During his recent visit to Kenya, United States President Barack Obama pointed out that Africa is one of the world’s the fastest growing markets. The continent is, however, at a crossroads: a moment filled with peril, but also enormous promise.

The biggest impediment to growth is corruption. In Kenya, Obama warned that the ‘cancer’ of corruption was costing the country 250 000 jobs annually – and much more in terms of other missed opportunities and income. But which factors and parties are the drivers of corruption on the continent?

Transparency International defines corruption as ‘the abuse of power for private gains.’ On the face of it, everyone seems to agree that corruption is bad. Yet it continues to be an endemic and intractable problem – even though many countries have ratified United Nations and African Union anti-corruption protocols.

In the early 1980s, the World Bank and International Monetary Fund (IMF) introduced so-called Structural Adjustment Programmes (SAPs): economic policies for developing countries that aimed to remove what was seen as ‘excessive’ government controls, and instead promoted market competition. Governments were encouraged or forced to reduce their role in the economy by privatising state-owned public industries and opening up their economies to foreign competition.

Several studies that have documented the subsequent reform process have concluded that market liberalisation did not, on the whole, achieve its intended purpose in sub-Saharan Africa. In many cases it instead worsened the situation, as the state’s retreat left behind an underdeveloped, ill-equipped and unprepared private sector.

Political dynamics in the public sector have led to corrupt market relations, and the public sector took on the role of ‘corruption enablers’. This made it difficult for the private sector to operate unless they were willing to corruptly pay the public sector for licences or other requirements. As a result, the rich grew richer still and the poor got poorer: a gap that continued to widen as the private sector thrived unchecked, with opportunistic behaviour rewarded by a ‘marriage of corruption’ with the public sector.

In Kenya, the problem was compounded when, in 1970, the government (through the Ndegwa Commission) allowed civil servants to own private property and companies, and run businesses. As a result, the ‘marriage’ between the two sectors became even more pronounced and confusing. Despite the SAPs recommendations, few market regulations had been put in place, and some civil servants began to use their own companies and those of their relatives, friends and cronies to supply the public sector at inflated rates – sometimes receiving pay without supplying anything.

This was the beginning of grand corruption. Instead of serving the public, many civil servants instead ended up compromising service delivery. As Obama said during his recent press conference in Kenya, ‘sometimes civil servants, they don’t feel like their salaries are high enough and they think that, ah, it's just the way of doing business; I supplement my salary by imposing my own personal little tax to boost my salary. And then that suddenly becomes commonplace in a department or a bureaucracy … The fact that doing business and ordinary people just moving along in their lives here is constantly sapped by corruption at a high level and at a low level.’

Kenya has indeed seen its fair share of public coffers being run dry through corrupt tenders. This is evident from the recent attempt by private companies to defraud Kenya’s National Youth Service of KES826 million. Some civil servants have also been accused of interfering with tendering systems and awarding bids to their own private companies, or those of their associates and cronies.

Africa loses more than US$50 billion yearly to illicit financial outflows as governments and multinational companies engage in fraudulent schemes aimed at avoiding tax payments. It is estimated that the continent loses a total of US$38.4 billion a year through trade mispricing and US$25 billion through other illicit flows. This is more than Africa receives through foreign aid and foreign direct investment. A joint report by the African Development Bank and Global Financial Integrity found that a staggering 60% to 65% of this lost revenue disappears in commercial transactions by multinational companies.

In Kenya alone, it is estimated that the government loses 30% of its budget every year to corruption; equivalent to KES300 billion (US$3 billion) annually. Since the year 2000, Kenya has lost an estimated KES4.5 trillion, which is equivalent to the country’s economy today. Most of this happens through collaboration between the private sector, some civil servants and political elites, as has been witnessed in the Goldenberg, Anglo Leasing and ‘Chickengate’ scandals, to mention but a few.

According to a recent report by the Auditor General, only 1.2% of Kenya’s trillion shilling budget for 2013-14 was spent effectively, legally and in a way that can be properly accounted for. The report is a litany of mismanagement, incompetence, wastage, misspending and possible corruption on a huge scale.

Kenya’s private sector has been listed among the world’s most corrupt. International audit firm Ernst & Young reported that one in every three Kenyan companies surveyed had paid bribes to win contracts. The survey, which is conducted in 59 countries, ranks Kenya behind Egypt, Nigeria and Namibia as economies where private sector corruption is most pervasive and tender award processes most distorted.

According to PwC, tender fraud has become Kenya’s fastest growing economic crime. Accounting fraud affects 38% of firms; procurement fraud 31%; bribery and corruption 27% and cybercrime at 22%: completing Kenya’s list of top economic crimes. Four out of every 10 Kenyan CEOs said they had been asked to pay bribes to win a tender or get business.

The corrupt alliance between the state and private sector has given rise to mafias and networks that facilitate corruption and illicit flows in and out of the African continent. Fighting this marriage has proven dangerous and almost impossible.

To end corruption, African governments must urgently re-evaluate the role of public and private sector and come up with stringent regulations to curb the menace. The private sector must be rightly regulated, protected from corrupt public sector officials and held to account. Regional economic communities must devise and enforce measures to regulate cross-border trade to enhance transparency and accountability at the regional level. Civil servants running private businesses must be held to account for their productivity in public service delivery.

‘People aren't stupid,’ Obama said. ‘[You] don't have to be forensic accountants to know what’s going on.’ There is a dire need for a greater civic engagement to curb corruption challenge. Africa needs more transparency and accountability in all sectors if we are to make headway against corruption.

Obama’s speech should give all of us renewed commitment to better understand and work collectively towards eliminating the largest obstacle to Africa’s development. Citizens must become relentless in their demand for accountability, and civil society must be allowed to thrive in the quest for transparency.

Written by Sebastian Gatimu, Researcher, Governance, Crime and Justice Division, ISS Nairobi