Whistleblowing in South Africa tends to be associated with calling out public sector fraud and corruption, but it is also becoming increasingly important in the private sector.
There are two key reasons for this.
One is growing recognition, especially since the release of the Zondo Commission’s report, that companies in the private sector are just as vulnerable to fraud and corruption as public sector entities.
A significant and growing risk in this regard is that companies may suffer significant reputational damage when they are caught wrongfooted on wrongdoing, usually very publicly.
Some of this risk could be significantly mitigated if companies could detect and address problems swiftly, effectively and internally, but for this to happen, they need the trust of the people best equipped to bring suspicions or evidence of fraud or corruption to their attention – their employees.
International studies show that over 40% of fraud or corruption in companies is picked up by whistleblowers, mainly employees. Knowing this, companies are realising how important it is to create an enabling environment for whistleblowers to come forward without fear of victimisation or occupational detriment.
The other major reason for the current heightened emphasis on private sector whistleblowing in South Africa are proposed changes in the laws governing protected disclosures. The Department of Justice and Constitutional Development recently published a discussion document on proposed reforms for the whistleblower protection regime in South Africa; and has invited comments to be submitted by mid-August.
The discussion document recognises that the Protected Disclosures Act (PDA) was primarily enacted to provide for procedures in terms of which employees in both the private and public sectors may disclose information regarding unlawful or irregular conduct and to provide protection to those who make a disclosure; but that while the PDA is well intended, it is deficient in many important respects. Among other identified deficiencies it does not provide a clear-cut procedure, does not deal with harm that goes beyond work-related detriments or threats that occur outside of work incidents, or economic impacts of whistleblowing.
There are 13 broad proposals made in the document for possible amendments including the expansion of occupational detriment and the creation of a fund for whistleblowers who face financial hardship. The proposals relate to amending the PDA, rather than creating a cohesive statutory framework. While it is a commendable first step from Government, it is clear that a great deal more work will be required and the proposed statutory amendments, at least in their current form, may not be the panacea many had hoped for.
Low levels of awareness of Companies Act whistleblower provisions
While private sector companies are generally familiar with the whistleblowing requirements of the PDA, many may not be aware of the enhanced obligations placed on companies – private and state-owned – under the Companies Act. Familiarity with the provisions of the Companies Act whistleblower provisions is especially important as it extends application of the PDA to disclosures made under the Companies Act, irrespective of whether the PDA would have otherwise applied to that disclosure.
Under section 159 of the Companies Act, protections are afforded to good-faith disclosures by employees, directors, prescribed officers, registered trade unions, suppliers and suppliers’ employees.
The Companies Act also protects disclosures made to a broad group of people and entities, including the Companies and Intellectual Property Commission (CIPC), the Companies Tribunal, the Takeover Regulation Panel, directors, prescribed officers, legal advisors and auditors.
A notable exception is that unlike other jurisdictions (including Australia), disclosures made to journalists are not protected.
Other notable whistleblower-related requirements of the Companies Act are the much wider scope of eligible disclosures, which include suspected discrimination or condonation of discrimination, as well as general prejudice.
Furthermore, a key protection provided for in the Companies Act is that whistleblowers can claim for damages if they have suffered harm or there is a real threat of harm as a result of a protected disclosure made in good faith and with reason to believe wrongdoing occurred.
For this reason, employers, with the help of their legal advisers, need to familiarise themselves with the interplay between the protected disclosure requirements of the Companies Act and the PDA.
Disclosure policies incomplete and out of date
As a law firm that is very active in the sphere of corporate investigations and compliance, Bowmans’ experience is that many employers have whistleblowing policies in place – but these are often out of date or too vague to inspire the confidence of employees thinking about reporting their suspicions.
Often such policies may have been drafted several years ago and are largely unchanged despite the rise in fraud and corruption and the significantly higher risks of reputational damage since then, and the amendments to the PDA which came into effect in 2017.
Some employers also do not regularly check that their reporting channels are fit for purpose, or do not ensure that employees know how to use them.
Here are a few thoughts employers should take into account when looking at ways to give employees comfort that the organisation takes whistleblowing seriously:
- Do anonymous hotlines provide prompts to ensure that employees provide sufficient information to ensure the matter can be investigated? A report cannot be investigated without enough information, while reports not acted on for lack of information are a signal to employees that the organisation is not serious about whistleblowing.
- What options do employees have if they want to lodge a report against their direct managers?
- How accessible are reporting channels? Do they allow for reports in various languages? Are calls to hotlines toll-free?
- Confidentiality tends to be a major concern for whistleblowing employees. People tend to mistrust online reporting forms because they can technically be traced back to the sender. Placing physical reporting boxes in areas out of sight of CCTV cameras may produce better results.
- How is the organisation dealing with confidentiality issues (bearing in mind that confidentially and anonymity are different concepts)?
- How will the company give feedback to whistleblowers on the steps taken to respond to their reports?
- What is the company’s stance on situations where an employee facing disciplinary action now lodges a complaint of bullying or victimisation, especially with the recently introduced Code of Good Practice on the Prevention and Elimination of Harassment in the Workplace?
These are only a few of a multitude of factors that employers should be taking into account in ensuring that their whistleblowing policies and channels are empowering, enabling and in compliance with the growing complexities of the laws around whistleblowing in South Africa. And the sooner, the better.
Written by Mieke Krynauw, Luway Mongie and Ntokozo Nzima, Bowmans South Africa