Karen Harverson
South Africa’s corporate standards are being polluted by corruption, and the toll on the country is far higher than the mere monetary value.
For example, corruption in Nigeria was initially accepted as a way of “getting the job done” — and so the cost of corruption was less than its monetary value because it had spin-offs of greater efficiency, explained Professor Lawrence Schlemmer of the Nedcor Project on Crime, Violence and Investment, at the fourth annual conference on fraud hosted by Compact Business Systems.
“But, of course, today Nigeria’s society and economy is crippled by corruption and it is plainly costing more than its monetary price,” he added.
Although statistics were unreliable, Schlemmer said corruption in South Africa was surging and estimated that serious economic offences in South Africa were up to three times higher than in Britain relative to the economy. “Just looking at commercial branch cases, between 1992 and 1995, there was a 60% real increase in the amounts involved in fraud.”
He attributed the increase in fraud, in part, to the transition the country has undergone. “Also to blame are skill shortages and high rates of emigration, which result in controlling agencies running out of human resources,” said Schlemmer.
Other factors, such as the general increase in crime, have resulted in more police entering the private security sector, further depleting the personnel in the various police commercial branches available to fight fraud.
Senior superintendent Frik Kitching of Gauteng’s commercial crime unit said the unit had lost a lot of personnel to the private sector. “It’s an enormous problem because we can’t compare to private sector rates, in order to keep our investigators, in whom we’ve invested time and money on training.”
But whatever the cause, said Schlemmer, corruption is at an unacceptably high level and the money cost thereof is higher than all other crime combined.
Also of concern, is that as much as 60% of corruption is committed by people in management positions, whereas in other countries it is mainly carried out by people in salaried employee positions.
So how much is it really costing South Africa? Schlemmer said the state was the victim in about 33% of serious economic offences in South Africa, far higher than in countries such as the UK, the United States, France or Germany.
“Including tax evasion, fraud, tariff scams and financial irregularaties, the state may be penalised by as much as R25-billion a year, which equals 17% of the 1994/95 budget,” commented Schlemmer.
He pointed out that this is roughly the size of South Africa’s interest payments on the state debt — “one of the factors crippling our capacity to improve the lot of the people”.
In essence, said Schlemmer, the combination of interest and corruption means that of South Africa’s state financial system, some 35% is being spent on things it shouldn’t be spending money on, if society had better controls.
The state, he said, may fight back by robbing investment capital which, along with high taxes, is imposing a huge penalty on a country that needs investment capital to grow.
Another serious implication for South Africa, if corruption continued unabated, is the damage caused to growth opportunities.
“Overseas countries may become cautious about risking investment in a country whose reputation for serious economic offences are growing. So, corruption is costing South Africa more all round than its financial value,” he said.