of the Witwatersrand</a></em></p>
<p>This article was originally published on <a href="http://theconversation.com">The Conversation</a>. Read the <a href="https://theconversation.com/understanding-the-economic-cost-of-corruption-in-kenya-98255">original article</a>.</p>


The economic cost of corruption in Kenya explained

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<p>The former governor of Nigeria&#8217;s Taraba State, Jolly Nyame was found guilty of corruption by a Federal High Court and sentenced to 14 years in prison. It was a case that lasted 11 years.</p>


The challenges of Nigeria’s war against corruption

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<p>NPA gives its views on the postponement of former president Jacob Zuma&#8217;s criminal case.</p>


NPA reacts to the postponement of the #Zuma case

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<p>For the better of twenty years, Anti-arms deal activist, Terry Crawford-Browne has been fighting to expose the corruption and fraud around the multi-billion-rand military acquisition project finalised in 1999 by the South African government.</p>


Arms deal cover-up worse than the crime – Terry Crawford-Browne

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<p>President Cyril Ramaphosa fired 10 ministers last night in the cabinet reshuffle that’s the talk of Africa this morning. It saw a restructured and workmanlike cabinet with a more than a few old faces. CNBC Africa’s head of programming Chris Bishop looks through some of the highlights.</p>


Explainer: What you need to know about SA President Cyril Ramaphosa’s new Cabinet

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<p>Nigeria&#8217;s corruption score by Transparency International worsened despite the government&#8217;s attempts. Eze Onyekpere, Lead Director at the Centre for Social Justice joins CNBC Africa for more.</p>


Corruption perception of Nigeria worsens

<p>There is an old joke that used to do the rounds from the lips of journalists in Africa that goes something like this.</p>
<p>President Robert Mugabe invites Kenya’s President Daniel arap Moi to Zimbabwe to show him the wonders of his country’s infrastructure.</p>
<p>“See that bridge?” says Mugabe. Yes says Moi.</p>
<p>Mugabe pats his pocket”</p>
<p>“Twenty per cent.”</p>
<p>The following week Moi invites Mugabe to Kenya and asks him to look across a river outside Nairobi with wretched poor people fording it in the rain.</p>
<p>“See that bridge?” says Moi.</p>
<p>“I see no bridge,” replies Mugabe.</p>
<p>“One hundred per cent,” says Moi with a pat of the pocket.</p>
<p>Now we laugh at these jokes because they’re funny and sadly because they have a ring of truth as they encapsulate the cost of corruption to Africa. It is the so called public servants who get the pleasure and the poor of Africa that get the blame. It is the people wading through a swollen river who pay the price of corruption. The people who profit from corruption usually spend their ill-gotten gains on houses they don’t live in and cars they don’t drive; at the expense of people who have neither.</p>
<p>That is why I was pleased when I heard the new South African president’s pledge to stamp out corruption in his back yard. He has an independent judiciary that will make it easier to get credible convictions to punish the guilty and encourager les autres.</p>
<p>Yet it’s going to be tough; Cyril Ramaphosa will have to see many of his comrades put behind bars in bruising, public, trials that are likely to open up wounds that will last a lifetime.</p>
<p><strong>READ: </strong><a href="http://cnbc.africa/trending/state-capture/2018/02/19/atul-gupta-challenges-south-african-asset-freeze/">Atul Gupta challenges South African asset freeze</a></p>
<p>Right now, many of the people of South Africa are behind Ramaphosa and are sick of the waste of their country’s coffers through corruption. Cyrilmania appears everywhere; it may be many a moon before we see the opposition give the president a standing ovation in Parliament.</p>
<p>Well that is my point. Time is the enemy of politicians who want to make decisive change. For Ramaphosa needs to push hard, while his stock is high, to see the prosecutions though and tighten the gaps to make sure corruption cannot happen. He could take a leaf out of neighbouring Botswana’s book if he wants a model of how to control tightly pubic funds. The leaf may come in triplicate and signed by three people – but that is how Botswana guards its public money.</p>
<p>Overall Ramaphosa needs to move fast before the forces of corruption can organise and fight back. Corruptors are cunning people, that is how they get away with it for so long.</p>


Why Africa should throw people in jail – quickly

<p>JOHANNESBURG/CAPE TOWN, Feb 19 (Reuters) &#8211; Atul Gupta, one of three Gupta brothers being investigated for corrupt links to ousted South African president Jacob Zuma, is challenging a court order freezing 10 million rand ($859,025) in his bank account, according to court papers seen by Reuters.</p>
<p>South African prosecutors were authorised to freeze 220 million rand, including 10 million which they said was illegally transferred to Atul Gupta’s bank account, as part of an investigation into fraud at a state-backed dairy project in the Free State province.</p>
<p>The three Gupta brothers, accused by the public anti-graft watchdog of using their friendship with Zuma to influence policy and amass wealth, have denied any wrongdoing, as has Zuma.</p>
<p>In the court papers filed in a court in the Free State province, Atul Gupta denied having received 10 million rand as alleged by prosecutors and said he was “currently outside South Africa.” The affidavit attached to the court papers was signed on Feb. 8 at the South African consulate in Dubai.</p>
<p>A spokesman for the National Prosecuting Authority confirmed the veracity of the court papers. A lawyer authorised to speak for Atul Gupta could not be reached for comment.</p>
<p>Police are searching for Ajay Gupta, Atul’s brother who has been declared a “fugitive from justice,” as part of their investigation into the dairy project.</p>
<p>However, the police aren’t looking for Ajay, a spokesman for the elite police unit, the Hawks, which targets organised crime and corruption, said on Friday. Johannesburg’s main airport said on Friday that Ajay Gupta had left South Africa for Dubai on Feb. 6. Last week, the Hawks raided several Gupta properties in Johannesburg as part of the investigation into the Vrede dairy. The project was meant to benefit the local community but prosecutors described it as a “scheme designed to defraud and to steal”.</p>
<p>Relations between the Guptas and Zuma, who resigned last week after being instructed to do so by the ruling African National Congress party, are the focus of a separate judicial inquiry into high-level state corruption.</p>
<p>A top judge will investigate whether the Guptas sought to influence the appointment of cabinet ministers and were unlawfully awarded state tenders.</p>
<p>South Africa’s new president, Cyril Ramaphosa, has made fighting corruption a top priority.</p>
<p>$1 = 11.6411 rand Reporting by Alexander Winning in Johannesburg and Wendell Roelf in Cape Town, editing by James Macharia, Larry King</p>


Atul Gupta challenges South African asset freeze

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<p>Alan Mukoki, CEO of SACCI talks to Fifi Peters about what big business can expect from new leadership in the Presidency and about how next week’s budget is likely to unfold.</p>


SACCI’s Mukoki on business expectations from Cyril Ramaphosa and next week’s budget

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<p>Controversial cartoonist Zapiro, Jonathan Shapiro, the man who forever cemented the image of Zuma with a showerhead growing out of his head in the South African psyche, discusses the Zuma years.</p>


The end of an error – Zapiro

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<p>Now that former President Jacob Zuma is out of office, it is critical for the country to rebuild the economy and to get the Judicial Commission of Inquiry and other prosecutorial measures back on track.</p>


Zuma’s resignation was long overdue – FEDUSA

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<p>Magda Wierzycka,  Chief Executive Officer of Sygnia Group, says trade union groups, labour, government and business have to come together to deal with the challenges. She also shares her thoughts on the future of the South African economy.</p>


Despite optimism about new era for South Africa, a lot of work needs to be done

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<p>Political analyst Mzoxolo Mpolase joins Fifi Peters and Chris Bishop in the studio to analyse the thought process former President Jacob Zuma may have gone through between his afternoon interview with the SABC and his late night resignation.</p>


Surprising how quickly people consolidated against Zuma

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<p>The new President will face quite a challenge to root out corruption in the South African government, David Lewis, Executive Director, Corruption Watch, told CNBC Africa’s Chris Bishop.</p>


No easy task ahead to root out corruption – Corruption Watch

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<p>Former President Jacob Zuma had good intentions for the economy, especially around radical economic transformation, says Xhanti Payi, Economist and Head of Research at Nascence Advisory and Research.</p>


Was Jacob Zuma’s economic legacy all that bad?

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<p>From Lagos, Bismarck Rawane, CEO, Financial Derivatives, speaks about the Nigerian view on the Zuma administration and expectations around ANC President Cyril Ramaphosa.</p>


Corruption

Jacques Pauw on Silas Ramaite’s appointment as NPA head

The economic cost of corruption in Kenya explained

The challenges of Nigeria’s war against corruption

NPA reacts to the postponement of the #Zuma case

Arms deal cover-up worse than the crime – Terry Crawford-Browne

Explainer: What you need to know about SA President Cyril Ramaphosa’s new Cabinet

Corruption perception of Nigeria worsens

Why Africa should throw people in jail – quickly

Atul Gupta challenges South African asset freeze

SACCI’s Mukoki on business expectations from Cyril Ramaphosa and next week’s budget

The end of an error – Zapiro

Zuma’s resignation was long overdue – FEDUSA

Despite optimism about new era for South Africa, a lot of work needs to be done

Surprising how quickly people consolidated against Zuma

No easy task ahead to root out corruption – Corruption Watch

Was Jacob Zuma’s economic legacy all that bad?

Nigerian view on South Africa’s economy after the Zuma administration

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Advertise With Us

Corruption

Jacques Pauw on Silas Ramaite’s appointment as NPA head

The economic cost of corruption in Kenya explained

The challenges of Nigeria’s war against corruption

NPA reacts to the postponement of the #Zuma case

Arms deal cover-up worse than the crime – Terry Crawford-Browne

Explainer: What you need to know about SA President Cyril Ramaphosa’s new Cabinet

Corruption perception of Nigeria worsens

Why Africa should throw people in jail – quickly

Atul Gupta challenges South African asset freeze

SACCI’s Mukoki on business expectations from Cyril Ramaphosa and next week’s budget

The end of an error – Zapiro

Zuma’s resignation was long overdue – FEDUSA

Despite optimism about new era for South Africa, a lot of work needs to be done

Surprising how quickly people consolidated against Zuma

No easy task ahead to root out corruption – Corruption Watch

Was Jacob Zuma’s economic legacy all that bad?

Nigerian view on South Africa’s economy after the Zuma administration

News Tips

Advertise With Us

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