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Title of the Assignment: Essay

Subtitle (‘Impact of Corruption on Economic Growth’)

Name: Mpho Mphephu


Registration number: R1803D4740707
Course: Induction Module: USW-IND-101
Tutor’s name: Florentia Antoniou
Date: 22 June 2018
“Corruption involves the malfunctioning of some (or all) areas of the public sector”
(Lambsdorff J, 20l7). Economies are crumbling, service delivery is non-existent and if it does
exist then the standard of the service is extremely poor. Marco Arnone and Leonardo S. Borlini
(2014), said “Corruption represents one of the most serious economic and societal problems”
(Arnone M and Borlini L.S, 2014). Are politicians more concerned about their selfish interest
rather rendering a better service to the community? How far will the politicians go just to
remain in power?

We are living in an age where there are so many Anti-Corruption Agencies (ACA) worldwide,
with the ability and means to fight corruption but corruption still continues as if those agencies
do not exist. With so many journal, books and articles written on corruption but perpetrators
are still finding new ways to get involved in corrupt activities. Politicians are more accountable
to their funders and political party instead of the public who voted them into public office.
Infrastructure development delayed, building and roads dilapidated or in poor standards while
public funds are redirected to cover unplanned and unbudgeted activities. Many perpetrators
of corruption have been exposed but judicial system is unable to prosecute them due to limited
funds. Instead of turning a blind while the act of corruption is taking place, I believe the time
has come for public to support the Anti-Corruption Agencies and the judicial system to
prosecute people involved in corruption. The outlook of South African economic growth is
challenging and the current President is faced with daunting task to change the perception of
the international community especially investors taking into recent rating by the rating
agencies. Apart from the recent rating, South Africa is still faces with high rate of
unemployment (26.7%) for the 1st Quarter of 2018 as published by Statistics South Africa
(Moya S, (2018), Trading Economics) and more workers getting retrenched, citizens are
wondering if the situation will change and because of frustration, they also embarked on violent
protests for service delivery but nothing has improved. Unless the corrupt public officials and
business leaders are brought to book, South African’s unemployment and inequality will
worsen. If the perception of the international community change, GDP growth will be limited
and with little or no foreign direct investment (FDI), South African government is faced with
a difficult task to convince the international community to invest the country. South Africa's
present disaster is a foundational disappointment stretching out crosswise over national and
nearby government. In spite of the fact that it's conceivable that the political cost of defilement
is presently achieving unsuitable levels, switching the impacts of state rot on the poor will take
short-run and long-run intercessions (Gossel S, 2017). It’s unfortunate that the poor citizens in
South Africa have little chance of living a better life or improve their lives (Gossel S ,2017).
In spite of the fact that the South African government has been instrumental in frameworks to
battle the shades of malice of defilement, reasonable issues have progressively developed
throughout the years (Pillay S, 2004). The most remarkable issues are: lacking coordination
of anti‐corruption work inside the South African open administration and among the different
divisions of society; poor data about debasement and the effect of anti‐corruption measures and
organizations; and the effect of defilement on great administration (Pillay S, 2004). According
to Dutta J and Aidt T.S (2016), “There are a few main theories that suggest that higher levels
of inefficiency increase the levels of corruption”. Tanzi V also point out that, “the existence of
regulations and authorizations gives a kind of monopoly power to the officials who must
authorize or inspect the activity” (Tanzi, 1998 ‘). Some researchers interrogated on the
toughness this practical relationship between corruption and economic growth, as findings of
a number of studies not reported a significant relationship and is quite sensitive to the inclusion
of other factors important to growth (Shabbir G, Mumtaz A, and Adil S, 2016). For example,
Brunetti, Kisunko, and Weder (1998) failed to discover any significant relationship between
corruption and economic growth. Abed and Davoodi (2000) reported that corruption becomes
statistically insignificant with inclusion of structural restructurings index in the regression. Mo
(2001), Pellegrini, and Gerlagh (2004) and Pellegrini (2011) documented similar findings that
corruption factor become insignificant after controlling the effects of other determinants of
growth such as investments, human capital, openness, and political instability. Corruption
forces distortionary consequences on a country’s economic growth through its negative effect
on public and private sector, the quality of the institutions, and the policy makers (Pellegrini
and Gerlagh, 2004). Though some would separate amongst terrible and great act of corruption
contending that exclusive defilement which is related with poor foundations negatively affects
Gross Domestic Product (GDP) development while remaining defilement (debasement which
is uncorrelated with other administration attributes) is decidedly identified with GDP
development with poor organizations (Moustafa M, 2013). This line of thought has it that an
examination of monetary information is emphatically associated with capital gathering and
profitability development in creating nations and that these experimental discoveries are
reliable with the hypothesis that defilement conquers wasteful boundaries (Moustafa M, 2013).
China's outstanding strategy of non-impedance in the household issues of beneficiary nations
proposes that they are probably not going to play a functioning part in battling defilement in
the same. The rule, which is obviously illuminated in official Chinese archives (State
Gathering, 2014), is portrayed as an approach to advance neighbourhood responsibility for
strategy. In any case, numerous spectators consider the approach a helpful method of reasoning
for monetary association in undemocratic and degenerate nations, and contend that it keeps
running against endeavours by the worldwide guide network to advance better administration
in Africa (Tull, 2006; Kaplinsky et al., 2007; Naím, 2007; Penhelt, 2007; Marantidou and
Glosserman, 2015).

This study examined the impact of corruption on economy in order to determine if corruption
does have any impact on economic growth and how the political leader’s decisions and
influence can impact economic growth. Political stability has a positive significant impact on
economic growth. Exposing act of corruption and eradicating it, is important for developing
countries and they should increase they effort in finding new initiatives to combat corruption
in order to realize the economic growth as required. Therefore, in order to reduce the impact of
corruption on economic growth, political stability is a vital factor because it reduces social
unrest and encourages investors to invest and that will lead to positive economic growth.
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