As more enterprises go underground, a government’s revenue base can be substantially eroded, resulting in long-term negative effects on economic growth.
Another area in which the burden of fiscal corruption is quite substantial is in the delivery of public services.
It does, however, provide mechanisms for societies to eject bad leaders, either through open elections or internal party processes.
The political ouster of Zuma, who showed egregious disregard for the rule of law and an inclination to treat government offices as platforms for self-enrichment, suggests that South Africa’s democratic institutions are functioning as one would hope.
South Africa remains a dual economy with one of the highest inequality rates in the world.
Similarly, countries with more corruption experience lower acceptance of established institutions, weakened political institutions and a deficient court system leading to higher political instability.Yet Zuma’s resignation, and the events that led to it, signal just the opposite.Democracy does not guarantee the selection of honest or competent leaders.This rise in the shadow economy is purely down to the extra costs of corruption that have essentially been burdened by newly established SMEs that don’t have the financial backing to cover further costs.As a consequence, entrepreneurs might be reluctant to start businesses in the official economy.In South Africa, officials will continue to act corruptly so long as the perceived gains from corruption outweigh the costs.With a weak judicial system, corruption will continue to grow as the probability of detection and punishment is lower.This year undergraduates addressed the economic and fiscal costs of corruption.In this abridged essay, finalist Jason Kelbrick from Nelson Mandela University explores its destructive consequences – and points to constructive remedies.It is evident that in the past years, corruption has become a more prominent issue both in South Africa and throughout the world.Along with corruption comes various economic and fiscal costs which have a direct effect on a country’s allocation of resources and social welfare.