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|
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)
|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.