Opinion: Time to unmask corruption in the Eastern Cape


For 83% of CEOs in Africa, bribery and corruption is a significant and frustrating threat to business growth, according to PwC’s Africa Business Agenda 2014 report released in September. This might be another statistic until one realises that this also applies closer to home in the Eastern Cape where endemic corruption is threatening businesses - and the livelihoods of families who depend on those businesses.

A more recent example is the closure of Port Elizabeth events company Frontier Events and popular eatery The Cash Store as a result of alleged government corruption in tender processes. While the closure cost creditors R10 million, about 36 people lost their jobs.

Without downplaying the creditor’s plight, the 36 no doubt had several dependants who survived on their income at the company and restaurant. All are in a quandary thanks to a few selfish and greedy individuals who could not care if other families got hungry as long they can enrich themselves with public funds.

An elaborate wholesale corruption scheme

In an article published in the PE Herald, company owner Doug Pudney, in an affidavit, said their closure was brought on them by greed and corruption as government officials demanded kickbacks – often up to R250 000 on a R500 000 invoice, or the officials would award the tender to out-of-town companies.

Pudney, who cannot provide the names of the corrupt officials, said that he had refused to pay the bribes, resulting in him not getting the tenders.

He also alleges that government departments turned a blind eye to ‘corrupt comrade-owned Johannesburg companies’ which provided substandard work.

Pudney added that ‘connected’ companies or government officials in Bhisho and in the Nelson Mandela Bay Council were also getting tenders – some on specifications which Frontier Events had written.

“Our very specific specifications would appear in the event tender adverts and we were informed in advance as to whose turn it was to win the tender,” he purported.

“This happened time and time again, and we were informed before the tender was actually advertised who would contact us and appoint us as the sub-contractor for the event.”

Just one example

This case highlights how corruption is paralysing not only business growth, but employment creation and the betterment of communities by enriching a few greedy individuals at the expense of every one.

And it is just one example. Most local entrepreneurs – both established and emerging, will tell you how hard it is to do business with government or municipalities without ‘greasing’ a few palms.

Fortunately for corrupt government officials, not many entrepreneurs or businessmen will be willing to come forward with their stories for fear of implicating themselves or losing future business.

It’s not just corruption  

Corruption is without a doubt one of the main obstacles to sustainable economic, political and social development, for developing economies such as the Eastern Cape.

First of all, corruption adds additional costs to doing any business in any area – which is not what we would want in the Eastern Cape. The World Economic Forum estimates that corruption increases the cost of doing business by up to 10% on average.

Corruption also creates business uncertainty as it does not necessarily guarantee business to a company - there can always be another competing company willing to offer a higher bribe.

According to economists, it does distort market mechanisms, like fair competition and deters domestic and foreign investments, thus stifling growth and future business opportunities for all stakeholders. The IMF has shown that investment in corrupt countries is almost 5% less than in countries that are perceived to be relatively corruption-free.

As in the Frontier Events example, corruption goes against the intelligence of getting the best value for money for services rendered as public tenders are awarded to the highest

bribe payer while neglecting the better qualified companies who not willing to bribe.

For a province like ours, economic growth is also stifled. Every financial year, the Auditor-General’s report shows millions of Rands in public funds to be unaccounted for in government and municipal coffers.

What it means is that the province’s communities (especially the poor) are excluded from public services and poverty is perpetuated. The embezzlement or diversion of public funds further reduces the government’s resources available for development and poverty reduction spending.

Moreover, communities (including the poor) are forced to bear the largest burden of higher tariffs in public services imposed by the costs of corruption, as they have no alternative to the public services.

Politicians may turn a blind eye to corruption but it promotes the undermining of rules and regulations. If basic public services are not delivered to citizens due to corruption, the state eventually loses its credibility and legitimacy. Recent violent service delivery protests in the Eastern Cape are evidence to this.

Everyone needs to be involved

The call to unmask corruption can never be more urgent. Everyone - in business and in society, needs to get involved in making it much harder for corrupt officials and individuals to continue milking public systems and get away with their ill-gotten gains.

For a start, everyone (including public officials) can simply say no to bribery. While he has lost his business in the process, Pudney should be commended for standing up for what’s right.

“I would rather go out of business than be involved in that type of corruption. I am never going to do it,” he told the PE Herald.

While Pudney could not identify the corrupt officials, most people doing business with government know who the corrupt officials are. They need to be named and shamed for the benefit of society as a whole.