To understand how best to deal with corruption, we first have to understand the system and its weaknesses. In SA we have a system where state companies are being privatised and private companies are competing for state tenders. This kind of system will always be prone to corruption because on the one hand you have companies bargaining for their own benefit, while on the other you have state officials with no stake in the negotiations, except a possible bribe, and who are dealing in billions in other peoples money (the taxpayer’s).
Whenever you have people dealing with money that’s not theirs, that is a weak point for the corrupt to target. As long as we have privatization and tendering, you can be pretty sure there will be corruption of some sort. As history has shown, there is nothing we can do to effectively stop corruption. It is built into the system.
So what can be done about it?
Instead of trying only to prevent corruption using prohibition, the answer lies in something I call Gateway Legislation. Gateway legislation is legislation that channels the proceeds of an activity so that it ends up benefiting the whole of society, turning something like corruption into something that will benefit the whole of society.
Sound far fetched?
What would happen if instead of just trying to ban corruption we also made sure any company being privatised or doing business with the state complied with the following?
1) It must be South African owned and staffed.
2) It pays all its workers a living wage and the pay gap in the company between workers and executives is a reasonable multiple (say 1 to 10). For more on the many benefits of salary gap moderation click here.
3) workers in that company own a reasonable amount of shares and thus share in any gains from state contracts.
Under the above 3 conditions, any proceeds from government contracts would spread into the communities that need money the most. Creating demand, jobs and economic growth.
An added benefit of Gateway Legislation is that it will speed up economic transformation. Our current race based empowerment programs, while necessary, have only been marginally successful. Workers in companies making billions are still surviving on poverty wages, while CEO’s and shareholders make a fortune. Its arguable that non-racial Gateway Legislation like salary gap moderation will be much more effective at spreading wealth than race based BEE programs have been.
Another advantage of Gateway Legislation is that by spreading the proceeds of state contracts, you reduce the personal incentive behind corruption, increasing the risk to reward ratio, thus making corruption less attractive, more complicated to organize and more difficult to conceal.
We know we will never get rid of corruption, but with Gateway Legislation in place, instead of ending up in some tax haven overseas, or some billionaire tendrepreneurs trust fund, the proceeds from any government contract, corrupt or not, would be spread into our poorest communities, stimulating and growing our economy and tax base, and creating demand for the goods and services the rest of us are selling. What are we waiting for?