December 9, 2012, was the International Anti-Corruption Day of the United Nations Convention Against Corruption. This follows on the release last week of Transparency International’s latest corruption index, South Africa has slipped further down the list, now occupying 69th place.  The moderately good news is that South Africa (with Brazil) is the highest rated BRICS country, with India, China and Russia all receiving worse scores from TI.

Whilst South Africa’s public service commitment to root out corruption might not be up to scratch, what businesses need to realise is that anti-corruption compliance is not just another layer of red tape which they have to reluctantly comply with or something that applies only to the public service.  The reality is that corrupt activities are bad for business. 

Local and international legislation and conventions, such as the United Nations Convention Against Corruption, impose clear guidelines and hefty penalties for non-compliance.  Both the Foreign Corrupt Practices Act of the United States and the United Kingdom’s Bribery Act have worldwide reach.  Companies headquartered in or with a presence or sufficient business link to the US or the UK face civil and criminal penalties in those countries, if their subsidiaries and affiliates make themselves guilty of corrupt practices in other countries.  South Africa is no exception.  This is illustrated by the investigation by the US authorities into an alleged corruptly obtained tender contract by Net1, listed both in South Africa and the US.

Not only do businesses that make themselves guilty of corruption face large penalties running into hundreds of million of US dollars in some cases, but their directors and officers could face personal liability for transgressions.

Boards of directors and senior management would do well to ensure that they perform proper risk assessments in their businesses, that they have compliance officers dedicated to the function of anti-corruption and that their employees are properly trained on an ongoing basis.  An empowered ethics committee is essential.

South Africa has strong historic and business ties with the UK.  The UK’s Bribery Act has a wider reach than the US’s anti-corruption law, because it is not limited as is the case with the US law to bribing of foreign officials, but outlaws both public and private corruption as well as passive corruption (accepting a bribe) and active corruption (offering a bribe).  Although there have not been any convictions under the UK Bribery Act, a number of investigations are underway and there is little doubt that it will also effect business operations in South Africa.  The bottom line is that anti-bribery and corruption compliance is good for a business’s bottom line.

Written by Andre Vos, Head of the Business Ethics and Anti-Corruption Group at Norton Rose in South Africa