A new OECD report finds that complacency underpins a dismal track record for effectively dealing with foreign corruption and bribery in South Africa.
The report and its recommendations, compiled by the Organisation for Economic Co-operation and Development (OECD), reflects the findings of experts from Hungary and the United States, based on legislation and other materials provided by South Africa and research conducted by the evaluation team.
Looking at cases of bribery and money laundering in the country, the OECD team found a serious lack of enforcement actions in South Africa, noting a seemingly passive approach to, and lack of significant investigative efforts in existing cases.
“The South African authorities have not been sufficiently proactive – neither in generating new investigations nor in investigating existing ones,” the OECD group commented.
Worryingly, “the number of foreign bribery allegations appears low, given South Africa’s economic links to a number of countries with corruption risks.”
According to the OECD investigation, South Africa has not led any prosecutions in ten known foreign bribery cases since becoming party to the anti-corruption convention in 2007.
SA authorities noted that six of the cases are tagged as ‘ongoing investigations’.
Included in the ongoing case list is the controversial MTN-Turkcell battle, in which MTN stands accused of allegedly paying bribes to foreign and domestic public officials to win a license to operate in Iran.
According to South African authorities, the investigation is at a preliminary investigation stage and investigators have interviewed legal representatives of the company concerned.
“The competitor company (Turkcell) has since lodged papers in the South Gauteng High Court, summoning the telecoms company for alleged improper conduct in obtaining the contract to provide cellular services in the foreign country concerned (Iran).”
The other cases that are still ongoing involve:
- The sale of farming equipment to an unnamed African country;
- Bribes being allegedly paid by an individual to obtain mining exploration licenses in an African country;
- A bribery case involving an SA SOE and an SOE of another African country in connection with an oil field contract;
- A South African state-owned defence company allegedly paying bribes through a UK-based intermediary to secure an arms contract with a South Asian country; and
- A billionaire European businessman allegedly seeking to pay bribes through a local intermediary to the sons of a former Prime Minister of a Middle Eastern country.
“South African authorities did not proactively investigate or seek the co-operation of foreign authorities in any of the on-going investigations or the other allegations,” OECD said.
“The lack of enforcement of corporate liability for foreign bribery is especially troubling in an economic environment where there has been a major growth in corporate activity, and where state-owned enterprises operating in sensitive sectors are allegedly involved in foreign bribery cases,” the OECD said.
“As described by South African authorities, all on-going investigations are far from reaching the prosecutorial stage.”
Political and economic meddling
The OECD report noted that South Africa’s lack of action on corruption is not immediately clear, but investigators were concerned that “political and economic considerations” may be influencing the investigation and prosecution of foreign bribery.
The investigators said that the offences do not raise any issues with South Africa’s “robust regulatory framework”, but argued that there was no case law on foreign bribery in the country, so the point is almost moot.
“In almost 10 years since the entry into force of South Africa’s foreign bribery legislation in 2004, no natural or legal persons have been convicted for foreign bribery,” OECD said.
The group noted further that no references or stats on the issue could be found in data from National Prosecuting Authority (NPA) or the Specialised Commercial Crimes Unit (SCCU).
The Special Investigating Unit reported in 2011 that R25-30 billion – or 20% of the South African government’s annual procurement budget – was lost to corruption.
“Against this backdrop, it appears that South Africa’s regime of corporate liability for intentional economic offences – while broad and flexible in theory and in force since at least 1977 – is given little priority and remains hardly enforced in practice.”
In order to better fight against corruption and foreign bribery, the OECD recommended that South Africa “significantly step up” efforts to detect, investigate and prosecute foreign bribery and money laundering.
People found to be corrupt should be hit with sanctions that are “sufficiently effective, proportionate and dissuasive” – while investigators, prosecutors and everyone involved in the process should be educated and trained to deal with such cases.
Most importantly, however, the group recommended that whistle blowers be granted far more protection:
“In an environment where the public perception is that there are very serious reprisals against whistleblowers, South Africa needs to urgently take concrete and meaningful steps to ensure that those who report suspected acts of foreign bribery are, in practice, afforded the protections guaranteed by the law, including those in the auditing profession,” the group said.
OECD noted that it was encouraged by expected legislative amendment to address some deficiencies in the system – and welcomed the move to make publicly-listed companies more accountable through compliance measures.