Evaluation of the impact of financial fraud and corruption on the sustainable development of selected municipalities in South Africa

Okubena, Olumuyiwa Olamilekan

Title: Evaluation of the impact of financial fraud and corruption on the sustainable development of selected municipalities in South Africa
Creator: Okubena, Olumuyiwa Olamilekan
Subject: Sustainable development -- South Africa
Subject: Fraud -- South Africa -- Eastern Cape
Subject: Municipal services -- South Africa -- Eastern Cape
Date Issued: 2010-12
Date: 2010-12
Type: Doctoral theses
Type: text
Identifier: http://hdl.handle.net/10353/25569
Identifier: vital:64335
Description: This thesis explored the pernicious effects of financial fraud and corruption and the importance of the rule of law, transparency and accountability of public sector. These critical conditions serve as the foundation for the effective and efficient governance and the economic growth of a nation, especially through utilizing the opportunities provided by globalization through increased investment and trade. The thesis looks at the importance of upholding the rule of law and fostering transparency and accountability in the public sector in combating financial fraud and corruption, particularly as components of effective national strategies. The rule of law, transparency and accountability in the public sector serve not only as means to counter financial fraud and corruption but also as fundamental conditions of effective governance. It was discovered that financial fraud and corruption is a complex phenomenon, present in all countries. Its causes are engendered by conditions of underdevelopment. Hence, its effects hinder and impede the development process itself. It was also confirmed that financial fraud and corruption are co-determined by many other factors, including cultural and moral values. The motivation to remain honest may be weakened by low public official’s salaries, promotion of personnel unconnected to performance, dysfunctional government budgets, loss of organizational purpose, bad example by chief official’s and political leaders, or long established patron-client relationships, in which the sharing of bribes or the exchange of favors has become entrenched. Financial fraud and corruption can be highly concentrated at the top of a political system and associated with political power, or broadly based at lower levels in the system, associated with administrative processes and discretionary powers. Hence, bribes can be blatant or subtle and take many different forms, including cash payments, job offers, scholarships, foreign trips or political and other favors. Furthermore, the development of sustainable local authorities however is an ambitious issue that requires local authorities to focus on the improvement of the quality of life of present and future communities without depleting the natural resources at their disposal. For sustainable and equitable development, this study espouses on the far-reaching implications for local authorities through multiple regression analysis due to various economic, social and institutional challenges that have to be taken into consideration when a process to promote sustainable development is considered. To comprehensively actualize the implications of financial fraud and corruption on the sustainable development of local authorities, a multistage cluster sampling, a form of probability sampling technique was adopted. Semantically, to identify the research paradigms suitable for this study, a hybrid approach to research design was used (quantitative and qualitative). This however enables the impact of financial fraud and corruption on the sustainable development of selected local authorities in South Africa to be ascertained. Moreover, the study explores the circumstances and implications surrounding financial fraud and corruption in the local authorities in South-Africa. Financial fraud and corruption tends to emerge when an organization or a public official has monopoly power over a good or service that generates rent, has the discretionary power to decide who will receive it, and is not accountable. Financial fraud and corruption’s roots are grounded in a country’s social and cultural history, political and economic development, bureaucratic traditions and policies. This study also identifies that, direct and indirect factors promote financial fraud and corruption. Direct factors include regulations and authorizations, taxation, spending decisions, provision of goods and services at below market prices, and financing political parties. On the other hand, quality of bureaucracy, level of public sector wages, penalty systems, institutional controls, and transparency of rules, laws, and processes are the indirect factors that promote financial fraud and corruption. Financial fraud and corruption is a symptom of deep institutional weaknesses that leads to inefficient economic, social, and political outcomes. It reduces economic growth, retards long-term foreign and domestic investments, enhances inflation, depreciates national currency, reduces expenditures for education and health, increases military expenditures, misallocates talent to rent-seeking activities, pushes firms underground, distorts markets and the allocation of resources, increases income inequality and poverty, reduces tax revenue, increases child and infant mortality rates, distorts the fundamental role of the government (on enforcement of contracts and protection of property. Nonetheless, this study concludes that financial fraud and corruption impedes economic efficiency which could slow or shrink economic growth. This will adversely affect all income classes, especially the most vulnerable, the poor. The effect of financial fraud and corruption through investment expenditure on health and education critical to sustainable development was noted in this study. In practice, the distinction between governance and government and the resultant mechanisms directed at local sustainable development do not seem to be clear. Hence, lack of understanding of the meaning of sustainability and governance for local development is still lacking. Recommendations on the serious consequences of financial fraud and corruption on economic growth, capital formation, poverty and inequality to foster and address sustainable development are also provided in this study.
Description: Thesis (PhD) -- Faculty of Management and Commerce, 2010
Format: computer
Format: online resource
Format: application/pdf
Format: 1 online resource (xxxi, 301 pages)
Format: pdf
Publisher: University of Fort Hare
Publisher: Faculty of Management and Commerce
Language: English
Rights: rights holder
Rights: All Rights Reserved
Rights: Open Access

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