Monday, April 3, 2017

THE UNDERRATED EFFECTS OF CORRUPTION

This week two officials from the finance ministry were arrested for allegedly soliciting bribes from an investor.

The officials, Charles Ogol and Geoffrey Turyamuhika, were allegedly caught red handed with $500,000 (sh1.8b) that was given to them by the investor in a sting operation organised by the police. Sources familiar with the case some of their counterparts in the ministry took the hills when they were arrested.

While the story got full media play, the cynics among us cannot help thinking this is a token gesture, a necessary sacrifice to assuage the masses baying for blood, but is unlikely to accelerate the momentum in the fight against the scourge.

"Uganda is currently in the throes of an economic slowdown, the worst we have since the 1990s. For years growth was driven by government spending and consumption. However a shift in government expenditure towards heavy infrastructure projects, a closing of some of the leakages by among other things, insisting on a single account per ministry housed in the Bank of Uganda rather than the myriad of accounts dotted around the banking sector and a shift of donor assistance away from budget to project support, has shown up our economy for what it really was – a mirage propped up by corruption rather than production...

The chicken have come home to roost.

In hindsight the footprints of corruption were there for everyone to see.

A real estate bubble, which until recently saw property prices in Kampala rise to higher than similar ones in Nairobi, whose output is almost as big as the Ugandan economy. Relatedly a construction boom that could not be accounted for by the rate of credit growth. And our exports showed no sign of keeping up with the growth in our import bill, even when oil prices fell through the floor.

Corruption is a terrible thing and not only from a moral standpoint.

It distorts markets, as the corrupt in an attempt to legitimise their ill-gotten gains have no sense of the value of things, paying too much and driving asset inflation. They also cripple legitimate businessmen who have to factor in a cost of money when pricing their goods and services but then are undercut by the corrupt who don’t have a similar concern.

And finally it concentrates resources in a few people’s hands to the detriment of the majority. So for instance five years ago Mulago required sh22.5b to treat 140,000 in patients. But in the public service sh88b was stolen by a handful of people. Assuming there were hundred people in the ring who stole the money, each would have received an average of sh880m or the cost of treating about 5,500 inpatients in Mulago for a year.

Clearly these kind of comparisons are not known for good reason. No one wants to put a human cost to these numbers, otherwise as a society we might muster an appropriate response against the thieves. But more worrying, we do not want to come face to face to the real cost because all of us are waiting in line for our turn. We daren’t upset the trough before we have partaken of it.

"Everybody is in on this racket from the lowly street child to the university alumni to the bible slapping clergyman...

The theory that the government cannot stand without corruption is now being tested. While it has not been eliminated the signs are that there is not enough to go around. We can expect a few more officials thrown under the bus in coming weeks and months as resources dwindle.

Corruption will not stop because the corrupt find a conscience. Corruption will be brought under control by the pressure from the legitimate economic players – the workers and producers, who have been cut out from the loop, insisting that the playing field has to be levelled or there will be political consequences.

Expect the champions of corruption to push back – after all, who wants to give up the easy money and out of this contestation will come a cleaner society.

Of course it may very well go the other way. That the corrupt pushed to the wall, blackmail the government into causing the taps to flow again and we return to business as usual. A jump in speculation and consumption unsupported by production and a continuation of the mirage of economic growth...


Wishful thinking or the ravings of the lone voice in the wilderness? Time will tell.

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