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Corruption and business growth and development: The setting - Thoughts from GNCCI

 The issue of corruption often raises contentious debates, based primarily on the view by some that it is perceived rather than real. Yet the evidence that is frequently produced by Transparency International with a focus tilted toward the public sector, and the Association of Certified Fraud Examiners which emphasizes the private sector, indicate that corruption is real and has undesirable consequences both in the public and private sectors. In its 2015 corruption perception index study of 168 countries, Transparency International reported that not even one country was corruption-free. With respect to the private sector, the Association of Certified Fraud Examiners in its 2014 and 2016 annual global corruption reports noted that businesses lose 5% of their annual revenues due to occupational fraud which may occur through asset misappropriation, corruption and financial statement fraud. However, a careful assessment of the debates around the globe suggest that there is the possibility of selective observation with respect to agreements or disagreements with its existence in countries and across continents.

As a way of contributing to the debate in order to help address the problem, we offer a three-part series with the first part focusing on the setting with some emphasis on Ghana, and conceptual explanations of corruption, while the second part examines the causes and manifestations, with the third part discussing the costs and effects, and how it can be tackled in order to improve the environment for business. The contents are based on a synthesis of views from several writers in academic and public domains, but the names have been omitted in order for ease of readability.

 

Part 1: The setting 

Since independence in the late 1950s and early 1960s, many African countries, including Ghana, have been battling underdevelopment as manifested in illiteracy, poor health, low incomes, food insecurity, unsanitary and unhygienic living environments, and poverty and their undesirable effects, in a conflicting scenario of natural resource plenty and development funds’ scarcity. From the basic needs approach, to import substitution, to economic recovery and structural adjustment  and their related strategies, several development paradigms have been proffered as frameworks for tackling the problems at different times, but throughout all these trials the often cited constraint is inadequate funds. International development assistance has thus been an integral part of the efforts that are aimed at lifting African countries out of their underdevelopment quagmire. However, all the efforts and the fund resource flows seem only to dent the problem rather than make major inroads.

In the particular case of Ghana, the strategies have evolved from growth and poverty reduction to the current emphasis on private sector led development. The emphasis on the private sector is evident in the government’s “one district, one factory” policy which, as reported by citifmonline on June 24, 2017, has attracted US$2 billion from the Chinese government. The core feature of the policy is the establishment of one viable factory in each district in Ghana with dominant participation by the private sector, and with the purpose of transforming the country through industrialization, and creating employment opportunities for the citizenry.

While the catch phrase “one district, one factory” is nouvelle, and the emphasis on private sector dominance pertains, the essential ingredients and intents of the policy are similar to what some of the previous governments tried to do under import substitution strategies which led to the establishment of state-owned enterprises in the late 1950s and early 1960s, and the relatively recent presidential special initiatives. The fact that the previous attempts failed is not in doubt, and aside the numerous economic phenomena, including inefficiencies and mismanagement, that were cited as the explanatory variables for the failures of the earlier attempts, another crucial variable that is often cited for policy failures is corruption. 

While corruption has always served as an impediment to Ghana’s development efforts, the level has now become almost intractable. A World Bank (2013) enterprise survey showed that the graft index for Ghana approximated 30, far above sub-Saharan Africa’s level of 20 and 15 for lower middle-income countries.

This essentially means that graft in Ghana is twice that of comparable developing countries. In an opinion piece published in Myjoyonline.com it was asserted that we can concretely say that corruption in Ghana is not just a mere perception but inherently pervasive in the country as evidenced by Anas’ exposé in the Judiciary. It was opined that since the judiciary is a very important state organ that is expected to adjudicate, preserve and safeguard the laws that protect the citizens, acts of corruption by its functionaries, even if perceived, can compromise law enforcement.

When the judiciary is distrusted, then the penchant for mob violence and vigilante justice prevail, rendering a country lawless with the accompanying uncertainties that have dire consequences for business. In addition, reports frequently surface with respect to corruption in the legislature or parliament. When two important arms of government experience dented integrities, the consequences can be disastrous for overall governance and thus business activities.

 

Conceptual explanations of corruption

There are generally no controversies about the definition of corruption. Several authors and international organizations define it as the misuse or abuse of public office for private gain. This definition fall a little short by neglecting abuses of office for private gain that occurs in the private sector without the involvement of public officials. Transparency International (2006) provided a more encompassing definition that corruption is the misuse of entrusted power for private gain.

In this respect, the focus is “entrusted power” and its misuse, regardless of which sector it resides in. In reality however, attention is often devoted to the public sector because that is where the deleterious effects are felt most, particularly in developing countries, even though it also has ominous effects in the private sector due to the dislocation of resources that accompanies it.

UNDP classifies corruption into two types: spontaneous and institutionalized or systemic. It explains that spontaneous corruption is usually found in societies observing strong ethics and morals in public service, while institutionalized corruption, on the other hand, is found in societies, including Ghana, where corrupt behaviors are perennially extensive or pervasive. In these societies, corruption has become a way of life, a goal, and an outlook towards “public” office. In Ghana, this often explains the reasons why people prefer to work in places like Customs, Police, Driver and Vehicle Licensing Authority, Revenue Services, Immigration, and Land Registration departments.

The typology has been further expatiated on as comprising grand corruption, bureaucratic corruption, and legislative corruption. From that point of view, grand corruption refers to exploitation of power by political elites to fashion national policies that tend to serve their interests at the expense of the general populace.

This type of corruption is difficult to identify and measure especially when at least some segments of the population will gain. However, it is easier to measure and study under dictatorships who make policy decisions that serve their interests exclusively, and where there is usually no distinction between the dictators’ own wealth and that of their countries. Bureaucratic corruption is the corrupt acts of the appointed bureaucrats in their dealings with either their superiors or with the public.

In its most common form, usually known as petty corruption, the public may be required to bribe bureaucrats either to receive a service to which they are entitled or to speed up a bureaucratic procedure. Legislative corruption, including “vote-buying”, is the manner and the extent to which the voting behavior of legislators can be influenced through bribery by interest groups to enact legislation that can change the economic rents associated with assets.

The typology can be further disaggregated into high-level corruption and low-level corruption. High level corruption or organized corruption results in kickbacks in the award of expensive contracts, the creation of a register of ghost employees, duplication of state agencies, establishment of agencies with overlapping functions, and excessive centralization of appointing authority, and they can  involve syndicates comprising members from various governmental offices such as the central bank, controller and accountant general departments, judiciary or attorney-general’s office, finance ministry, trade ministries, revenue agencies, registration agencies and other allied offices. There can be an intricate network of alliances and collusions such that the corrupt practices take longer to detect and once detected they become difficult to prove because of the nature of the web. On the other hand, low-level or chaotic corruption includes bribes paid at licensing offices, immigration/passport offices, and registration offices, where several targets have to be satisfied before the service is delivered. Its effects are immediately felt in delays and unsatisfactory service, and the victims are often the less privileged in society, and because of its nature there is very little incentive to curtail it. The two types co-exist in reality, and they are prevalent in countries where the moral and ethical standards for conducting business are low. 

Transparency International has also characterized corruption with similar typologies. They classified corruption as grand, petty and political, depending on the pecuniary value and sector of the economy in which the activity occurs. They explain that grand corruption occurs at the high level of state or government with the connivance of leaders or politicians, while petty corruption connotes the abuse of office or entrusted power by low- and mid-level public officials in their interactions with the ordinary citizens. In this respect we can consider the activities of office holders at licensing and permit issuing organizations as falling into the category.

The World Bank enterprise survey in 2013, for instance, found that Ghana fared worse with respect to bribes for issuing licenses and permits when compared to sub-Sahara Africa and low income countries. According to Transparency International, political corruption is the manipulation of policies, institutions and rules of procedure to perpetuate the hold on electoral power and executive control of state resources.

The above setting and conceptual explanations, provide the stage for us to discuss the causes and manifestations in the second part of the series. It is our assumption that, understanding the causes and manifestations will give all of us clearer insights into the phenomenon and motivate us to address it.  

The writer is with the Ghana National Chamber of Commerce & Industry (GNCCI)

Published in the Business & Financial Times

Ghana National Chamber of Commerce and Polish Chamber of Commerce sign MoU

Business Relations between Ghana and Poland are set to receive a major boost with the signing of a Memorandum of Understanding (MoU) between the Ghana National Chamber Of Commerce (GNCC) and the Polish Chamber of Commerce.

The MoU was signed on Tuesday at a one-day Ghana-Poland Business Forum in Accra.

The forum, jointly organised by the GNCC and the Polish Chamber of Commerce, is to strengthen the co-operation between the two countries.

Speaking at the Forum, Nana Dr Appiagyei Dankawoso I, President of the GNCC, said the signing of the MoU would, among other things, further the development of trade and economic, scientific and technical relations between Ghanaian and Polish enterprises, companies, and entrepreneurs.

It is also expected to promote the development of new effective forms of economic co-operation.

“Today’s business forum as well as the presentation of business opportunities is meant to provide the requisite information to enable business men and women make an informed business and investment decision,” he added.

Explaining why he was enthused about the Ghana-Poland collaboration, Mr Dankawaso said his outfit had over the decade, embarked on a number of trade and investment missions towards building co-operation critical for private sector growth and saw this opportunity as one that would lead Ghana towards achieving its growth agenda.

He noted there were various investment opportunities to be explored for the mutual benefit of Ghana and Poland, including in the energy, agriculture, trade, pharmaceuticals and construction sectors, among others, in order to boost the levels of trade between them.

Statistics from the International Trade Centre showed that Ghana’s exports to Poland stood at GH¢33.3 million in 2016, while imports from Poland stood at GH¢37.4 million.

The main commodities traded include Cocoa and cocoa preparations, rubber and articles, wood, machines and equipment, paper, electricals and beverages.

He, however, bemoaned the lack of a Polish Embassy, saying the absence of a consulate made visa acquisition for businesses difficult and called for the establishment of a, embassy in Ghana.

Currently those seeking to travel to Poland have to use its Embassy in Abuja, which is accredited to Ghana.

Mr Andrzej Dycha, Ambassador of the Republic of Poland in Abuja said that his country was delighted to have such an alliance with a country that had been described by many as the gateway to Africa.

He said Poland and Ghana had some similarities, including both being fast growing economies, with Poland recording about four percent growth in 2016.

“Let’s join efforts and make the growth faster,” he said.

Mr Dycha said the Polish delegation were not only in Ghana to reap benefits for themselves but to participate in the objective of the Akufo- Addo government, especially the one district one factory project.

He was of the view that Polish enterprises could help execute the One District One Factory project by investing in some of the key areas earmarked by the government for the project.

Mr Carlos Kingsley Ahenkorah, Deputy Minister of Trade and Industry, commended the GNCC for its resolve to promote cooperation and partnership through trade and investment.

He encouraged the Polish businesses to take advantage of the business incentives that Ghana offered such as tax rebates and exemptions, repatriation of profits, and relief from double taxation.

He also committed to pursue the GNCC’s call for the establishment of a Polish embassy in Accra. “We look forward to engaging the government of Poland towards setting up a Polish Embassy in Ghana to deepen our diplomatic and trade relations”.

Mr Jerzy Drozdz, Member of the Board of the Polish Chamber of Commerce and Leader of the Polish Business delegation, who signed the MoU for his side, told the GNA that the Poland had been growing steadily in sector like agriculture and agro foods industry and could work together with Ghana to grow its sector.

He said Polish businesses specialised in producing agricultural machinery and were open to partnering with Ghanaian businesses, not only to sell the finished products but also to possibly set up manufacturing or assembly plants in the country.

“Another important thing is to find good local partners. This is very important because the local partners knows everything about the country; business environment, how the economy works, relations between government and business community,” he stated, adding this was very important in doing good business.

Mr Jacek Jedruszak, of the Ministry of Economic Development, International Co-operation Department outlined the opportunities for Ghanaian businesses in Poland.

He said Poland’s import value from Ghana, including cocoa and cocoa products, timber and wood products, aluminium, fruits and natural rubber, stood at 30 million Euros while its export to Ghana, including meat, machinery, dairy products, second-hand clothing, electricals, animal feed and paper, stood at 34 million Euros.

He said import and export levels between the two countries were very low and asked businesses to do more now that a formal agreement had been reached.

Source: Belinda Ayamgha/Agnes Ansah, GNA Accra, June 27

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About GNCC

The Ghana National Chamber of Commerce is an association of business operators, firms and industries with interests spanning every sector of private enterprise in Ghana. Read more

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Ghana National Chamber of Commerce
1st floor,World Trade Center,
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P.O Box 2325,Accra

233(0) 302 662860 / 233(0) 544114306

info@ghanachamber.org

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