Former President, John Dramani Mahama, has revealed that the practice of capital flight from corruption will worsen the growth of developing countries.
According to him, corruption, described as an instrument of “murder”, can lead to loss of citizens lives due to deprivation of critical public infrastructure and services. Surveyors, He revealed that corruption is an economic malady, which means different things in different context.
Nonetheless, he explained that whichever form it takes and no matter the context, corruption is a feature of poor governance and ethics in both public and private sectors.
Mr Mahama noted that because corruption is a global challenge, its scope and seriousness have led to calls for a worldwide response and cooperation in the fight against it.
“Also, because of our current interconnectedness, we have open economies that allow the easy transfer of funds, which often could include financial rewards from corruption related activities. Corruption, therefore, has the negative effect of robbing a country of productive capital gained from graft because the proceeds may be transferred to foreign bank accounts. The practice of capital flight from corruption will worsen the growth of developing countries if the international community does not enforce the Conventions and Declarations against corruption.”
John Dramani Mahama
Speaking at the 53rd annual conference of the Nigerian Institution of Estate Surveyors and Valuers, Mr Mahama highlighted that graft thrives due to the layered irresponsibility of institutions and state actors that must fight it. He noted that the World Bank explains corruption as the abuse of public office for private gain in the public sector.
On the other hand, he stated that Transparency International (TI) has described corruption within the private sector as the misuse of entrusted power for personal gain. Nonetheless, he explained that whichever way it is visualised, corruption must be fought whether it occurs in the public or private sector.
For corruption to thrive, the former President revealed that someone must first have discretionary power, which includes the ability to influence the formulation of regulations and administer them. Also, he stated that “economic rent” must be associated with discretionary power, primarily when higher rents are related to the misuse of discretionary power.
“The World Economic Forum estimates suggest that the global cost of corruption is at least US$2.6 trillion. This equals 5 per cent of the global gross domestic product (GDP). The World Bank has also disclosed that businesses and individuals pay more than $1 trillion in bribes yearly. This being the case, the international community, and I am talking about development partners, international organisations, non-governmental organisations, academic experts, and professional bodies, continue to advocate an integrated and comprehensive approach to fighting corruption worldwide.”
John Dramani Mahama
Furthermore, Mr Mahama revealed that per empirical evidence and because of its secrecy, corruption distorts incentives and market signals and aggravates economic distortions. This, he explained, is because enormous productive resources, such as human talent, which should be channelled to constructive engagements, are diverted into rent-seeking activities for financial rewards and further into escaping detection and punishment.
“Corruption hinders economic development, diverts investments from infrastructure, institutions, and social services, and undermines efforts to achieve other country-specific development goals and targets. Corruption also retards growth because bribes paid by investors to secure investment licenses, including building permits, increase the cost of doing business and, consequently, reduces the incentive to invest in a country.”
John Dramani Mahama
Real estate asset and property valuation, critical factor in asset investment
Real estate, Mr Mahama underscored, is a factor of production in the same light as labour and capital which provides unique, tangible, and intangible benefits that attract investors. Compared to other asset classes, he noted that real estate investment, studies have shown, is a store of value, a hedge against inflation, and a good portfolio for investment diversification. Real estate investment serves as a cash flow stream from tenant’s rent payments.
In 2022, he revealed that the Real Estate Market Size Report revealed that the size of the professionally managed global real estate investment market increased from US$10.5 trillion in 2020 to US$11.4 trillion in 2021. The estimates, he indicated, were from 37 markets in America, Europe, the Middle East, Africa, and Asia Pacific. Keep in mind that COVID-19 was ravaging the world between 2020 and 2021.
“Therefore, real estate asset and property valuation are a critical factor in asset investment decision-making and a vital tool for the global fight against corruption. Asset valuation is an exercise conducted by professionals in public agencies, private companies, organisations, and individual professionals.”
John Dramani Mahama
Considering the heavy reliance on physical asset collateralisation by financial intermediation systems, including government-required performance bonds, the former President emphasized that the mechanisms deployed for asset valuation must be scientific, transparent, and credible.
Additionally, he highlighted that the enormity of the consequences of perversely attributed values to assets, asset valuation deservedly demands and requires increased attention from critical actors, such as the Nigerian Institution of Estate Surveyors and Valuers.
“Similar attention is also needed from your counterparts in my country, Ghana, and across the globe. I dare say that among several vices, dubious valuation for assets that are used as collateral deposited with financial institutions or for business valuations during Initial Public Offering (IPOs), mergers and acquisitions are at the top of the list of potential dangers to the growth of the private sector. In Africa, assets, especially houses, offer more than a monetary value. Assets may have ancestral relevance, must never be flipped in an economic exchange or sale, and are often appreciated beyond monetary value.
John Dramani Mahama
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