Eustace Mashimbye is chief executive of Proudly South African. Image: Supplied.
JOHANNESBURG - It is with a great sense of dismay that we received the latest unemployment figures last week - up to 27.2percent from 26.7percent the previous quarter.

As an organisation whose work is entirely about contributing to job retention and creation, it is disheartening to say the least, and so while we continue to believe that we should be promoting local procurement as an economic driver and means of creating much-needed jobs, we have to look at some of the reasons why we cannot seem to climb out of our slough of despondency.

Corruption, which is a pervasive social evil, has an enormous negative impact on economic growth and job creation.

According to the Minister of Economic Development, Ebrahim Patel, whose department last year undertook an exercise to quantify the real costs of corruption, 76000 jobs were lost and R27billion in monetary terms as a direct consequence of state corruption.

Corruption comes in many guises, including collusion, price fixing and straight forward bribery, involving the payment of a “back hander” to someone who facilitates a deal, or similar.

The net results are as many as the multiple ugly forms corruption takes.

These consequences include over-inflated costs of doing business, which pushes smaller players out of the game; mistrust by investors in a corrupt society, resulting in less foreign direct investment in new manufacturing plants and commercial bases, where the potential for new jobs is lost (International Monetary Fund research shows that even a single point increase in the corruption index can lead to a reduction in foreign direct investment by as much as 8percent) and a government forced to pay more for procurement, leaving them with less money to spend on services.

According to an essay by economics graduate Jason Kelbrick of Nelson Mandela University as a submission to Old Mutual’s 2018 Budget Speech Essay Competition, studies show that countries with higher levels of corruption experience significantly lower government expenditure levels on key economic fundamentals such as health and education. Kelbrick makes the point that corruption in the public sector can increase the cost of services by as much as 30 to 50percent.

Compromised

A legislated process aimed at specific products that are designated for local procurement in the public sector can be compromised by the procuring officer, whose choices are to comply with the provision of buying from a local producer, or colluding with the supplier of an imported, non-compliant product.

He stands to gain nothing from the first option, but can secure personal financial benefit in following the corrupt route.

Even if so-called state capture - which is alleged corruption on a massive scale by anyone’s standards - is now being investigated and is subject to an upcoming inquiry, corruption in public procurement processes remains prevalent.

In our dog-eat-dog world, there is a sense of “if you can’t beat them, join them”, and if you have any hope of securing lucrative government contracts you have to be prepared to crook the Ts&Cs somewhere.

And so corruption is perpetuated. And in a country where the consequences of being caught are way lower than the potential gain, corruption becomes even more attractive.

That is not to say that corruption is not present in the private sector, where we know it is rife, but is less spoken about. Localisation, job creation, support for small and medium enterprises as well as making a contribution to the growth of the economy is never top-of-mind when enforcing corrupt procurement decisions, price fixing or colluding in one way or another.

It must be daunting as a start-up, or even for an honest medium-sized enterprise to have to weigh up the pros and cons of joining the gravy train in order to remain afloat, or else shed jobs.

If we could trace the impact of corruption through the entire supply and value chains of procurement, we would see that corruption is damaging the push for localisation, which is one proven way of improving livelihoods and creating jobs. Corruption runs completely contra to the sentiment of ubuntu, which Siphokazi sings about in her song “Ubuntu Bam”.

Eustace Mashimbye is the chief executive of Proudly South African.

The views expressed here are not necessarily those of Independent Media.

-BUSINESS REPORT