RESEARCH PAPER
Aid, Governance and Public Finance Fraud: Evidence from Zimbabwe
 
More details
Hide details
1
University of Reading, United Kingdom
CORRESPONDING AUTHOR
Weronika J. Krawczyk   

University of Reading, United Kingdom
Publish date: 2019-09-30
Submission date: 2019-03-14
Final revision date: 2019-07-23
Acceptance date: 2019-07-23
 
Gospodarka Narodowa 2019;299(3):119–144
KEYWORDS
JEL CLASSIFICATION CODES
ABSTRACT
The purpose of this case study article is to explore the process of public finance fraud resulting in an unjust enrichment of local ruling elites in Zimbabwe, a resource-rich yet paradoxically fragile state characterised by decades of rule by Robert Mugabe. The article examines the phenomenon of political corruption occurring in Zimbabwe and translating into the mismanagement and misuse of public revenues from natural resources for the sake of private gain and power consolidation. Furthermore, the article looks at the link between corruption and illicit financial flows by examining complex organisational networks and mechanisms created for the sake of diverting public assets with the help of front companies. Finally, since political corruption is inherently connected to the quality of governance, the author explores the impact of governance on human development as well as the effectiveness of foreign aid channelled to Zimbabwe. The article was written on the basis of an analysis of secondary sources including a review of relevant literature and existing evidence. The findings of this research coincide with a general academic standpoint supporting the narrative that both natural resources and aid have negative consequences for governance, the rule of law, and, consequently, human development, especially in countries governed by unscrupulous leaders.
This paper is based on dissertation entitled "Aid, Governance and Public Finance Fraud: Evidence from Angola and Zimbabwe", prepared in partial fulfilment of the requirements for the MSc Development Finance at the University of Reading.
 
REFERENCES (83)
1.
Acemoglu D., Robinson J. A. [2013], Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Profile Books, London.
 
2.
Acemoglu D., Robinson J. A. [2014], Why foreign aid fails – and how to really help Africa [online], The Spectator, 25 January 2014, available from: https://www.spectator.co.uk/20... [accessed: 10 May 2018].
 
3.
Ahmed F. [2012], The Perils of Unearned Income: Aid, Remittances, and Government Survival [online], American Political Science Review, vol. 106 (February 2012), Issue 1, pp. 146–165, available from: https://doi.org/10.1017/S00030... [accessed: 6 June 2018].
 
4.
Alesina A., Weder B. [1999], Do Corrupt Governments Receive Less Foreign Aid? [online], NBER Working Paper No. 7108, National Bureau of Economic Research, Cambridge, available from: http://www.nber.org/papers/w71... [accessed: 9 May 2018].
 
5.
Apodaca C. [2017], Foreign Aid as Foreign Policy Tool [online], Oxford Research Encyclopedia of Politics, available from: http://politics.oxfordre.com/v... [accessed: 10 May 2018].
 
6.
Arndt C., Jones S., Tarp F. [2010], Aid and Growth: Have We Come Full Circle? [online], Journal of Globalization and Development, vol. 1 (2010), no. 2, art. 5, available from: https://doi.org/10.2202/1948–1... [accessed: 22 July 2019].
 
7.
Arndt C., Jones S., Tarp F. [2015], Assessing Foreign Aid’s Long-Run Contribution to Growth and Development [online], World Development, vol. 69, May 2015: 6–18, available from: https://doi.org/10.1016/j.worl... [accessed: 22 July 2019].
 
8.
Bhebhe N. [2018], Latest on ex Finance Minister Ignatius Chombo who is facing several corruption charges [online], My Zimbabwe, 22 July 2018, available from: https://www.myzimbabwe.co.zw/n... [accessed: 12 August 2018].
 
9.
Bräutigam D., Knack S. [2004], Foreign Aid, Institutions, and Governance in Sub- Saharan Africa [online], Economic Development and Cultural Change, vol. 52, No. 2 (January 2004), pp. 255– 285, The University of Chicago, available from: http://www.jstor.org/stable/10... [accessed: 9 May 2018].
 
10.
Buch B. P., Buntaine M. T., Parks B. C. [2015], Aiming at the Wrong Targets: The Difficulty of Improving Domestic Institutions with International Aid [online], Working Paper No. 4, Aiddata.org, Williamsburg, available from: http://docs.aiddata.org/ad4/pd... [accessed: 9 May 2018].
 
11.
Bueno de Mesquita B., Smith A. [2010], Leader Survival, Revolutions, and the Nature of Government Finance [online], American Journal of Political Science, vol. 54, no. 4 (October 2010), pp. 936–950, available from: https://doi.org/10.1111/j.1540... [accessed: 6 June 2018].
 
12.
Burgis T. [2015], The Looting Machine: Warlords, Tycoons, Smugglers and the Systematic Theft of Africa’s Wealth, William Collins, London.
 
13.
Buss T. F. [2015], Foreign Aid and the Failure of State Building in Haiti from 1957 to 2015 [online], Latin American Policy Journal, vol. 6, no. 2: 319–339, available from: http://onlinelibrary.wiley.com... [accessed: 10 May 2018].
 
14.
Cascais A., Mwakideu C. [2017], Zimbabwe ex-President Robert Mugabe’s stolen fortune [online], Deutsche Welle, 23 November 2017, available from: https://www.dw.com/en/zimbabwe... [accessed: 22 June 2018].
 
15.
Central Intelligence Agency (CIA) [2018], The World Factbook on Zimbabwe [online], CIA, Langley, available from: https://www.cia.gov/library/pu... [accessed: 22 August 2018].
 
16.
Chêne M. [2015], Zimbabwe: Overview of Corruption and Anti-Corruption [online], Transparency International, Berlin and U4 Anti-Corruption Resource Centre, Bergen, available from: https://www.u4.no/publications... [accessed: 21 June 2018].
 
17.
Chiyangwa N. [2018], Chidhakwa, Gudyanga trial opens on Sept 11 [online], The Herald, 11 August 2018, available from: https://www.herald.co.zw/chidh... [accessed: 12 August 2018].
 
18.
Chiyangwa N. [2018], Undenge turns to High Court [online], The Herald, 27 July 2018, available from: https://www.herald.co.zw/unden... [accessed: 12 August 2018].
 
19.
Choto R. [2015], Zimbabweans Linked to $ 270 Million Stashed in HSBC Foreign Bank Accounts [online], VOA Zimbabwe, 9 February 2015, Voice of America, Washington, available from: https://www.voazimbabwe.com/a/... [accessed: 23 June 2018].
 
20.
Collier P. [2008], The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It, Oxford: Oxford University Press.
 
21.
Conrad J., Kim H. and Souva M. [2013], Narrow interests and military resource allocation in autocratic regimes [online], Journal of Peace Research, vol. 50, no. 6: 737–750, available from: https://doi.org/10.1177/002234... [accessed: 9 May 2018].
 
22.
Donga G., Ngirande H., Shumba K. [2018], The Impact of Zimbabwe’s Statutory Instrument 64 of 2016 Import Regulation on Informal Cross-Borders Trading in South Africa [online], The Social Sciences, vol. 13, no. 2: 368–375, available from: http://docsdrive.com/pdfs/medw... [accessed: 8 June 2019].
 
23.
Duri J. [2016], Assets Declarations by Public Officers in Zimbabwe as an Anti-Corruption Tool [online], Faculty of Law, University of the Western Cape, available from: http://hdl.handle.net/11394/54... [accessed: 3 June 2019].
 
24.
Duri J., Matasane M. A. [2017], Regulation of Beneficial Ownership in South Africa and Zimbabwe [online], Journal of Anti-Corruption Law, vol. 1, no. 2: 175–195, University of the Western Cape, available from: http://www.jacl.org.za/docman-... [accessed: 3 June 2019].
 
25.
Financial Action Task Force (FATF) [2017], Countries: Zimbabwe [online]. FATF, Paris, available from: http://www.fatf-gafi.org/count... [accessed: 22 June 2018].
 
26.
Fletcher M. A. [2017], Zimbabwe is engulfed, and not only by a political crisis. While its leaders fight, its economy is in meltdown [online], Martin Anthony Fletcher, London, available from: http://www.martinanthonyfletch... [accessed: 21 August 2018].
 
27.
Friends of the Earth International (FoEI) [2017], Diamond mining in Zimbabwe: A story of the people fighting state and corporate human right abuses and their stranglehold on natural resources [online], FoEI, Amsterdam, available from: https://www.foei.org/features/... [accessed: 26 June 2018].
 
28.
Fund for Peace (FFP) [2018], Fragile States Index, Country Dashboard: Zimbabwe [online], FFP, Washington, available from: http://fundforpeace.org/fsi/co... [accessed: 21 June 2018].
 
29.
GAN Integrity [2016], Zimbabwe Corruption Report [online], Gan Integrity, Copenhagen, available from: https://www.business-anti-corr... [accessed: 21 June 2018].
 
30.
Gibb M. [2018], Is ZANU-PF’s hidden hand in Zimbabwe’s diamond industry revealed by secret document? [online], Global Witness, 25 June 2018, available from: https://www.globalwitness.org/... [accessed: 27 June 2018].
 
31.
Global Financial Integrity (GFI) [2015], Illicit Financial Flows from Developing Countries: 2004–2013 [online]. GFI, Washington, available from: https://www.gfintegrity.org/wp... [accessed: 15 June 2018].
 
32.
Global Witness [2012], Diamonds: A Good Deal for Zimbabwe? Who Controls Revenues from Marange Diamonds? A Case Study of Mbada and Anjin Companies [online], Global Witness, London, available from: https://www.globalwitness.org/... [accessed: 26 June 2018].
 
33.
Global Witness [2012], Financing a Parallel Government [online]. Global Witness, London, available from: https://www.globalwitness.org/... financing-parallel-government/ [accessed: 8 August 2018].
 
34.
Global Witness [2017], An Inside Job. Zimbabwe: The State, the Security Forces, and a Decade of Disappearing Diamonds [online], Global Witness, London, available from: https://www. globalwitness.org/en/campaigns... [accessed: 26 June 2018].
 
35.
International Consortium of Investigative Journalists (ICIJ) [2018], Zimbabwe- Swiss Leaks [online], ICIJ, Washington, available from: https://projects.icij.org/swis... zwe [accessed: 23 June 2018].
 
36.
Kairiza T. [2018], Zimbabwe: Mnangagwa’s Anti-Corruption Unit Illegal [online], AllAfrica, 1 June 2018, available from: https://allafrica.com/stories/... [accessed: 12 August 2018].
 
37.
Kaplan S. D. [2013], Betrayed: Politics, Power and Prosperity, New York: Palgrave Macmillan USA.
 
38.
Kenny C. [2014], Bill Gates Is Right: Corruption Isn’t the Problem We Think It Is [online], Bloomberg, 3 February 2014, available from: https://www.bloomberg.com/news... [accessed: 9 May 2018].
 
39.
Knack S. [2001], Aid dependence and the quality of governance: Cross-country empirical tests [online], Southern Economic Journal 68 (2001), pp. 310–329. Southern Economic Association, available from: https://www.jstor.org/stable/1... [accessed: 9 May 2018].
 
40.
Kono D. Y., Montinola G. [2013], The uses and abuses of foreign aid: Development aid and military spending [online], Political Research Quarterly, vol. 66, no. 3: 615–629, available from: http://journals.sagepub.com/do... [accessed: 9 May 2018].
 
41.
Lancaster C. [2006], Failing and Failed States: Toward a Framework for U. S. Assistance in Short of the Goal: U. S. Policy and Poorly Performing States [online], Center for Global Development, Washington: 285–305, available from: https://www.cgdev.org/sites/de... [accessed: 3 January 2018].
 
42.
Majoni T. [2018], Assets declaration: How Mnangagwa is fooling us [online], The Standard, 18 February 2018, available from: https://www.thestandard.co.zw/... [accessed: 3 June 2019].
 
43.
Mambo E. [2017], Military looted diamonds- report [online], Zimbabwe Independent, 15 September 2017, available from: https://www.theindependent.co.... [accessed: 27 June 2018].
 
44.
Mambo E. [2017], CIO company looted Marange diamonds [online], Zimbabwe Independent, 22 September 2017, available from: https://www.theindependent.co.... [accessed: 27 June 2018].
 
45.
Mambo E. [2017], Jinan diamond saga mystery [online], Zimbabwe Independent, 11 August 2017, available from: https://www.theindependent.co.... [accessed: 27 June 2018].
 
46.
Mambo E., Manayiti O. [2017], Anjin builds US$ 7 m Grace school [online], Zimbabwe Independent, 30 June 2017, available from: https://www.theindependent.co.... [accessed: 27 June 2018].
 
47.
Mambo E., Manayiti O. [2017], Chinese siphon US$ 255 m from Anjin [online], Zimbabwe Independent, 7 July 2017, available from: https://www.theindependent.co.... chinese-siphon-us255 m-anjin/ [accessed: 28 June 2018].
 
48.
Marima T. [2018], Zimbabwe: President Emmerson Mnangagwa’s 100 days in office [online], Al Jazeera, 5 March 2018, available from: https://www.aljazeera.com/news... days-office-180305114311581.html [accessed: 12 August 2018].
 
49.
Menard A., Weill L. [2015], Understanding the Link Between Aid and Corruption: A Causality Analysis [online], AFSE, 64th Annual Meeting of the French Economic Association, available from: https://afse2015.sciencesconf.... [accessed: 9 May 2018].
 
50.
Milner H. V., Tigley D. [2013], Introduction to Geopolitics of Foreign Aid [online], Harvard University, Cambridge, available from: https://scholar.harvard.edu/dt... introduction-geopolitics-foreign-aid [accessed: 10 May 2018].
 
51.
Morrison K. M. [2007], Natural Resources, Aid, and Democratization: A Best-Case Scenario [online], Public Choice, vol. 131 (June 2007), no. 3–4: 365–386, available from: https://link. springer.com/article/10.1007/s... [accessed: 6 June 2018].
 
52.
Moyo D. [2010], Dead Aid: Why aid is not working and how there is another way for Africa, Lon¬don: Penguin Books.
 
53.
Moyo L., Mafuso L. T. [2017], The Effectiveness of Foreign Aid on Economic Development in Developing Countries: A Case of Zimbabwe (1980–2000) [online], Journal of Social Sciences, vol. 52, no. 1–3: 173–187, Taylor & Francis Group, available from: https://www. tandfonline.com/doi/abs/10.108... [accessed: 5 June 2019].
 
54.
Natural Resource Governance Institute (NRGI) [2015], NRGI Reader, The Resource Curse: The Political and Economic Challenges of Natural Resource Wealth [online], NRGI, New York, available from: https://resourcegovernance.org... [accessed: 6 June 2018].
 
55.
Ndebele H. [2017], Police complete US$ 585 m siphoning probe [online], Zimbabwe Independent, 21 July 2017, available from: https://www.theindependent.co.... m-siphoning-probe// [accessed: 28 June 2018].
 
56.
Ndlovu C. [2017], The ugly face of protectionism [online], Zimbabwe Independent, 26 May 2017, available from: https://www.theindependent.co.... [accessed: 6 June 2019].
 
57.
Nehanda Radio [2014], Offshore syndicate siphons off diamond revenue [online], Nehanda Radio, 21 March 2014, available from: http://nehandaradio.com/2014/0... [accessed: 26 June 2018].
 
58.
News24 [2002], Mugabe millions hard to trace [online], News24, 19 February 2002, 24.com, Cape Town, available from: https://www.news24.com/xArchiv... [accessed: 23 June 2018].
 
59.
Organisation for Economic Co-operation and Development (OECD) [2018], Development Aid at a Glance Report, Statistics by Region: 2. Africa, 2018 Edition [online], OECD, Paris, available from: http://www.oecd.org/dac/financ... [accessed: 15 June 2018].
 
60.
Organisation for Economic Co-operation and Development (OECD) [2015], Gross disbursements of Official Development Assistance (ODA) in 2016, Zimbabwe- ODA by sector and donor, USD million [online], OECD, Paris, available from: http://www2.compareyourcountry... aid-statistics?cr=265&lg=en&page=31# [accessed: 21 June 2018].
 
61.
Organisation for Economic Co-operation and Development (OECD) [2015], Gross disbursements of Official Development Assistance (ODA) in 2016, Zimbabwe – ODA by donor and sector, USD million [online], OECD, Paris, available from: http://www2.compareyourcountry... aid-statistics?cr=265&lg=en&page=21# [accessed: 21 June 2018].
 
62.
Payaslian S. [1996], U. S. Foreign Economic and Military Aid: The Reagan and Bush Administra¬tions, University Press America, Lanham.
 
63.
Rodrik D. [2001], Trading in Illusions [online], Foreign Policy, No. 123 (March–April 2001): 54–62, available from: https://www.jstor.org/stable/p... [accessed: 10 May 2018].
 
64.
Rodrik D. [2013], The Past, Present, and Future of Economic Growth [online], Global Citizen Foundation Working Paper; John F. Kennedy School of Government, Harvard University, Cambridge, available from: https://drodrik.scholar.harvar... [accessed: 2 January 2018].
 
65.
Sharife K. [2013], Disappearing Diamonds [online], 100Reporters, 20 February 2013, available from: https://100r.org/2013/02/disap... [accessed: 8 August 2018].
 
66.
Sithole-Matarise E. [2017], Zimbabwe’s Mnangagwa promises zero tolerance in corrupt fight [online], Reuters, 20 December 2017, available from: https://uk.reuters.com/article... [accessed: 12 August 2018].
 
67.
Smith B. C. [2007], Good Governance and Development. Palgrave Macmillan, Basingstoke.
 
68.
Swissinfo [2002], Switzerland imposes sanctions on Zimbabwe [online], Swissinfo with Agencies, 20 March 2002. Swiss Broadcasting Corporation, Bern, available from: https://www.swis¬sinfo.ch/eng/... [accessed: 23 June 2018].
 
69.
Tarp F. [2012], Aid and Development [online], Discussion Paper No. 06–12, Department of Eco¬nomics, University of Copenhagen, available from: https://pdfs.semanticscholar.o... 52b66b5618464c2f6ee7fd46d1543d3da332.pdf [accessed: 22 July 2019].
 
70.
Transparency International (TI) [2002], Mugabe stands out among the politically corrupt, while banks and energy sector top dirty business deals uncovered in 2002, says Transparency International [online]. TI, Berlin, available from: https://www.transparency.org/n... [accessed: 23 June 2018].
 
71.
Transparency International (TI) [2018], Corruption Perceptions Index: Overview [online]. TI, Berlin, available from: https://www.transparency.org/r... [accessed: 5 June 2018].
 
72.
Transparency International (TI) [2018], Corruption Perceptions Index 2017 [online]. TI, Berlin, available from: https://www.transparency.org/n... [accessed: 21 June 2018].
 
73.
United Nations (UN) [2015], Handbook of the Least Developed Country Category [online], UN, Department of Economic and Social Affairs, New York, available from: https://www. un.org/development/desa/dpad/w.... pdf [accessed: 21 June 2018].
 
74.
United Nations Conference on Trade and Development (UNCTAD) [2018], World Investment Report 2018: Investment and New Industrial Policies [online], UNCTAD, Geneva, available from: https://unctad.org/en/Publicat... [accessed: 5 June 2019].
 
75.
United Nations Development Programme (UNDP) [2018], Human Development Reports, Zimbabwe: Human Development Indicators [online] UNDP, New York, available from: http://hdr.undp.org/en/countri... [accessed: 10 August 2018].
 
76.
United Nations Treaty Collection (UNTC) [2018], United Nations Convention against Corruption [online], UNTC, Treaty Section, Office of Legal Affairs, New York, available from: https://treaties.un.org/Pages/... [accessed: 5 June 2018].
 
77.
U. S. Agency for International Development (USAID) [2016], U. S. Foreign Assistance, Fiscal Years 1946–2016 (Greenbook) [online], USAID, Washington, available from: https://explorer.usaid.gov/pre... [accessed: 4 June 2018].
 
78.
U. S. Embassy Harare [2001], Assets of President Mugabe and Senior Goz and Ruling Party Leaders (C-TN1-01067) [online], Wikileaks Cable: 01HARARE2547_a, 29 August 2001, Wikileaks, available from: https://wikileaks.org/plusd/ca... [accessed: 23 June 2018].
 
79.
World Bank (WB) [2018], Country Overview: Zimbabwe [online], World Bank Group, Washington, available from: http://www.worldbank.org/en/co... [accessed: 21 June 2018].
 
80.
World Bank (WB) [n.d.], GNI per capita, Atlas Method (current US$) [online], World Bank Group, Washington, available from: https://data.worldbank.org/ind... [accessed: 21 June 2018].
 
81.
World Inequality Database (WID) [2017], Per adult national income [online], WID World, Paris, available from: https://wid.world/country/zimb... [accessed: 28 August 2018].
 
82.
Zimbabwe Independent [2012], Matt Bronze ‘front firm for military’ [online], Zimbabwe Independent, 10 August 2012, available from: https://www.theindependent.co.... [accessed: 27 June 2018].
 
83.
Zimeye [2017], Mnangagwa moves to arrest Mzebi and Chidhakwa [online], The Zimbabwean, 18 December 2017, available from: http://www.thezimbabwean.co/20... [accessed: 12 August 2018].
 
eISSN:2300-5238
ISSN:0867-0005