Second, through the procurement of productive inputs, corruption raises the price of publicly procured inputs and increases the costs of public services.Recent unscientific evidence demonstrates that corruption in the public sector can increase the costs of services by 30 to 50 percent.
Research indicates that corruption has a significantly lower effect on economic growth in a democratically run country than in a more authoritarian country.
Furthermore, it appears that democracy may not purely reduce the level of corruption, but also change the composition of corruption. (2001), a democratic governance system can actually facilitate growth as citizens are better able to remove corrupt politicians.
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.
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.
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.
Every year the Nedbank & Old Mutual Budget Speech Competition invites economics students to submit essays on critical issues.
The winners are announced on the evening of the day of the Budget Speech.