In this special edition of Focus, we finish our look at anti-corruption legislation in Africa. In this fourth and final part of the series, we consider South Africa with the assistance of Bowman Gilfillan in Johannesburg.
South Africa has comprehensive corruption and white collar crime legislation, and there is increasing foreign and domestic pressure to ensure the effective application and policing of that legislation.
On 3 July 2010 the OECD published a report on the application of the OECD Convention in South Africa:
"As of the time of this report, there are no prosecutions for foreign bribery in South Africa, a matter that… could be addressed if South Africa adopted a more proactive approach to the investigation and prosecution of this type of crime"
…The working group noted that, in spite of the long standing existence of corporate liability legislation, convictions or prosecutions of companies… appear to be rare. The Group also indicated that it would follow-up on South Africa’s ability in practice to prosecute companies for foreign bribery acts…
…the legislative framework for combating bribery (in South Africa) is of a generally high standard…"
South Africa is required to implement the Working Group’s recommendations, and to report back on such implementation within 1 year (with a further formal written report within 2 years).
The South African government has been proactive in establishing various structures to deal with corruption and economic crime, including the Hawks, the South African Revenue Services, the Special Investigating Unit, the South African Police Services, the Public Protector, the Asset Forfeiture Unit and the newly established Anti Corruption Task Team ("ACTT").
In South Africa, corruption and other economic crime is governed by four main legislative enactments. These are the Prevention and Combating of Corrupt Activities Act 12 of 2004 ("the Corruption Act"), the Financial Intelligence Centre Act 38 of 2001 ("FICA"), the Prevention of Organised Crime Act 121 of 1998 ("POCA") and the Electronic Communications and Transactions Act 25 of 2002 ("ECTA").
The Corruption Act creates a general offence of corruption under Section 3 and then numerous specific offences of corruption relating to public officers; foreign public officials; contracts with public and private bodies and procurement.
The elements of the general offence of corruption are a) the giving of b) a gratification, which includes money, any donation, gift, reward, property or valuable consideration of any kind c) to a receiver d) for an unlawful purpose.
As with the UK Bribery Act, the South African Corruption Act applies equally to individuals and entities in the public and private sectors.
The Corruption Act has extraterritorial application and applies inter alia, to any act which takes place outside South Africa which affects or is intended to affect a public body, a business or any other person in South Africa.
Duty to Report
One of the unique features of the South African Corruption Act is the duty to report knowledge or even a suspicion of either the statutory offence of corruption or any of the common law economic crimes, failing which heavy penalties are imposed. No similar provision is found in the Foreign Corrupt Practices Act or the UK Bribery Act.
Section 34 of the Corruption Act provides that a duty to report an offence falls on any person who "holds a position of authority" in the organisation and who knows or ought reasonably to have known or suspected that any other person has committed an offence in terms of the Corruption Act that being an act of corruption of any value, as well as theft; fraud; extortion; forgery or uttering a forged document involving an amount of R100 000 (approximately £10,000) or more.
The Corruption Act requires that a person who holds a position of authority must report his/her knowledge or suspicion to a police official and that any person who fails to comply with this requirement is guilty of an offence.
The obligation to report arises where there is actual knowledge of an offence, imputed knowledge, actual suspicion that an offence has been committed or imputed suspicion.
The reporting obligation in the Corruption Act was widely publicised in the beginning of 2010 with the laying of charges by one of the opposition parties, the Democratic Alliance, of Provincial Premier Paul Mashatile under this section. Mashatile had allegedly failed to report his knowledge of economic crimes including the forging of signatures, committed by Carl Niehaus who had held the position of Chief Executive at the Gauteng Economic Development Agency, before Niehaus resigned from this position in 2005. The effect of this was that the reporting provision was widely publicised, which brought it to the attention of the law enforcement agencies leading to an increased use of the provision.
Persons found guilty of committing corruption under the Corruption Act may be sentenced to imprisonment for any period including for life or the payment of a fine of unlimited extent. In addition to the ordinary fine, the Court may also impose on the guilty party a second fine of five times the value of the gratification involved in the offence.
Failure to report an offence where there is an obligation to do so, is a further offence in terms of the Corruption Act. The penalty for the failure is a fine or imprisonment for a period not exceeding ten years depending on which Court hears the matter. The jurisdiction in which the matter is prosecuted will depend largely on the complexity of the case and the monetary value attributable to the offence which had to be reported.
The Court is also empowered to order that the details of a person or entity found guilty of corruption in relation to contracts or tendering be endorsed on a Register. This endorsement will apply to every enterprise to be established in the future by a person or entity entered on the Register.
The National Treasury is entitled to terminate any contract it has entered into with a person or entity endorsed on the Register and any person or entity so endorsed on the Register is obliged to disclose this fact in any future tender to an organ of state or public body.
Gifts and hospitality
The nature or value of a gift is irrelevant to its legality. The purpose for which the gift or gratification was given is determinative. No fixed monetary limit is stipulated in the Corruption Act. The context in which the gift or gratification is provided is only relevant in so far as it indicates motive.
Although the Corruption Act has no fixed monetary value for gifts and hospitality there is a plethora of other law that governs this. The Executive Ethics Code provides that Cabinet Ministers, Deputy Ministers and Members of Provincial Executive Committees, who are Ministers in the provincial cabinets must obtain permission of the President or relevant provincial Premier to accept gifts worth more than R1000 and must disclose gifts with a value of more than R350 or gifts from a single source which cumulatively exceed R350 in value during any calendar year. Members of Parliament must also report gifts worth R350 or more. Public servants should not accept a gift worth more than R350 without the prior approval of the Head of the Department. The offering of gifts to public servants is discouraged. Senior Managers in the Public Service may only in exceptional circumstances should gifts be accepted and they may accept unsolicited gifts or moderate acts of hospitality. Gifts or hospitality over the value of R350 must be declared.
Under the Public Service Code of Conduct, public servants must not use their official positions to obtain gifts or benefits for themselves during the performance of their official duties nor may they accept any gifts or benefits when offered, as these may be construed as bribes.
Governance Compliance Programmes
Entities doing business in South Africa should as a matter of course ensure that they have internal governance compliance programmes and action plans which ensure that they have adequate systems in place to prevent and avoid corruption and economic crime, which should take account of international best practice and importantly should be reflective of the local law.