What is the true cost of corruption to society?
12 February 2016
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Hello and welcome to the latest edition of Old Mutual Live Business, my name is Chris Gibbons. Barely a day goes by without a headline announcing that this or that company or such and such an official here or a company executive there has been fingered for corruption. A bribe paid here, a dodgy tender awarded there, the list is a long one.
But what is the true cost of corruption to society? Can we really measure it? Joining us now on Old Mutual Live Business is David Lewis, CEO of Corruption Watch. David, greetings, thank you for your time, first off, how severe is the problem in this country?
How much of a problem is corruption?
David Lewis: Well, it’s perceived to be very serious and you may have seen that Transparency International released their authoritative corruption perceptions index yesterday. We’re ranked 61 out of 178 countries, with a score of 44 out of a possible 100. While that’s by no means the worst in the world, we are perceived to be in the group of countries that have a serious corruption problem.
Then, a month prior to that, the TI, Transparency International released another one of their international surveys, the Global Corruption Barometer in which 83% of the South African’s surveyed believed that corruption was getting worse. Which was higher than any other country in Africa, I might add. Not that they thought that the corruption in South Africa was the worst. But most of the largest number of them thought that South African corruption was getting worse.
CG: These are based on perceptions, do we have hard evidence to back this?
What does the evidence suggest?
DL: You know, there is a wealth, you said in your introduction, hardly a day goes by where there’s not some report or another of a dodgy tender or a dodgy contract of some sort of another. But you know, corruption is different from house robbery or even homicide or assault.
There is a victim who has an interest in reporting the crime committed. Corruption is most often an act of collusion between two guilty individuals. If you relied on data of reported corruption or even more limiting prosecuted corruption, you would very much under-shoot the real target.
CG: Does corruption always take place between business on the one side and government on the other?
DL: Not always. I think the most common corruption takes place at the interface between the public and the private and possibly the lion’s share of it. There are cases where public servants abuse their power and their access to public resources without the intervention of a private player. As in the case of money laundering and many would argue in the case of price fixing, there are cases where the private sector commits an act of corruption without engaging with the public sector.
Is price fixing corruption?
CG: Let’s be clear about that, price fixing, two companies agreeing to charge the same amount for a service or a product, that’s an act of corruption too?
DL: Well, you know, it’s an interesting question. The public certainly view it as such and we think here, and have made such submission to the Competition Tribunal actually, that it would be captured by the Prevention and Combatting of Corrupt Activities Act. Why it may fit, even though it’s a slight stretch, within the standard definition of corruption is because it is a conspiracy against the public.
It’s not an act against an individual as most criminal conduct is. Because it is an act against the public, even though it may involve toothpaste rather than roads, rather than a government contract as it were. I can understand why most people conceive of this as an act of so-called pure private sector corruption.
CG: How do you set about measuring then the actual cost of corruption?
Can you measure the cost of corruption?
DL: With great difficulty and I’m not sure that it’s possible. We’re going to try and do a very large project this year on that precise question. Because the figures, the Rands and cents figures that are bandied about are, frankly, embarrassing. The range is so huge that it’s difficult to give credit to any of them and it may indeed not be possible.
Maybe what you’re doing is relying on perception, anecdotes and the kind of intelligence that comes with that. The fact that, if the people of a country view it as too much corruption, well, you know, quite honestly, for the most part, that’s good enough for me.
CG: You mentioned the Transparency International indexes, what would we need to change for us to move to a better spot on those tables?
How would we improve out ratings?
DL: That’s obviously a very large question and one that indices – certainly the latest index – doesn’t go into. They don’t take a view on the causes of corruption in each of the 168 countries surveyed. We, and I don’t doubt you, have an idea of what we think it would take in South Africa to start turning this around and moving up the index.
There was some very useful intelligence in the global corruption barometer. I mean to cut a long story short, I think that there are a variety of issues that go into making up that perception. One, I think, is the perception that if you’re politically well-connected and wealthy, you can get away with pretty much anything. So to demonstrate that no one is above the law, is absolutely critical.
That then raises the question of well, why does it seem that some people are above the law and I think that a major reason for that is because of the corruption and dysfunctionality of key law enforcement agencies, including the national prosecuting authority.
I think those are critical and then at the other end of the spectrum, I think that petty corruption is critical because I think for ordinary people, and they are the whole who that in that survey have said that 83% of people thought corruption was getting worse.
They experience corruption not as the big headline making stories, although in those stories they see big people getting, what they experience, the mayor, the town councillor, the traffic cop, the licensing official, getting away with proverbial murder, in this regard. I think that corruption at that level needs also to be focused on and examples need to be made there that suggest that there will be consequences for engaging in it.
CG: If I run a company of 50-100 employees or whatever, how do I go about safeguarding that company from corruption? What can I do as a business leader?
Can you safe guard your business?
DL: Well, interesting point and I’m sure your podcast won’t be out before then. But you know, on Thursday evening at Wits Business School we’re hosting, together with the Business School a conversation about precisely this issue. With three South African business leaders, all of whom are well-known for actually speaking out about it.
It would be interesting to know what they think the impact of their speaking out has been. Most large companies now, particularly those that are vulnerable to the Foreign Corrupt Practices Act, have an anti-corruption compliance programme, which they implement with varying degrees of energy.
Many of them very energetically, because as I say, the US Foreign Corrupt Practices Act is a very threatening piece of legislation and decides which many of our large companies, I think, certainly like to think of themselves as ethical companies.
You know, I’m beginning to think that it’s not good enough to look only inwards. What I would be saying to the business leaders on Thursday night is that don’t you think it’s about time that companies started to find a way of positively associating their brands with opposition to corruption.
Just as, you know, some companies do with environmental issues and other companies loudly proclaim they don’t employ child labour. Isn’t it about time that companies did the same in relation to corruption as well? I think though what people should not lose sight of is that the largest cost of corruption is not the cost that’s measured in Rands and cents.
It’s the fact that it undermines fundamentally the relationship of trust that is necessary between the public on the one hand and the public sector and the private sector on the other hand. If you can’t trust the people who guard your savings or build your bridges or provide your essential goods and services, we’re in bad territory. When that level of trust is broken down and that’s the true cost of corruption.
CG: There’s a fair point, David Lewis, CEO of Corruption Watch, thank you for joining us on Old Mutual Live Business.
DL: Thank you Chris.