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Send  Share  RSS  Twitter  17 Sep 2012

GOVERNMENT: New Body Critical To Curtail Corruption


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If Government is serious about tackling large scale corruption in South Africa then it urgently needs to take drastic action by establishing an independent anti-corruption body, or else risk the situation becoming endemic. 

This is according to Steven Powell, the head of Forensics at leading law firm, Edward Nathan Sonnenbergs (ENS). Powell, who is an expert in anti-corruption compliance initiatives in the private sector, called on government to show genuine political will to tackle the issue of corruption in South Africa.

One of the key structural issues impacting on white collar crime in South Africa is a lack of resources on both the investigative and prosecution level. In order to detect and address the undercurrents of corruption in our society, the formation of an independent, multi-disciplinary anti-corruption body is crucial. This body must take strong measures to bolster public awareness of their anti-corruption obligations,” he says.

Powell criticised the demise of the Scorpions, describing it as a regressive step in the war against corruption.  “The replacement of the Unit by the Hawks, which forms part of the police service, is simply not sufficiently independent or effective enough. They do good work on organised crime, but they are not the ideal solution to the corruption problem.”

He says the perception that corruption is rife in South Africa has contributed to South Africa’s slide down the Transparency International corruption index by more than 20 positions in the last five years. South Africa currently occupies the 64th position out of the 189 countries that participated in the Transparency International Corruption Index.

According to Powell, South African law provides powerful legislation to tackle corruption – however few people are aware of critical anti-corruption requirements.

Many of the initiatives to address corruption in South Africa are not marketed effectively and consequently are not widely known, leaving many individuals and companies open to exploitation,” he says.

For example, Powell says in terms of Section 34 of the Prevention and Combating of Corrupt Activities Act, act 12 of 2004 it is a criminal offence for any person in a position of authority, who knows, or ought reasonably to have known, or suspects that an act of fraud, theft, corruption, extortion or forgery & uttering not to report the incident to the SA Police Services, where the value exceeds R100,000.00. “However, very few people are aware of this requirement even though the failure to report carries a potential 10 year jail penalty,” he says.

Powell also points to onerous anti-corruption compliance requirements in terms of the new Companies Act which came into effect in 2011. Regulation 43 of the new Companies Act (Act 71 of 2008) requires South African companies to establish Social and Ethics Committees which have a host of good corporate citizenship obligations.

Included amongst those obligations is a requirement to monitor the company's progress in respect of adhering to the OECD recommendations on reducing corruption. What’s most concerning about this is that very few people have any idea of what the OECD recommendations entail. Furthermore, many companies labour under the misapprehension that this legislation only applies to listed corporate entities in South Africa.”

Not only does it apply to all state-owned entities such as Telkom and Eskom, but it is also applicable to medium to large enterprises.  As such there are a large number of unlisted companies that are also subject to these requirements,” says Powell.

Powell welcomes the inclusion of the OECD recommendations on reducing corruption in the Companies Act. He says the legislation is similar to actions taken in the United States with its Foreign Corrupt Practices Act (FCPA) and the United Kingdom, with the United Kingdom Bribery Act (UKBA) which targets bribes paid to foreign government officials and any other person. “It is a bold first step down the anti-corruption path and should have a positive effect on reducing corruption in our country – provided the legislation can be properly marketed and enforced,” he says.

He urges government to follow the US and UK anti-corruption models and impose heavy penalties on bribe-paying companies.

The penalties for failure to comply with global anti-corruption measures are significant. Multi-million pound or dollar penalties are imposed by the Department of Justice and the SEC in the United States as well as by the Serious Fraud Office in the United Kingdom. In 2010, penalties of more than $1.8 billion were imposed in respect of its FCPA breaches in the United States,” he says.

Powell also encouraged incentivised whistle blowing. “In the US, whistleblowers can receive up to 25% of recovered amounts from offending companies. This has driven a culture of "self-reporting" when corporates discover corruption breaches within their own organisations. Many such breaches take place in subsidiaries in remote regions. The parent company is regarded as vicariously liable for the illicit activities of such subsidiaries, its agents, business partners and intermediaries – and the onus is on them to ensure compliance to anti-corruption laws,” said Powell.

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