Corruption scaring off foreign

Corruption scaring off foreign investment in South Africa

South Africa’s global image as investment destination could be in tatters as reports spread worldwide that this county has become a bribery and corruption hotspot.

Corruption scaring off foreign

 

South Africa’s global image as an investment destination is being tarnished by bribery and corruption scandals, and businesses need to focus on improving their image if they wish to secure foreign investors, especially investors from the US and the UK.

This was the message from forensics specialist Dave Loxton, of the legal firm ENSafrica, during the launch of the 2015 anti-bribery and corruption survey earlier this week.

A total of 88 organisations across Africa, including in Mauritius, participated in the survey, which was designed to gauge perceptions regarding an organisation’s anti-corruption compliance commitment to observing local and global requirements, and to see how these compliance processes compare to generally accepted anti-corruption compliance best practice.

 

Key findings included:

  • 24% of organisations have experienced an incident of bribery and/or corruption in the past 24 months (that’s an increase of 4% since 2013), with 5% experiencing five or more incidents within the last 24 months
  • just over 90% of organisations surveyed have a policy prohibiting bribes, 52% have an established anti-bribery compliance programme and 43% have conducted a detailed anti-bribery risk assessment of their bribery risks

 

Other key findings included:

  • 68% of those surveyed believe that third-party business partners pose the greatest source of bribery risk to their organisations
  • 17% of organisations feel they are highly exposed to bribery in Africa (a drop of 33% compared to 2013), with 71% believing they are moderately exposed to bribery and corruption in Africa
  • South Africa, along with Angola, the Democratic Republic of Congo, Ghana, Kenya, Mozambique, Nigeria and Uganda were highlighted as corruption hotspots.
  • only 36% of organisations surveyed:
    • are confident that they have proportionate procedures to mitigate bribery risks; or
    • believe they are well prepared to respond to the threat of an anti-bribery regulatory investigation
  • 62% of organisations now conduct due diligence screening on third parties, an increase of 22% from 2013
  • only 40% of organisations have a dedicated anti-bribery training programme for their employees and 15% provide anti-bribery training to their business partners

Steven Powell, co-head of forensics at ENSafrica said there are ten things the US Department of Justice usually expects to see in a company’s anti-bribery and corruption programme.

 

These are:

  • Commitment to compliance at the highest level;
  • Written and widely disseminated compliance policies – also translated into local languages where appropriate;
  • Periodic reviews and updates;
  • Independence and adequate funding;
  • Training and guidance;
  • Internal reporting mechanisms;
  • Investigations, including adequate resources and effective processes as integrity is very important;
  • Enforcement of policies and disciplinary measures for non-compliance;
  • Paying attention to third party relationships – examine these closely and sensitise third parties to the importance of compliance and show a willingness to terminate those agents and contractors who fail to comply;
  • Monitoring and testing.

 

The UK Government looks at:

  • Procedures;
  • Top level commitment;
  • Due diligence;
  • Communication and training;
  • Monitoring and reviewing.

Speaking at the launch of the statistics, Powell also said the general corruption levels in SA could very well be “almost out of control and almost anything can be acquired at a price”.

He expressed concern about corruption becoming entrenched in municipalities and in the government, adding that only about 10% of corporates in South Africa are probably anti-corruption compliant.

Effects of corruptions can also can be seen in Foreign Exchange Trading, with the Rand dropping year after year against the USD.

For a full breakdown of ENSafrica’s findings, click here