Corruption, firm growth and export propensity in Kenya

Abstract

Manufacturing firms in Kenya spend an average of 7.5% of their annual sales on bribery, and as much as 14% of the value of government contracts on kick-backs. These averages mask significant sector, location and size differences in the exposure to corruption. Networking with public servants somewhat shields firms against corruption but that with politicians deepens exposure. Corruption does not fast-track access to public services and does not, therefore, play any greasing function. Rather, corruption significantly dampens firm growth and the propensity to export, implicitly reducing returns to investment and employment. It also adds to the cost of doing business, reducing Kenya's competitiveness and critically undermining the country's development prospects. These findings uphold others that have demonstrated the deleterious consequences of corruption, and provide further reason for intensifying the fight against the vice. In the circumstance, there is value in exploring ways of dismantling bureaucratic discretion and control rights on which corruption thrives. Furthermore, sustaining the program of privatisation of state corporations and utility companies would create space for expanding services, ameliorate capacity restrictions, obviate service-stretching, inject competition in the provision of services and reduce rents that are the objects of corruption.