By Souleymane Gueye Ph.D, Professor of Economics and Statistics, College of San Francisco
This first part of our article examines the economic effects of corruption on the Senegalese economy. How corruption and bad governance have generated an endemic misery in Senegal? What is the relationship between corruption and real GDP per capita? How corruption affects the Human Development Index and the Private consumption? It also illustrates the relationship between corruption, income inequality and poverty. The role of good governance in modulating the effects of corruption on economic growth and poverty in Senegal will be examined in the second portion of the study.
While traveling through Senegal and talking to people from different backgrounds, I could not hide my frustration and sadness as I contemplated the despair, anguish, and sorrow in the eyes of the people I met throughout my journey in Senegal, who are struggling to make ends meet. For example, in the coastal zone of the region of Dakar from Yarah to Toubab Jalow and the small coast (Dayane to Joal), the advance of the sea and the scarcity of fish due to the fishing licenses that the government signed with the EU, China, and Japan have installed an unimaginable misery associated with poverty, poor health, low life expectancy, an unequal distribution of income and wealth that remain endemic. This misery is the outcome of the growing phenomenon of corruption “the abuse of an entrusted power for private gain” (1) in the public sector and the private sector in Senegal and bad governance as well.
Economic and Social misery
The social and economic misery is visible everywhere after a decade of mismanagement of public resources (Flooding fund , Program National des Domaines Agricoles Communautaires (PRODAC), Covid 19 Fund), embezzlement of taxpayers’ money by unaccountable chief executives officers at many state owed enterprises such as ( La Poste, L’IPRESS , CMS, LONASE, COUD , SAPCO, SAR, etc.. ), corrupt politicians , and crooked businesspeople under a more authoritarian government that is dimming hopes for a whole young generation to build a future in Senegal.
This misery is also compounded by an attitude of resignation of many Senegalese people because of a tacit coalition between some religious leaders, crooked politicians, and civil servants pursuing their self- interest, and safeguarding French and other foreign business interest (Turks, Chinese, Indian, Moroccans etc.).
The endemic misery has generated an abject poverty conducive to extreme violence and insecurity in many places in Senegal, social fractionalization, and a fertile ground for an exploitation of the masses by corrupt political leaders and executives who are accumulating insane amount of wealth without any rational justification (not based on their productive capacity). Senegal is one of the few countries in which civil servants are the wealthiest.
Under this dire situation, record numbers of Senegalese are leaving the country. The flood of Senegalese emigres spans socio economic classes, with professional, the working class, and the destitute represented among those risking their life in the Mediterranean Sea as Russian’s invasion of Ukraine pushes up the price of different imported staples (wheat, rice,) gas, and oil; hence creating an inflationary pressure which is undermining the purchasing power of almost 95% of Senegalese households.
Other desperate Senegalese are attempting illegal routes into Europe, South and North America and dying in record numbers according to Geneva- based civil – society group” Global Initiative Against Transnational Organized Crime.” Senegal is the sixth largest nation of origin for migrants, according to the international migration Organization (IOM).
This exodus from Senegal constitutes a blow to the legacy of the Democratic principles that generated hopes after the political transition of 2000 when a president from an opposition party was elected and ten years later the election of a young president who promised a “sober and virtuous “management of public resources and equitable justice.
Unfortunately, under their reign, public money has been transformed into a private kitty in the service of a suspicious generosity, open to all the audacity of capture and predation. This has paved the way for stealing state money, enrich friends and relatives, while impoverishing the country, and consequently put the Senegalese people in misery – the misery index is more than 25% (2).
The consequences are dire: an underutilized agricultural sector, a growing informal sector, an inflated public sector, a weak private sector unable to create enough employment to absorb the rising supply of labor due to the demographic explosion, poor infrastructure, poor health facilities ( poor women are still dying in childbirth and are transported on carts), poor education, (many school children receive their education in temporary shelters – about 6000 ), weak institutions and last but not least an anemic economy in which corruption prevails at all levels of the decision-making process – executive, judiciary , territorial administration, public security ( police and gendarmery), health and education sectors.
In Senegal, bribery (public servant accepting bribes to certify unsafe building in violation of many cities planning code), frequent embezzlement of contract fund so that a promised infrastructure project is delayed and over budget ( Universities of Amadou Mathar Mbow and Ibrahima Niasse , and many schools and hospital projects), as well as the theft of public fund in a way that inflates public budgets ( recent report of the court of Audit regarding the Covid Fund ), nepotism, influence peddling, conflicts of interests are erected as a mode of management of public resources..
Currently, the “Corruption Perceptions Index” for the public sector is at 57 points slightly higher than the index in 2021, making Senegal one of the most corrupt countries with a rank of 75th.
Figure 1. [Corruption Perception Index by Transparency international]
There are a host of causes of this endemic corruption in Senegal: incentives, institutions, and personal ethics. With respect to incentives, we can identify low salaries of the civil servants with a weak purchasing power. As for the institutions, some key variables can be identified such as political structure with a strong executive branch headed by a president who has at his disposal a discretionary budget without accountability to the Senegalese people. The systemic corruption is also due to a lack of ethic, an alarming disappearance of our traditional values of Diom (dignity) Deugou (faith), Dioub (honesty), leguey (travail),
Economic Effects of Corruption on the Senegalese Economy
This ingrained corruption in the public sector undermines different aspects of the Senegalese society since the corruption carries negative social and economic consequences: it harms economic efficiency, increases social inequities, undermines the functioning of democracy, and exacerbates poverty and social exclusion. Furthermore, it reduces the effectiveness of public and industrial policies, making running a business more expensive, and thus encourages business to operate in the informal sector in violation of tax and regulatory laws (3). Senegal is suffering from this endemic corruption with respect to economic growth, human development, food security, and poverty alleviation.
Corruption and GDP per Capita
There is strong evidence of a negative correlation between corruption and the low level of GDP per capita ($1590) in countries like Senegal with high level corruption (140th on a list by Transparency International of 175 countries ranked by how corrupt their public sectors appear to be.).
The theorical literature does not provide a clear answer on this issue –relationship between corruption and economic growth and poverty alleviation. One strand of the literature argues that corruption affects positively economic growth by making it easy for investors to avoid red tape (bureaucratic delay) by bribery /kickbacks and by incentivizing low paid civil servants to work faster and harder if they could supplement their income by levying bribes (De Soto, 1989) (Egger and Winner, 2005) (4). This belief is rooted in the impressively rapid economic growth that the East Asian- and Southeast – Asian countries have achieved since the early 70’s despite widespread corruption.
This situation known as the “East – Asian paradox” has justified the view that corruption is not a key barrier to economic growth; hence countries should not waste time designing policies or instrument to deal with corruption. However, what this strand failed to acknowledge is the fact that these Asian countries were autocracies in which the perceived credibility of the commitment of ruling political elites to economic freedom, associated with a massive investment in education and a higher domestic saving rate created a favorable economic environment, hence providing confidence to multinational firms to invest, leading to long term economic growth. It is almost impossible to quantify and attribute to corruption the sustained increased of real GDP per capita of these countries over the last three decades. For example, in Sub Saharan Africa, there are many autocratic regimes (RDC, Republic of Congo, Cameroon, Tchad, Equatorial Guinea, Gabon, Angola, Zimbabwe where high rates of corruption had a deleterious effect on economic growth and poverty reduction (Haber, 2002) (5).
I believe that the negative effect of corruption on real GDP per capita is more common as many examples in Developing countries in general and Senegal demonstrated. In this strand in which I subscribe, corruption has a negative impact on GDP per capita because it reduces investment in physical and human capital in one hand and leads to a misallocation of public expenditures away from growth enhancing sectors such as education and health towards areas that are less productivity enhancing but are more corruption intensive.; namely large and expensive infrastructural projects on the other hand.
For example, Senegal with the current government is a perfect illustration of this choice. The government has chosen to build an arena, a stadium, TER (train express rapid), and BRT (rapid transit) instead of investing in more efficient project such as rebuild the railroad throughout the country, increases the sanitary tray and invest efficiently in the education sector to set the foundation for a skilled labor force with a strong productivity of labor.
Studies (Fishman and Svenson 2001) have shown that a 1 % increase in corruption leads to a 3 % reduction in firm growth and reduce the growth rate by about 0.72% (6)
In Senegal Real GDP per capita of Senegal increased from 1,092 US dollars in 1972 to 1,437 US dollars in 2021 growing at an average annual rate of 0.62%. while corruption continued to increase substantially (Senegal is the 73 least corrupt nation out of 180 countries in 2021 and previously Senegal was the 67 least corrupt nation. Corruption Index in Senegal averaged 36.63 Points from 1998 until 2021, reaching an all-time high of 45 Points in 2020. The perception corruption index has deteriorated (score continue to drop, 2 points compared to last year and the poverty rate continued to increase.). This is evidence that the negative correlation between corruption and GDP per capita growth is more observable in countries like Senegal than the positive relationship.
World Bank: development indicators
This is explained by the fact that the waste or the diversion of public funds due to corruption leaves Senegalese governments with fewer resources to fulfil its human rights obligations (provide shelter, food, and education), to deliver services and to improve the standard of living of Senegalese people.
Corruption and Human Development Index
Consequently, the insidious corruption prevailing in Senegal is negatively impacting human development of the country and is increasing social vulnerabilities within the country. In Senegal, an estimated 500 billion CFA francs in public health spending is lost globally to corruption every year, undermining health services and health equipment. Furthermore, 60% of school children do not complete primary school (high rate of illiteracy). This can be linked to a lack of state resources to build schools and maintain a qualified labor force due to bribery, embezzlement, privatization of public schools to enrich well connected people and civil servants.
Fighting corruption in Senegal is thus considered a key element to achieve the sustainable development needed to improve the HDI of Senegal as corruption (racketing by the police officer on the road, frequent embezzlement at the office of Taxes and Domain, and the Treasury as well , justice splashed every day by corruption scandal, Customs which is perceived as a quick mean to accumulate wealth, a press which traffic in influence and marketing for amoral politicians, military with rumors smuggling overseas missions, etc. ), is at the center of most of the socio-economic problems that Senegal is facing.
Corruption, Food Security, and Level of Consumption
Corruption is also affecting food security in Senegal since the level of corruption in land and water (land scandal in local communities such as Degleer, Dougaar etc.) is impacting small scale farmers which constitutes most of the agricultural providers (67% of agricultural product).
This high level of corruption is also impacting the level of consumption in Senegal as demonstrated in some economic studies (7) since many households are forced to reduce their expenses on good and services to compensate the money wasted on bribery daily (money given to the police officers on the road, to the civil servants to receive an administrative act, to bribe a person to gain access to people making decision on behalf of Senegalese citizens etc.).
The recent drama of Sikilo in the department of Kaffrine with its 50 dead and Sakal with its 18 dead highlights the danger of corruption in a country like Senegal. This sector is one of the most corrupt areas in Senegal as the fake has become so embedded in our country and at all levels that it part of the DNA of Senegalese citizens. The overwhelming majority of drivers bought their driving licenses, have fake registration cards, have bought their technical inspection certificate, and drive without insurance. This is possible because of a corrupt administration unable to enforce the law and punish bad behavior.
Overall Impact of Corruption and Bad Governance on the Senegalese Society
This situation can only be blamed on systemic corruption prevalent in the Senegalese society and on bad governance. Corruption, nepotism, clientelism, impunity have been erected as modes of government in Senegal; this is the root cause of increasing poverty, increasing income inequality, decline of industrialization, incapacity to satisfy the basic needs and build basic infrastructure as well as allowing foreigners to grab land and exploit Senegalese workers. Foreign national are taking advantage of this corrupt environment to gain favor under the pretense of creating enterprises that will create jobs and repatriate easily profit at the expense of local citizens and the Senegalese economy overall hence contributing to an alarming trend of capital flight. This corrupt system has destroyed opportunities for many Senegalese people to generate wealth for themselves and the society.
These challenges exacerbated by incompetent, corrupt leaders, and obedient population educated, molded, shaped in corruption, easy money and compromise that has created a system of “politique alimentaire” prevent Senegal from moving forward in term of development outcomes (job creation and poverty reduction).
Addressing the entrenched corruption due to a lack of ethic, abject poverty, ignorance, and low wages that is prevalent in Senegal will open greater opportunities for the youth like entrepreneurship in different sectors (primary, secondary, and tertiary) of the economy that can lead to job creation.
Unfortunately, the current government of Senegal is not only unable to come up with an effective economic strategy to deal with these socio-economic problems because of a lack of political will, a president who exercises an excessive liberality with the public purse, the politicization of managers with the express request of their possible political involvement by the President, and a population that institutionalized the practice of corruption to gain favor with the possible involvement of the justice and the security forces, but also to deal with this endemic problems: Corruption. Furthermore, this regime is incapable of solving the challenges of bad governance, because of a conscious choice of a clientelist model which is inseparable from corruption by the current regime.
Reversing these trends and characteristics of the current Senegalese economy should be the primary focus of any credible person aspiring to lead this nation. Hopefully, the current administration will reverse course and start the process of creating a stable political environment in which a productive debate among all the interested parties will take place so that the Senegalese people will get all the relevant information to make an informed choice as to the selection of the person who will lead the country in a new direction for the benefit of all Senegalese citizens.
Looking towards the 2024 election, many politicians and presidential hopefuls are proposing policies and strategies to improve Senegal. However, no matter how great these policies and strategies are, no meaningful or impactful change can come from them unless we address the deep issues at the core of Senegalese government which are the cracks in the institutions and the constitution that allows for the executive branch to wield unchecked power. This allows them to use the state for personal enrichment, pursuing vendettas and state sanctioned embezzlement. Senegal can’t win the fight against poverty without winning the war against corruption.
(1) Ray Fisman “corruption: what everyone needs to know”
(2) The misery Index is calculated as the sum of the inflation rate and the unemployment rate.
(3) The evaluation of the tax system of Senegal by Souleymane Gueye
(4) Egger, P and Winner, H (2005) “Evidence on corruption as an incentive for foreign direct investment, European journal of Political Economy
(5) Haber. S (ed) Crony Capitalism and Growth in Latin America: Theory and Evidence, Stanford, CA Hoover Institution Press
(6) Fishman and Svenson (2001) Are corruption and Taxation Harmful to growth? Firm level evidence Manuscript, IIES Stockholm University
(7) Impact of Corruption on the Private consumption in Senegal by Souleymane Gueye. Working paper CCSF 2016