THE COST OF CORRUPTION IN UGANDA

This Extract is from The Inspector General of government report for 2021 Titled “The Cost of Corruption in Uganda” Popular Version. One of the Arms of the Ugandan Government charged with the role of fighting corruption and supervising the lifestyle of Public servants besides other agencies like the Anti-Corruption Unit of State House. The Inspectorate is headed by Mrs Beti Kamya Turwomwe. Late us look at the basics in the report and how dangerous corruption is. Here is an extract from the report.

DIRECT COSTS OF CORRUPTION

Government revenues Corruption in the collection of government revenues has profoundly harmful effects on the economy and living standards. As the government does not receive the full value of taxes, fees and royalties, it is not able to adequately provide necessary services, such as healthcare and education.

Taxation

Using the data on prevalence and size of bribes in taxation, the estimated total cost of bribes paid by citizens to tax officials is about UGX. 27 billion per year. While, in the absence of data about the value of bribes and gifts paid by firms to tax officials, it is difficult to develop a precise cost estimate of bribery in tax collection for businesses. Government administrative data suggest the shortfall in income tax collection and indirect domestic taxes equal to more than UGX. 1.7 billion per annum. The estimated loss for the public budget due to misreporting and underreporting of value added tax by firms is found to be nearly UGX. 107 billion. In sum, the total cost of corruption in taxation is estimated to be nearly UGX. 136 billion per year.

User fees for public utilities

Evidence on the level of bribery rates in water and electricity utilities and the average amounts of bribes result in a total cost for public service users of nearly UGX. 54 billion. According to the Uganda National Water and Sewerage Corporation and the Electricity Regulatory Authority, losses due to billing inefficiencies costed public budget more than UGX. 424 billion. While there is no evidence on the exact share of these costs attributable bribery, we argue that most or close to all costs likely involve some form of corruption. In sum, these two costs lead to the total loss of almost UGX. 478 billion.

Natural resource rents

Uganda is rich in natural resource wealth such as oil, gas, gold, phosphate, etc. However, due to corruption and mis-governance in the sector, a significant share of income from natural resources is lost for the society. In the absence of comprehensive data about the prevalence of bribery and size of payments in the sector, the study relied on the known cases of corruption and avoidance of paying royalties, such as extraction of over USD 200 million worth of gold without a license by the African Gold Refinery in 2016. The analysis of known cases leads us to a lower-bound estimate of the cost of corruption in contract royalties of UGX 868 billion per year. While representing a low-bound estimate, this figure amounts to 77% of government spending on the environment sector in 2019.

 

 

Environment protection

Uganda loses considerable amounts of its renewable and non-renewable resources each year due to weak environmental regulations and enforcement, and consequently, overexploitation of the environment by firms and individuals. For instance, biodiversity and critical ecosystems are put under the threat by mining activities in the protected areas. According to the Global Witness, mining licenses 8 COST OF CORRUPTION IN UGANDA were granted in 3 of 28 protected areas, such as Bwindi National Park. The study estimates the loss of environmental resources to corruption to be nearly UGX 2.28 trillion, while the cost of environmental pollution and degradation amounts to UGX. 536.8 billion. These figures are developed using the available estimates of total loss for the economy and the public budget that are discussed below. The study hypothesize that 10% of total costs of environmental degradation and loss of resources could be attributed to corruption. Therefore, the estimates of corruption costs are more uncertain than most other figures in our study. This is because the available studies do not allow us to estimate the precise share of environmental degradation costs that are attributable to corruption. While environment and biodiversity constitute an important share of Uganda GDP, the loss of environmental resources could lead to significant costs for the public budget. The World Bank’s “Uganda Economic Update’’ suggests the cost of environmental resources degradation amounts to 17% of GDP or . 22.8 trillion. Environmental degradation brings significant losses for citizens. For instance, deforested slopes and floods lead to losses of trillions UGX. for Ugandans. According to the most recent available estimate, the economic costs of environmental degradation for Uganda was between 4 and 12% of GDP or from UGX. 5.4 trillion to 16.1 trillion.

Public service provision

Quality of public services that are provided by government to people living in the country can be seriously undermined by corruption. The consequences of corruption in public service provision are detrimental to individual citizens (users) who lose out and bear the costs in terms of bribes, lost health or years of education, for example. The study first considers absenteeism in the public sector, and then focus on the other types of corruption in key areas of public services: healthcare, education, welfare, and security.

Absenteeism in the public sector

High rates of absenteeism in the public sector leads to numerous costs for citizens and society at large. First, absenteeism makes essential services less accessible for users, as well as reducing their quality. Second, wages of absent employees are net losses to the public budget, which fail to create value for citizens.

As the bulk of existing studies about absenteeism rates in the public sector in Uganda are dedicated to healthcare and education, we developed cost estimates for these two sectors only. Before discussing these costs, it is important to acknowledge drivers of high rates of absenteeism in healthcare and education in Uganda. Multiple studies suggest that absenteeism is driven by factors, different from healthcare workers’ motivation, such as insufficient and delayed salaries, weak leadership, low staffing creating work stress and lack of housing.

Approximately one out of every two health workers is absent on any given day at healthcare facilities in Uganda. Based on administrative data from the Ugandan Ministry of Health on the number of health workers (UGX. 47,929) and the average daily salary (UGX. 32,881), we estimate that the cost in terms of salaries amounts to almost UGX 49.5 billion. This figure also includes another cost for citizens - loss of healthcare treatment and/or quality due to absenteeism. COST OF CORRUPTION IN UGANDA 9 Turning to the education sector, the rate of teachers’ absenteeism in Uganda is 27%. In addition, drawing on the data on public expenditure on education allows to conclude that the cost of absenteeism in the education sector amounts to nearly UGX. 180 billion.

Similar to the public budget, teachers’ absenteeism also brings costs for public service users - a loss of education hours for students. On average, 1.9 hours out of 7 hours of classroom time is lost due to absenteeism per day. In one year, it sums up to 478 hours per student. Multiplying this figure by the number of students in secondary and primary schools, and by the average cost of teaching hour per student results in annual costs of nearly UGX. 1.5 trillion. With that, the costs of teachers’ absenteeism for the public budget and for users are not directly comparable. In the absence of other relevant estimates, we calculate the loss of education hours for users based on the average government expenditure per student per hour that includes expenses on teachers’ salaries. Therefore, the estimate of the cost of teachers’ absenteeism for students partially captures the cost of teachers’ absenteeism for the public budget.

 In total, approximately UGX. 2.3 trillion are lost annually due to absenteeism in the healthcare and education sectors. It was not possible to extrapolate costs to the whole public sector due to lack of data. However, this corruption cost estimate is equal to almost 6% of total national government spending in 2019.

Healthcare and education provision

While the costs of absenteeism in the healthcare and education sectors are discussed above, in this section we focus on the costs of bribery for service users, as well as embezzlement of public funds. The total cost of bribery in healthcare is estimated to be almost UGX. 141 billion. This estimate was developed by extrapolating household survey evidence about the prevalence of bribery in healthcare (20%) and the average size of bribes (UGX. 20,000). Another cost for citizens in the healthcare sector is the loss of treatment due to not being able to afford or refusing to pay a bribe. In our household survey sample, 3% of potential healthcare patients reported that they or their family members did not receive treatment because they refused or were unable to pay a bribe. Another 1% avoided needed healthcare services because they could not pay a bribe. We estimate the loss of treatment to be nearly UGX. 33.3 billion. Using the same approach as with the healthcare sector, we estimate the total cost of bribery in the education sector to be almost UGX. 39 billion27a.

In the education sector, we were also able to estimate the amount of public education funds that are lost due to embezzlement. On average, 18% of funds are lost due to corruption leading to an estimate that nearly UGX. 245 billion savings could be achieved from the total eradication of corruption in this process.

Security provision

Given the limited data on corruption in the security sector, we were able to estimate only one cost - public service users’ cost of bribing security officials. Similar to the education and healthcare sectors estimates, we relied on existing survey data. The prevalence of bribery in the security sector was the highest of all sectors with 39.5%. Accounting for the average size of the bribe (UGX. 56,779), the total cost of bribery in this sector is nearly UGX. 91 billion per year. The cost of bribery in the security provision sector alone amounts to more than 2% of national spending on the sector in 2019.

Corruption in employment in the public sector

Corruption in recruitment of public service workers introduce costs of paying bribes for applicants, as well as loss of quality of services for users, and the cost of salaries paid to unqualified workers for the public budget. Firstly, interviews revealed that bribery is a common practice in hiring process in the public sector. One respondent said that to get a job in a grade III school, a candidate has to pay about 3 million UGX. Similarly, bribes are often used by teachers and healthcare workers to secure a transfer to a preferable place, or, by contrast, to avoid relocation to remote areas.

Fair competition in recruitment is also undermined by political interference when politicians, especially on the local governance level, influence hiring or transfers to secure best positions for their relatives or other connected individuals. Bribery and nepotism lead to the loss of the quality of service provision for users. First, corruption can restrict the most talented and qualified candidates from getting jobs. By contrast, unqualified candidates without documentary evidence of their qualifications can get positions. However, we were not able to develop precise numerical estimates for costs of corruption in the public sector employment due to the lack of relevant data.