By Jaya RamachandranPhoto Credit: Business Anti-Corruption Porta
Republished courtesy of IDN-InDepthNewsAnalysis
PARIS (IDN) – Criticising South Africa for its failure to combat corruption in international business deals, a new report is asking the country to intensify its efforts to detect, investigate and prosecute cases of foreign bribery.
In the context of its regular cycle of reviews, the 38-country OECD Working Group on Bribery completed mid-July a review of South Africa's enforcement of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and related instruments. The Convention was introduced in 1999.
In its second report on the country, the Working Group of the Organisation for Economic Cooperation and Development on Bribery notes that "as of the time of this report, there are no prosecutions for foreign bribery in South Africa". This is a matter that could be addressed if South Africa adopted a more proactive approach to the investigation and prosecution of this type of crime.
In this context, the Group recommends that South Africa develop specialised investigators and prosecutors to more effectively investigate and prosecute foreign bribery, and ensure adequate training and resources, as well as enhance coordination between the police and prosecutors with respect to these cases.
"South Africa should also strengthen safeguards to ensure that prosecutorial decisions cannot be affected by those considerations set out in Article 5 of the Convention," the report says. Article 5 prohibits political interference in the investigative and prosecutorial process.
With regard to liability of legal persons, the Working Group notes that, in spite of the long standing existence of corporate liability legislation, convictions or prosecutions of companies for intentional economic offences appear to be rare.
The Group proposes that the attention of prosecutors and investigators be drawn to the importance of effectively enforcing liability of legal persons for acts of foreign bribery.
The Group also indicates that it would follow-up on South Africa's ability in practice to prosecute companies for foreign bribery acts committed by intermediaries abroad, including related legal persons such as their subsidiaries.
With respect to sanctions, the Working Group recommends that South Africa raise awareness among prosecutors and judges of the full range of penalties applicable to legal persons for foreign bribery irrespective of the level of the Court, including debarment sanctions available under the Prevention and Combating of Corrupt Activities Act (PRECCA).
Other main recommendations of the Group are that South Africa should:
- Raise awareness of the fight against foreign bribery in both the public and private sector;
- Boost existing law enforcement resources and training dedicated to fighting complex economic crimes, including foreign bribery offences, and enhance coordination among the police and prosecution authorities to combat foreign bribery more effectively;
- Ensure that companies engaging in foreign bribery are duly held liable; and
- Ensure that Article 5 of the Convention, which prohibits considerations of national economic interest, relations with another state, and the identity of individuals or companies when prosecuting foreign bribery, applies effectively to all investigative and prosecutorial decisions in foreign bribery cases.
The report lists all the recommendations of the Working Group on pages 74-78, and includes an overview of enforcement actions and specific legal and policy features in South Africa for combating the bribery of foreign public officials.
The report is based on the laws, regulations and other materials supplied by South Africa, and information obtained by the evaluation team during its five-day on-site visit to Pretoria and Johannesburg in February 2010, during which the team met with representatives of the South African public administration, the private sector, civil society and the media.
As with all other OECD Working Group members, South Africa will orally report to the Working Group on its actions to implement the Working Group’s recommendations after one year.
The Working Group also highlights positive aspects of South Africa’s efforts to fight foreign bribery, including a strong legislative framework for combating foreign bribery under the Prevention and Combating of Corrupt Activities Act.
"The reporting obligation of suspected foreign bribery imposed on a broad range of persons under this Act, could be a useful tool in uncovering foreign bribery instances. South Africa’s legislation regarding the prevention and detection of money laundering should also help detect attempts to launder funds related to foreign bribery," says the report.
The Business Anti-Corruption Portal -- maintained by the Global Advice Network on behalf of the government ministries and agencies among others of Austria, Denmark, Germany, Norway, Sweden and UK -- seeks to put things in perspective.
NOT AS PERVASIVE
South Africa is the largest economy in the region with a large private sector and a growing private tax base, it says. The government has openly committed itself to a liberal economic course with a focus on macroeconomic stability, financial discipline and an increase in foreign direct investments.
"The level of corruption in South Africa is not as pervasive as in other African countries, largely due to the country's relatively well-functioning government institutions. However, business surveys indicate that corruption still forms an obstacle to business operations," says the Global Advice Network.
Compared to the Sub-Saharan regional average, companies in South Africa encounter less complicated and costly import/export procedures, less complicated procedures related to starting and closing a company and securing property rights, and smoother interaction with tax officials.
Dispute settlement and enforcement of commercial contracts is relatively easy and not as costly as in other countries in the region, which also reflects that companies operating in South Africa have greater confidence in the integrity of the judicial system.
The Network points out that although the regulatory environment in South Africa is continuously being improved, some public services are still characterised by high levels of red tape -- much to the disadvantage of companies.
"According to observers, corruption is rife in the granting of government contracts. Bribery thrives at the central government level, as exemplified by the high-profile procurement scandals that have been exposed within the last decade. Many companies also cite the procurement of goods for private companies as an activity likely to involve bribery," say the Network.
In its view, the Black Economic Empowerment (BEE) strategy, aiming at increasing the participation of black citizens in the economy, has been criticised for providing too much preferential treatment to wealthy black elites in relation to getting government contracts, and for leading to increased procurement corruption.
ECONOMIC BACKGROUND
The OECD Working Group also points out that the South African economy is among the largest and most prosperous on the African continent.
The democratically elected government that came to power in South Africa in 1994 inherited an economy wracked by long years of internal conflict and external sanctions. Against that backdrop, economic performance since 1994 has been impressive.
In particular, the successive governments during that period have shown considerable prudence, refraining from resorting to economic populism in an effort to boost short-term growth. As a result, public finances were stabilised, inflation was brought down, foreign capital was attracted in growing amounts, and economic growth, after lagging for a time, improved.
Since 2004, South Africa‘s economic growth has accelerated significantly, with a GDP growth rate averaging over 5 per cent annually through 2007. Growth slowed down to 3.7 per cent in 2008, and real GDP fell by 1.8 per cent in 2009.
Economic activity was adversely affected by severe energy shortages, slowing domestic consumption and the worsening world recession. Growth has resumed and is anticipated to reach3.3 per cent in 2010, boosted by the soccer World Cup.
With over 50 per cent of the world‘s proven gold reserves, and as the largest producer and exporter of important precious metals such as platinum and chromium, South Africa relies heavily on its abundant natural resources, with the mining industry and its large privately owned firms currently accounting for 9.7 per cent of the country‘s GDP.
The construction sector is currently booming due to infrastructure projects under way in transport and electricity, and projects related to the hosting of the soccer 2010 World Cup: construction grew by 9.3 per cent in 2008, after a 14.3 per cent growth in 2007, and is expected to remain dynamic in the coming years.
Tertiary industries account for almost 66 per cent of gross value added led by financial services and wholesale and retail trade. Following a growth rate of 6 per cent in 2007, the tertiary sector grew by only 4.7 per cent in the first three quarters of 2008, and slowed down to 1.1 per cent in 2009. Agriculture accounted for 3 per cent of gross value added in 2009.
In the area of international trade, South Africa now enjoys robust trading relationships throughout the world. Key exports include the aforementioned commodities such as gold, chromium, platinum and palladium.
In contrast with much of the rest of the agriculture-dependent African continent, South Africa also boasts a well developed manufacturing industry whose output accounts for over 50 per cent of the country‘s exports.
South Africa‘s primary trading partners currently include the United States, the European Community, and China.
The principle destination of South Africa's exports is Japan (11.1 per cent), the U.S. (11.1 per cent), Germany (8 per cent), the UK (6.8 per cent), China (6 per cent), and the Netherlands (5.2 per cent).
As to imports, these principally originate from Germany (11.2 per cent), China (11 per cent), the U.S. (7.8 per cent), Saudi Arabia (6.2 per cent), and Japan (5.5 per cent).
More recently, a significant and growing share of transactions has been taking place with other sub-Saharan countries, a trend commensurate with ongoing efforts at regional economic integration, and the diversification of trading partners amongst less developed African nations.
