The Scrouge of Corruption and State Capture.
egc...@africaonline.co.zw
The Scrouge of Corruption and State Capture.
Corruption is a global phenomenon and has to be treated as such. The total cost to the global economy is probably trillions of dollars annually. In rich countries the impact is probably minimal but in poor countries it can be devastating. In the Congo it can be seen at two levels – the police road blocks which routinely demand a bribe to allow you to proceed – a friend of mine who is building two factories in the Congo says he often has to pay several road blocks every time he drives in from the airport. The second level involves large companies and government both at the local level and at the National level.
In China all cases of corruption are treated as serious crimes and since 1975 up to 300 000 cases have resulted in executions – often in public to act as a deterrence. In Africa, Chinese based activities are almost always associated with corrupt activities and even a form of State Capture as they seek opportunities and resources. The cost to the host country can be massive.
But these forms of corruption are also often associated with international firms seeking access and opportunities. I once had a conversation with a major European company from a country with a reputation for good government and humanity and he said to me that they did not do business in countries with a competitive market for their products, they preferred to operate in countries with corrupt governments as they made much more money.
Petty crime in the form of State employed persons with some power – the ability to control permits, licenses and other forms of State control, will often ask for a bribe to do so. Threats of a fine or even detention can be used to extort payments. Do not think that such activities are insignificant – they are not at all, and I see evidence of the wealth created in unlikely hands every day. I once sent a member of staff to a country in Africa to supervise deliveries of our product there and we used the postal service for some communications. He rented a post office box near his home and when no post was delivered for some weeks he asked if the postal service worked. He was told to put US$10 in the box and wait. Sure enough, in half an hour his post box was full.
But this is just the tip of the iceberg. In Africa there is no culture of support for politicians and political parties. In the USA and Europe, companies and individuals contribute to their Parties and individual candidates. Politics takes money, large amounts of it. In the early days of the Movement for Democratic Change in Zimbabwe, when we set out to challenge the ruling Party, we were sent to a workshop sponsored by a German political party. There they told us “You cannot fight a political campaign without money.” In the trenches of the political struggle that followed, we had to operate on our own funds or tiny budgets fed by well-wishers. Companies were fearful of making contributions and individuals even more so.
We find that political parties with power in their own countries almost always use such power to raise funds. This can be in the form of international funding by States seeking influence or companies who want to seek the approval or support of the Government. Often such companies operate schemes that make them a great deal of money, but which require protection, either from competition or to facilitate the schemes that they benefit from.
This form of corruption often leads to State Capture, where the political elite is influenced by a cartel of private interests or major players in a country to make decisions that not in the interests of the State itself. The Gupta scandals in South Africa is a good example. The men responsible for this episode now live in the Middle East in luxury whilst they left the ANC in a shambles and were probably partly responsible for their loss of power in the last election. The cost to South Africa was immense.
Another common form of corruption that has plagued Africa is the access to State controlled funds in all its different forms. In every country the State is always the biggest business, in every City, the local authority is always the biggest business. State controlled enterprise are nearly always sources of funding and personal enrichment. In Zimbabwe the SOE sector contributed 40 per cent to the GDP of this country at Independence in 1980, now 5 per cent. The country is littered with bankrupt and broken assets that were created by the State, nothing works. The reason in most cases is simply various forms of corruption. The cost to the nation has been enormous.
Air Zimbabwe gone, we now pay the highest cost of flying in the world. NRZ no longer functioning, our imports and exports now have to move by road at three times the cost. The CSC collapsed and our one million cattle owners are exploited by buyers who take advantage of the open market. Cottco, closed down and burdened with more debt than its assets, directors fled; the result of decades of under invoicing exports. 400 000 growers left destitute. Virtually every City and town is broke, unable to supply even basic services and the maintenance of infrastructure. The list of failures goes on and on.
The corruption takes many forms – overpriced contracts, side payments to individuals, high salaries that are not justified in any way – the CEO of the State controlled medical aid organisation paying himself US$6 million a year plus perks. He is fired but without consequences. The management of the City of Harare has just been investigated, I am told the results are shocking by any measure, will we see the report? Will there be any action apart from the Opposition led Council swinging its support to the Ruling Party?
A cartel of private companies operates in the field of maintenance of our national roads. They charge up to three times the cost of the work involved claiming late payment by Government and other issues. Yet we continue to issue major contracts worth billions without proper financing in place or tenders. Similar cartels exist in other sectors, taking excess margins on trade that cost us billions, most of it externalized. In the gold industry Ghana has just announced that last year US$11 billion in gold sales were externalized. They only discovered this when the Gold Traders in Dubai told them that they handled nearly 250 tonnes of gold from Ghana and only a small proportion was an official trade.
In 2024, the Dubai gold market handled over 1000 tonnes of gold from Africa. That is worth a Trillian US dollars a year. Half was smuggled and without certificates of origin. The cost of this activity to Zimbabwe was probably US$5 billion – equivalent to 70 per cent of our budget and 40 per cent of our exports. The impact of Ghana trying to close these gaps has been dramatic, they are now Africa’s largest gold producer, and their currency has strengthened 40 per cent this year.
I have said that we are among the most heavily taxed countries in the world. Yet we do not have the money to pay our civil service properly or to educate our children or to ensure decent health services. The reason is partly that our grey economy is so large and does not pay significant taxes but the combined impact of corruption, rent seeking, over inflated contracts and supplies, lower export earnings because of under invoicing as well as leakages in our tax system, far exceeds what we must pay in taxes. Put that right and we could lower the tax burden and increase the budget for the benefit of everybody.
Eddie Cross
Harare 18th of June 2025