Abstract

The study examines the effect of corruption on the economic growth of Cameroon. The model specifies economic growth measured by Gross Domestic Product (GDP) as dependent on corruption proxy by Embezzlement (EMBZ), Bribery (BRIB) and Nepotism (NEPO). Annual time series data from 1996-2018 was sourced using secondary data and analyzed using ordinary least squared (OLS) estimation technique.

It was evidenced that corruption has a significant impact on the economic growth. Both Embezzlement (EMBZ) and Nepotism (NEPO) had a significant effect on the economic growth of the country while Nepotism (NEPO) had an insignificant effect on the economic growth of the country.

Based on the findings some recommendations were made on the way forward. Corruption has been detrimental to economic growth and in order to enhance the economic growth in Cameroon, the rate of corruption need to be reduced to a certain level closer to 0 or 1.

Also, given the negative impact of Embezzlement on economic growth, the Government should implement measures that can combat it and this can be done by investigating on infrastructures and making sure that they are properly constructed and yield the purpose for which it was elevated.

CHAPTER ONE

INTRODUCTION

1.1. Background of the study

In recent years, corruption has been a global issue that affect many countries of the world especially the less economical developed countries with Cameroon being among. And  has now globally recognised as a policy variable that affect almost all aspect of social and economic life of most developing countries where it is thought to be more important for the attainment of long term economic growth and sustainable development.

According to world transparency international organisation, corruption can be define as the misused of public power for personal or private interest. Some examples of corruption includes; embezzlement of public funds, the sale of government properties by public officials, bribery, patronage, and nepotism. Corruption is the greatest obstacle to social and economic development since it twist the rule of law and weakens the institutional foundation upon which economic growth is constructed.

Corruption has become a common phenomenon in every society nowadays and the negative effect it has on the political and socio-economic structure of a country can be hardly over emphasized. There has been a global out cry and collective effort to tackle this social ill through the implementation of anti-graft laws and policies across the world.

As the fight against corruption continues, other nations have been successful in their quest to limit the level of corrupt practices while others are still lagging behind. According to 2010 CPI shows that nearly three quarters of the 178 countries in the index score below five on a scale from 0 to 10, indicating a serious corruption problem.

The 2010 CPI measures the degree to which public sector corruption is perceived to exist in 178 countries around the world. The 2010 CPI shows that nearly three quarters of the 178 countries in the index score below five on a scale from 0 (perceived to be highly corrupt) to 10 (perceived to have low levels of corruption), indicating a serious corruption problem. Botswana, the first sub-Saharan African country comes at the 33rd position with a score of 5.8, followed by the Mauritius Islands at the 39th position with a score of 5.4 and Cape Verde at the 45th position with a score of 5.1. The rest of the 30 African countries considered in this ranking are below average. Cameroon and Cote d’Ivoire share the last position with a score of 2.2.

According to the World Bank, corruption can generally be defined or described as the abuse of public power or corporate office for private benefit (World Bank, 2005). Types of corruption include grand corruption, which involves corruption that pervades the highest level of national Government, to petty corruption, the exchange of very small amounts of money or the granting of minor favours by those in minor positions.

Regardless of the scope of corruption, such acts undermine the development of civil society and exacerbate poverty, especially when public resources that would have been used to finance people‟s aspirations for a better life are mismanaged or abused by public officials (John Sullivan and Aleksander Shkolnikov, 2006).

Corruption in Cameroon takes several forms ranging from bribery and extorsion, bureaucratic corruption, private sector corruption and tax evasion, judicial corruption, electoral financing as well as corruption in the budget process, procurement and public contracts (Transparency International, 2016).

According to Freedom House (2015), “Bribery is commonplace in all sectors, from gaining school admission to fixing traffic infractions.” (Freedom House, 2015) Bribery in Cameroon assumes the street names of “gumbo”, “beer”, “taxi”, “fuel”, “tchoko”, “motivation” (Atangana , 2012), and is common practice at all levels of the Cameroon state and business sector.

International diagnostic surveys show that corruption in Cameroon is widespread, affecting a variety of sectors. Cameroon ranks 130 out of 168 countries on the 2015 Corruption Perceptions Index, with a score of 27, below the global and slightly below the Sub – Saharan African average score of 33 (Transparency International, 2016).

The Ibrahim Index of African Governance tells a similar story with its indicator on accountability, giving Cameroon a score of 31.2 over 100, slightly below the African average for the same indicator (Mo Ibrahim Foundation, 2015). Finally, the World Governance Indicators, specifically the indicator on control of corruption, place Cameroon in the lowest 10 percentile, while performing in the low (in the 25 percentile or lower) for the remaining indicators (Kaufmann, D., & Kray, A, 2015).

These perceptions tend to correlate to national opinion surveys on corruption. In the 2013 Global Corruption Barometer (GCB), at least 69 per cent of respondents in Cameroon stated that they had paid a bribe in some form, and 46 per cent of respondents thought the corruption situation had worsened (Transparency International, 2013). In the Afrobarometer survey, 45 per cent of respondents from Cameroon believe all or most government officials to be corrupt (Afrobarometer, 2015).

In Cameroon, empirical studies show that more than 4700 billion FCFA (approx. US$8 billion) accounting for about 20% of Cameroon’s current GDP have been embezzled in the last decade. Grand corruption which is corruption involving head of states, ministers and senior ranking civil servants has so badly weakened the economy of Cameroon and plunge millions into abject poverty, misery and unemployment.

Aside CONAC, the office of Supreme State Audit is also a leading body in the fight against corruption in Cameroon today. In 2011, a Special Criminal Court was created to prosecute State officials who misappropriated funds valued equal to or above fifty million francs CFA. Since then, several top state officials including a former Prime Minister, Minister of State in charge of Territorial Administration and Decentralization, Minister of Finance and numerous General Managers of public enterprises and parastatals have been convicted by this court for embezzlement of funds (Nguemegne JP, 2011).

These are clear indicators that the advent of the 21st century brought about a drastic change in the government‟s fight against corruption in Cameroon. The “Operation Sparrow Hawk” was launched by the President of the Republic and placed under the coordination of the Vice Prime Minister, Minister of Justice, and Keeper of the Seals, to track down and expose public servants who misappropriate state funds (Monde Afrique, 2015). These institutions were created to jointly and severally uproot corruption which hinders development as it accounts directly and indirectly for loss of revenue by the government.

It is also important to highlight that the fight against corruption in Cameroon does not exist only in the public sector, but also in the private sector. The results of a survey carried out in 2008 showed that 49% of the 1052 companies interrogated affirmed to have bribed taxation officers (Afrique L, 2011). Another 76% of those companies agreed that corruption had negatively affected their businesses. This is the double tragedy of corruption in Cameroon – killing of businesses and severe weakening of the economy.

SSA countries like Cameroon is considered one of the worst performing regions in the world, a factor seen as contributing not only to the slow growth, but also to the limited progress in poverty reduction. Six of the ten most corrupt countries in the world (Transparency International, 2018) and four of the ten least democratic countries in the world (The Economist Intelligence Unit’s Democracy Index, 2016) are in the SSA. A 2002 African Union study estimated that corruption cost the continent about 25% of the GDP of African countries a year (Hanson S, 2009).

The African Union’s panel on illicit financial flows also found that African countries lose over $50 billion a year due to tax evasion and other illicit practices and its 50-year losses top a trillion dollars (United Nations Economic Commission for Africa, 2018), an amount roughly equivalent to all of the official development assistance received by Africa during the same timeframe. These illicit outflows are of serious concern for this region, given inadequate economic growth with 81.8% of countries classified in the “low human development” category worldwide (Africa Human Development Report, 2016).

Corruption manifests itself in many ways: as bribery, financial leakage, conflict of interest, embezzlement, false accounting, fraud, influence peddling, nepotism, grand corruption, and illicit financial flows (UNPAN, 2002 as cited in African Union, 2018). In principle, corruption is a scourge and a cankerworm which has existed since human beings started organising themselves into communities, indicating that corruption exists in countries in the World over. What generally differs from country to country is its dimensions, its intensity and most important, the way the Government and the Society at large deal with the problem so as to reduce or eliminate it (GERDDES-Cameroon, 1999).

While corruption is mostly described as the abuse of public power for private gain (a definition used by the World Bank as seen above), moralists describe corruption as “an immoral and unethical phenomenon that contains a set of moral aberrations from moral standards of society, causing loss of respect for and confidence in duly constituted authority” (Bechem, 2018).

Corruption is a canker worm that has invaded the Cameroonian society. It cuts across all sectors in Cameroon, be they the Public or Private sector and, not even the church is free of corruption. It is an age-old phenomenon that has plagued the Cameroonian society notably in the Health, Educational, Judicial, Financial, Military, and in the Law and Order departments (Bechem, 2018). Cameroon has twice topped the chart of the most corrupt country in the world in 1998 and 1999 according to the corruption perception index by Transparency International indices (Transparency International, 1998 & 1999).

The Offshore oil deposits exploited since in the early 1970s had made Cameroon one of the most prosperous nations in tropical Africa, but economic mismanagement along with overvalued currency has led to recession during last few years. The current account and fiscal deficits have widened, and foreign debt has grown.

The government has now embarked upon a series of economic reform programs supported by the World Bank and IMF. The GDP growth rate was 3.8% in 2006 and 3.8% in 2007, with a forecast of 5.3% for 2008 by IMF. The economic dynamism of the country is still fragile because on the one hand, the economy is largely dependent on international oil prices (considering that the oil production in the country is declining) and on the other hand, the budgetary deficit is affecting the industrial production.

Furthermore, Cameroon is still not able to attract sufficient foreign investments; the country is suffering from insufficient infrastructure and is one of the most corrupt countries in the world. However, inflation remains under control at around 5.3% (2008 EST.).

However, the issue of corruption has been an on-going debate whereby one school of thought says, corruption has a positive impact on economic growth and are of the opinion that corruption encourages trade that might not have  taken place and it also promotes efficiency by allowing private sectors agents to avoid unmanageable regulations ( Huntington, 1968; Summers, 1977; Lui, 1985; Meon and Weill, 2010) and by implication, corruption has the power of producing a more efficient economic agents and in the long run it enhance economic growth.

Despite the above positive impact of corruption on economic growth, another school of thought are opposing that corruption has a negative impact on economic growth and sustainable development( united nation development program UNDP, 1997; Wei, 1997, World Bank, 2000; Svenson, 2004).The transmission mechanism of these negative impact is that, it has reduced domestic and foreign investment, increase cost of production, misallocation of natural resources, higher inequality and poverty, uncertainty in decision making.

However, the government of Cameroon has embarked upon a series of economic reforms programs supported by the World Bank and the international monetary fund (IMF). The gross domestic product (GDP) growth rate was 3.8% in 2006 and 3.8% in 2007, with a forecast of 5.3% for 2008 by IMF. The economic dynamism of the country  is still fragile given the fact that the economy still depend so much on international oil prices(considering that the oil production in the country is declining) and the budgetary deficit is affecting the industrial production.

In addition Cameroon is still not able to attract sufficient foreign investment, the country is suffering from insufficient infrastructures and is one of the most corrupt countries in the world. Even though the country has numerous resources, Cameroon economy had witnessed a period of stagnation in economic growth especially during the heavy economic crisis that stoked the country in the late 80s and this partly blamed on corruption and mismanagement of the country’s vast resources.

Corruption has gone so deep inner core of the Cameroon government and has gone up to the level that private and public sector, government and non-government organisations have essentially become a useful channel for people to acquire wealth (Mustapha, 2008).

This highly contributed to the backwardness of the country’s economic development and the inability of the government to implement the anti-corruption policies successfully and it’s a threat to the future economic development.

Given the prevailing issue of corruption in Cameroon, the anti-corruption campaign by the government known as operation sparrow hawk to imprison all corrupt government officials was launched. However, the biggest challenge for the country is not just to punish the perpetuators of corruption but educating its citizens on the dangers and measures to tackle corruption (Obayelu, 2007). In this light, the researcher seeks to examine the effect of corruption on the economic growth of Cameroon.

In recent years the level of corruption in Cameroon is up 26.3% in 2019 compared to same period in 2018. This increase together with gross fixed capital formation contributed 1.2% to GDP growth. Similarly, it contributes 2.2% to GDP growth. As a result, Corruption is estimated at CFAF 133.5 billion (INS, 2019). Thus, corruption drives growth negatively (INS, 2017). It’s also noticed that during the period of 1977-1986, Cameroon recorded an average real GDP growth ratio of 7.6%. This was due to a high investment rate of 33% of GDP in 1985, averaging 2.9% in 1977 to 1986 (Touna Mama, 2008)

In addition, the growth accounting in Solow’s model (1956) shows that the important part of the explanation of growth being attributed to the residual variable, questions arise on the quality of the measurement of traditional variables such as the investment and corruption. This squareness of Solow’s model (1956) is the basis of the emergence of theories of endogenous growth, through the work of Barro (1990), Romer (1986) and Lucas (1988), who put forward the importance of endogenous factors in the process of economic growth. Since the latter, in fact, it appears that as a source of productive supply and therefore of economic growth, the impact of corruption on growth is negative and significant, as shown by the work of Barro (1990) and the econometric models of Aschauer (1989).

In contrary, scholars who created exogenous growth theory were unsatisfied with the assumption of exogenous technological progress in the Solow–Swan model, economists worked to “endogenize” technology in the 1980s. They developed the endogenous growth theory that includes a mathematical explanation of technological advancement.

This model also incorporated a new concept of human capital, the skills and knowledge that make workers productive. Unlike physical capital, human capital has increasing rates of return. Research done in this area has focused on what increases human capital (e.g. education) or technological change (e.g. innovation).

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