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.
South Africa remains a dual economy with one of the highest inequality rates in the world.
Similarly, countries with more corruption experience lower acceptance of established institutions, weakened political institutions and a deficient court system leading to higher political instability.
In South Africa, officials will continue to act corruptly so long as the perceived gains from corruption outweigh the costs.
With a weak judicial system, corruption will continue to grow as the probability of detection and punishment is lower.
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.
As more enterprises go underground, a government’s revenue base can be substantially eroded, resulting in long-term negative effects on economic growth.
Another area in which the burden of fiscal corruption is quite substantial is in the delivery of public services.