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Corruption and Doing Business in Zimbabwe

Corruption and Doing Business in Zimbabwe

This article by Transparency International Zimbabwe makes an attempt to show the impact of endemic corruption in Zimbabwe’s economy. The article is an extract from TI Z’ ‘s 2015 Annual State of Corruption Report.

 

High levels of corruption in Zimbabwe have resulted in an increase in the cost of doing business. The high cost of doing business in Zimbabwe has acted as a strong disincentive for local and foreign investment and seriously eroded the country’s internal and external competitiveness, with the country scoring poorly on all the major business competitiveness indices – as shown in Table 1.

 

Table 1: Competitiveness and Ease of Doing Business Rankings

Year World Economic Forum (WEF) Global Competitiveness Rankings World Bank (WB) Ease of Doing Business Rankings
2008 129/131 154/183
2009 118/121 160/183
2010 132/134 156/183
2011 136/139 157/183
2012 132/142 170/183
2013 132/144 172/185
2014 131/148 170/189
2015 124/144 171/189
2016 125/140 155/189

Source: World Economic Forum Global Competitiveness Reports and World Bank Doing Business Reports

 

More so corruption in Zimbabwe has resulted in a marked increase in levels of fiscal deficit and domestic indebtedness as central government has bailed out and taken over the debts of a number of parastatals and banks, including the central bank through the Debt Assumption Act 2/2015 which saw the government assuming the RBZ’s US$1.4 billion debt. Consequently, according to the IMF (2016), total public domestic debt increased from US$1,124 million in 2013 to US$1,960 million in 2015 (See Table 2). As a percentage of GDP, total public domestic debt rose from 8.3 percent in 2013 to 13.8 percent in 2015. Unfortunately, this has had the negative effect of crowding-out resources from the private sector. Debt repayment will also crowd resources away from social expenditures. There has been a reduction in government revenues as receipts from the sale of minerals have not been properly accounted for through the treasury. Government has also been prejudiced of significant revenues through the smuggling of commodities into the country. The inflation of the cost of projects has resulted in an increase in the cost of services and a reduction in the quality of services rendered.

 

Table 2: Total Domestic Debt, Zimbabwe (in millions of US dollars)

2012 2013 2014 2015
Total Public Domestic Debt 1,110 1,124 1,660 1,960
Total Public Domestic Debt (% of GDP) 8.9 8.3 11.7 13.8

Source: IMF (2016)

 

Corruption has also contributed to a significant increase in the levels of informalisation and underground economic activities in the country. Moreover, corruption has discouraged production and provided strong incentives for rent-seeking and conspicuous consumption. This has had the effect of undermining economic growth as well as the ability of government to mobilize resources domestically.

 

TI Z applauds the policy efforts by the Government through the Office of President and Cabinet in particular through the Doing Business Reform Agenda. TI Z strongly believes that such policy drives can yield high impact if the government put in place a Whistleblowing Act and also effectively act upon Reports by the Auditor General. TI Z also believes that the Against Corruption Together Campaign has not lived to its expectation. To date it just remains a policy rhetoric lacking practical and institutional action.