Can business commit to be part of solution rather than partner in graft?

THE European view of Africa is that it is a continent that is corrupt to the core, with sweetheart arrangements all-pervasive in business and politics and where presidents rule for life. As the undisputed master of double standards, the Eurocentric standpoint is one of ignoring the illegal practices of its own corporate sponsors of corruption in Africa.

Within SA, these same perceptions exist, as predominantly white business leaders bemoan the fact that corruption is now de rigueur while trumpeting the fact that misspending and abuse of taxpayers’ funds is the exclusive responsibility of malfunctioning government departments and state-owned entities.

One is hard pressed to disagree with these business leaders’ justified criticism, but, on further examination, is it not a case of blindly adopting the Eurocentric self-righteous and morally dishonest approach? Corrupt practice by definition requires a corruptor and a beneficiary.

It appears that the corruptor side of the equation is frequently overlooked by these critics, as well as the vast majority of financial journalists, whose almost exclusive focus is on exposing government and public-entity beneficiaries while appearing disinclined to expend similar energy on targeting private-sector perpetrators.

The requirements for products and services for government and public entities are generally on such a scale that, more often than not, the execution of such supply contracts falls within the preserve of publicly listed or larger private companies. It follows that any corrupt or fraudulent activity will, by definition, involve government and public entities operating with the private sector. So, if it is accepted that big business transacts with the government and that it sets great store by codes of ethics, governance and corporate citizenship, and if it is accepted that there is a raft of well-drafted anti-corruption laws, then how is it possible that there is corruption on the rampant scale that we are experiencing?

The answers from the perspective of the government appear to be:

• That there is no political will to stamp out corruption — political leaders and public-entity employees suspected of, or guilty of, contravening the statutes invariably have the option to resign, as opposed to being fired and criminally prosecuted.

• That there is insufficient prosecutorial capacity to investigate and then swiftly convict beneficiaries and corruptors.

The answers from the perspective of business appear to be:

• That codes of ethics and governance are but another layer of corporate spin that is not taken very seriously when push comes to shove.

• That directors, notwithstanding the requirements of the Companies Act and the Prevention and Combating of Corrupt Activities Act (PCCA), display little commitment to rooting out corruption as they adopt a non-confrontational “hear no evil, see no evil” approach, which allows them the default setting option of “but we didn’t know” as a lame but seemingly effective excuse should the wheels come off.

Numerous sections within the National Treasury and Public Finance Management Act focus on procurement, together with the criminal ramifications of breaches of the acts. It is common knowledge that most government procurement requires tenders and yet the levels of corruption we are seeing clearly show that deployed cadres, politicians and public-entity employees engaged in nefarious activities view these laws with contempt. Additional statutory anticorruption muscle is included in numerous sections of the Companies Act and PCCA, which are applicable for public and private corporate entities, their employees and their leadership. Notwithstanding all this “big stick” legislation, business people seem equally dismissive of the legal requirements and appear to act with a culture of impunity, knowing full well those in responsible positions will rarely, if ever, be prosecuted.

So what, then, is the outline of a practical solution for the corruption pandemic that blights SA?

• All tenders, apart from the usual tender submission fee, must include a “tender compliance fee”, which is calculated as a formula based on the percentage of the tender value, as well as a percentage of the respective bidder’s annual turnover.

• Tender compliance is deposited into a separate account administered by the Treasury.

• The Treasury establishes a panel of firms specialising in forensic investigation.

• All corruption or tender complaints are submitted to the Treasury.

• Where applicable, the Treasury rotates cases to forensic firms, taking account of potential conflicts of interest.

• The tender compliance fund pays these forensic firms’ fees.

• Corruption or tender fraud are fast-tracked through the commercial courts and convictions with jail terms are secured.

• No deals are allowed for employees of corrupting firms or beneficiaries to resign instead of facing prosecution.

• Fines for companies involved in corruption are calculated as a percentage of turnover on a par with the scale of fines imposed by the Competition Commission.

Business in SA has reached a critical point at which decisions have to be made with or without the government.

Does business decide to continue down the road of corruption, or does it choose the less travelled but more principled high road? Does executive management continue to turn a blind eye by naively accepting representations from employees at face value when these employees are very often at the heart of the problem?

Do nonexecutive directors continue to abdicate their fiduciary responsibilities in terms of the Companies Act, the PCCA and the King III codes of governance as they tap-dance around contentious issues by referring them to executive management that is clearly unwilling or incapable of decisive and unpopular action?

Does business commit to becoming part of the solution as opposed to being the dominant partner in the corrupting of SA?

From the government’s side, the kernel of the solution requires very little political will and is easy to implement — if there is any desire to right the listing ship, there is little time left.

Business faces challenging times through government incompetence, but it is also fair to say that business, as it currently operates, appears to be a more-than-willing partner in creating and sustaining corruption in this country.

We can continue with corrupt business practices and mortgage our economic future, or business can raise the ethical bar and decide to show real leadership by being at the vanguard of an ethical business regeneration that can counter the scourge of corruption in our society.

The right choice is a simple one that makes sound long-term business sense.

• Mantell runs a level 2 black economic empowered biscuit factory in Cape Town



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