The nexus between the World Governance Indicators’ scores on corruption and the financial performance of SOEs in South Africa

Abstract

South Africa, according to Crompton et al. (2017), is dealing with a triple threat of poverty, inequality, and unemployment. As a result, the government is faced with the task of meeting all of these urgent demands while being hampered by a tight budget and weak economic growth. Procurement is a critical component of the government's service delivery system, and it has been utilised as a policy tool to achieve the government's socioeconomic goals (Badenhorst-Weiss, 2012). Government spending is required to be thoroughly thought out on this basis before any public funds are spent. As a result, government expenditure should be monitored and evaluated as part of the architecture of all government-led projects (Crompton et al., 2017). SOEs (State-owned entities), also known as public entities, are tasked with specific responsibilities by the country's constitution in order to assist the state in fulfilling its mandate (Ovens, 2013). In line with international trends, South Africa has implemented corporatisation, or the transfer of state assets or agencies into state-owned corporations, in a number of areas to encourage more effective and efficient service delivery. Increased public procurement is the result of this. Public procurement involves a large amount of money, which has attracted corruption because of the scale at which it is carried out (Crompton et al., 2017). According to the South African Department of Commerce and Industries, government purchasing power contributed between 15% and 25% of GDP in 2016 (Makube, 2016). Makube (2016) estimates that, between 2013 and 2016, public infrastructure investment in healthcare facilities, schools, water, sanitation, housing, and electrification totalled R827 billion. As a result, the SOEs have been subjected to outside intervention, as well 2 as possible wrongdoing and corruption. According to recent media reports, the country has unacceptably high levels of corruption (Mantzaris, 2016). Understanding how this corruption affects the workings of SOEs is important if the country wants to attempt to start addressing this scourge. Therefore, this study seeks to investigate the relationship that exists between a known measure of governance in a country, namely the World Governance Indicators and the financial performance of SOEs in South Africa