Anti-Corruption in South Africa

By Darryl Bernstein* and Nikita Shaw* (Baker McKenzie South Africa)

1. Domestic bribery (private to public)

1.1       Legal framework

Bribery of public officials is primarily regulated under the Prevention and Combating of Corrupt Activities Act, 2004 (PCCAA), which criminalizes corruption and bribery. However, there are extensive legislations and regulations that deal with various industry-specific forms of corruption. These include the following:

  • The Financial Intelligence Centre Act, 2001 (FICA), which is aimed at fighting financial crime such as money laundering, tax evasion and terrorist financing activities
  • The Public Finance Management Act, 1999 (PFMA) and the Local Government: Municipal Finance Management Act, 2003 (MFMA), which regulate and monitor government spending to reduce wasteful and unauthorized spending of public funds, and seek to prevent corruption in the procurement process
  • The Prevention of Organised Crime Act, 1988 (POCA), which was introduced to combat organized crime, (including money laundering and criminal gang activities), and provides for the preservation and forfeiture of property implicated in these offenses
  • The Protected Disclosures Act, 2000, which provides protection to employees who disclose information relating to corrupt activities within the workplace, in both the private and public spheres
  • The Criminal Procedure Act, 1977 (CPA), which provides for procedures relating to all crimes, including domestic bribery
  • The Companies Act, 2008 (Companies Act), which seeks to provide protection for whistleblowers and to stop corrupt activities within companies through the practice of good corporate governance
  • Various international agreements and conventions to which South Africa is a party, which oblige South Africa to address corruption and bribery in the public and private spheres

1.2       Definition of bribery

The concept of bribery in South Africa is referred to as “corruption” and is a crime that may be committed by both public officials and private individuals, as well as both public and private entities.

The PCCAA provides for a general offense of corruption, which is very broadly defined, as well as specific offenses in respect of corrupt activities relating to a range of specific persons and specific matters. We do not intend to be labour this article with the provisions relating to specified corrupt activities and will deal mainly with the general offense of corruption.

In general, a person will commit corruption if he or she directly or indirectly accepts or offers to accept gratification from another person, or gives or agrees to give gratification to any other person for his or her benefit, or that of another, and such giving or receipt is done in order to induce the other party to act in an improper manner, in the performance of that individual’s duties.

Gratification is also broadly defined and includes, but is not limited to, money, loans, donations and gifts, employment, avoidance of loss or liability and any other valuable consideration, or benefit of any kind.

The PCCAA has extraterritorial jurisdiction in certain circumstances. Even if the act alleged to constitute an offense was committed outside of South Africa, South African courts will have jurisdiction if the person to be charged:

  • is a citizen of South Africa;
  • is ordinarily resident in South Africa;
  • was arrested in the territory of South Africa;
  • is a company incorporated or registered as such in South Africa; or
  • is any body of persons, corporate or unincorporated in South Africa.

1.3       Definition of public official

The position of public official in South Africa is referred to as a “public officer” and is defined in terms of the PCCAA as any person who is a member, an officer, an employee or a servant of a public body, and includes any person in the public service, any person receiving remuneration from public funds, or where a public body is a corporation, the person who is incorporated as such. This definition explicitly excludes members of the legislative and prosecuting authorities, as well as judicial officers.

1.4       Consequences of bribery

(a) For the individuals involved

The penalty provisions in the PCCAA differentiate between certain categories of offenses. The penalties in relation to the majority of the offenses (including the general offense of corruption) are the following:

  • In the case of a sentence to be imposed by a High Court, a fine or imprisonment up to a period of imprisonment for life
  • In the case of a sentence to be imposed by a regional court, a fine or imprisonment up to a period not exceeding 18 years
  • In the case of a sentence to be imposed by a magistrate’s court, a fine or imprisonment up to a period not exceeding five years

Other categories of offenses in terms of the PCCAA, such as the concealment of the offense of corruption and being an accessory to or after the offense of corruption, carry lesser penalties, namely:

  • In the case of a sentence to be imposed by a High Court or regional court, a fine or imprisonment up to a period not exceeding 10 years
  • In the case of a sentence to be imposed by a magistrate’s court, a fine or imprisonment up to a period not exceeding three years

In addition to any fine a court may impose, as abovementioned, the court may further impose a fine equal to five times the value of the gratification involved in the offense.

Furthermore, the PCCAA provides for a register of entities and individuals convicted of acts of corruption relating to contracts and the procurement and withdrawal of tenders, with the consequence being that the national treasury may terminate any agreement and prevent such persons from doing business with the government for 10 years.
The national treasury may also recover from the person or enterprise any damages incurred or sustained by the state as a result of the tender process or the conclusion of the agreement, or that the state may suffer by having to make less favourable arrangements afterwards.

Lastly, the proceeds of and assets instrumental in the commission of the offense of corruption may be confiscated and/or forfeited in terms of the POCA. Generally, the value of assets may be used to compensate victims of the crime involved, or forfeited to the state.
Any person convicted of offences related to the proceeds of unlawful activities will be liable for a fine not exceeding ZAR 100 million or imprisonment not exceeding 30 years.

(b) For the company/legal entity

Both the general offense of corruption and the penalties previously identified apply equally to a company / legal entity that commits the crime of corruption.

(c) For the public official involved

The PFMA and MFMA provide for measures to deal with financial mismanagement (which may constitute corruption) in the context of procurement in the public sector. Any spending by political officials that falls outside of the regulatory framework, and which results in allegations of financial mismanagement, will lead to an investigation and a subsequent disciplinary hearing in accordance with the prescribed procedures. Furthermore, the codes of conduct for public officials, as provided for in various statutes such as the Public Service Act, 1994 and the Executive Members’ Ethics Act, 1998, regulate the management of gifts and hospitality.

Regulations published under the Local Government: Municipal Systems Act, 2000, further seek to curb corruption in municipalities by banning a person dismissed for financial and related misconduct from being employed as a senior manager in any municipality for up to 10 years.

Most of the penalties for violations of the abovementioned legislative framework apply to employees of the public service and include termination of employment, criminal charges, and publication of the identity of the person and details of the contravention.

1.5       Political contributions

Public funding by the state to political parties represented in Parliament and in the provincial legislatures is regulated by the Public Funding of Represented Political Parties Act, 1997. This legislation also makes the accounting officers of political parties, in certain circumstances, liable to repay the Electoral Commission any money irregularly spent.

By contrast, private funding of political parties is almost entirely unregulated and disclosure is discretionary. Public opinion and recent case law on this issue is divided.

1.6       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

In general terms, South African law does not prescribe any limitation on hospitality expenses; however, whether or not a hospitality expense is appropriate will depend on the reasons for the gift or entertainment and the level of employment of the government official to whom it is offered.

Accordingly, public officials must ensure that they do not compromise the credibility or integrity of the supply chain management system. Public officials must not use their official positions to obtain gifts or benefits for themselves during the performance of their official duties, or accept any gifts or benefits when offered.

However, senior government employees may accept gifts that are offered as part of a formal exchange of gifts, or if the gifts are unsolicited or constitute a moderate act of hospitality, and they are satisfied that they will not, in any way, be compromised by such acceptance. Senior government employees, however, are required to disclose the following:

  • Gifts and acts of hospitality from a source other than a family member with a value exceeding ZAR 350
  • Gifts from a single source that cumulatively exceed the value of ZAR 350 in a 12-month period
  • Hospitality intended as a gift in kind

2. Domestic bribery (private to private)

2.1       Legal framework

Private bribery is regulated by the PCCAA.

2.2       Definition of private bribery

Private bribery falls within the ambit of the general offense of corruption, as earlier set out

2.3       Consequences of private bribery

The consequences of private bribery for the individual and/or for the company / legal entity committing the crime of corruption are as earlier set out. Please see Section 1.4.

2.4       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

In general terms, South African law does not prescribe any limitation on hospitality expenses; however, whether or not a hospitality expense is appropriate will depend on the reasons for the gift or entertainment, and if the purpose of the hospitality expense was to induce the other party to act in an unauthorized manner. Accordingly, hospitality expenses in the private sector are not unlawful, per se, provided that the expenses are not given as a form of gratification for an unauthorized or improper inducement to do, or not to do, anything. In practice, most companies have their own internal hospitality expenses policy, which regulates the acceptance and offering of gifts.

3. Corruption of foreign public officials

3.1       Legal framework

Corruption of foreign public officials is regulated by the PCCAA. In addition, the Companies Act regulates dealings with foreign officials through a social and ethics committee. Finally, certain foreign legislation has extraterritorial jurisdiction and can therefore be imposed on activities in South Africa that deal with foreign public officials.

3.2       Definition of corruption of foreign public officials

While corruption of foreign public officials falls within the ambit of the general offense of corruption, as earlier explained, the PCCAA also provides for specific offenses in respect of corrupt activities relating to foreign public officials.

Generally speaking, these provisions make it an offense for any person to directly or indirectly give or agree or offer to give any gratification to a foreign public official, whether for the benefit of that foreign public official or for the benefit of another person, in order to act, personally or by influencing another person to act, in an improper or unauthorized manner.

In this context, “to act” specifically includes using a foreign public official’s or such other person’s position to influence any acts or decisions of the foreign state or the public international organization concerned, or obtaining or retaining a contract, business or an advantage in the conduct of business of that foreign state or public international organization.

3.3       Definition of foreign public official

For purposes of this crime, a foreign public official means:

  • any person holding a legislative, administrative or judicial office of a foreign state;
  • any person performing public functions for a foreign state, including any person employed by a board, commission, corporation or other body or authority that performs a function on behalf of the foreign state; or
  • an official or agent of a public international organization.

3.4       Consequences of corruption of foreign public officials

The consequences of corruption of foreign public officials for individuals and/or for the company / legal entity involved are as set out in Section 1.4.

3.5       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

In general terms, South African law does not prescribe any limitation on hospitality expenses; however, whether or not a hospitality expense is appropriate will depend on the reasons for the gift or entertainment and the level of employment of the government official to whom it is offered.

4. Facilitation payments

Facilitation payments (i.e., a financial payment to a public official made with the intention of expediting an administrative process) are not excluded from the ambit of the PCCAA. Accordingly, such payments would fall squarely within the definition of an unauthorized gratification, and as such, could amount to corruption.

5. Compliance programs

5.1       Value of a compliance program to mitigate/eliminate the criminal liability of legal entities

As a general proposition, South African legal entities may be held vicariously liable in terms of the CPA for the crimes committed by directors or servants, acting within the scope of their employment or authority, or while furthering the interests of the corporate body.

Furthermore, South African case law has held that knowledge of the acts of omissions by the corporation or its members is not a relevant consideration when determining criminal liability.

South African law does not specifically recognize compliance programs and as such, does not officially stipulate how such programs may mitigate liability.

However, the South African government has introduced requirements for certain companies (such as state-owned and public companies) to adopt the international recommendations on combating bribery, bribe solicitation and extortion, as contained in the Organisation for Economic Co-operation and Development guidelines for multinational enterprises. These requirements are contained in the Companies Act and, inter alia, provide for the establishment of a Social and Ethics Committee. A Social and Ethics Committee must be established by the following:

  • Every state-owned company
  • Every listed public company
  • Any other company that has, in any two of the previous five years, had a public interest score of at least 500 points

The public interest score of a company is calculated at the end of each financial year as the sum of the following:

  • The number of points equal to the average number of employees of the company during the last financial year
  • 1 point for every ZAR 1 million (or portion thereof) in third- party liability of the company, at the financial year end
  • 1 point for every ZAR 1 million (or portion thereof) in turnover during the financial year
  • 1 point for every individual (natural person) who, at the end of the financial year, is known by the company to directly or indirectly have a beneficial interest in any of the company’s issued securities

The Social and Ethics Committee is tasked with a number of monitoring activities, including monitoring the company’s activities in relation to good corporate citizenship, which includes the company’s measures to address corruption.

While the implementation of a compliance program may not necessarily absolve a legal entity of vicarious liability, it may be considered mitigating if the company is able to show that it has taken all reasonable steps to prevent the commission of corruption.

5.2       Absence of a compliance program as a crime

South African law does not recognize the absence of a compliance program as a crime.

5.3       Elements of a compliance program

(a) Legal framework

South African law does not specifically recognize or regulate compliance programs.

(b) Recommended practice

It is recommended practice that companies establish a Social and Ethics Committee to initiate, monitor and implement a robust compliance program as a strategy to mitigate liability for crimes of corruption.

6. Regulator with jurisdiction to prosecute corruption

The primary law enforcement body in South Africa is the South African Police Services (SAPS), which is the first port of call for any person wanting to report a suspected act of corruption and open a criminal case. Within the SAPS is the Directorate for Priority Crime Investigations (colloquially known as the Hawks).

The National Prosecuting Authority (NPA), which is South Africa’s centralized prosecuting authority, has the power to initiate criminal proceedings on behalf of the state. Within the NPA are the Specialized Commercial Crimes Unit, which has specialized commercial crime prosecutors and courts, and the Asset Forfeiture Unit, which recovers the proceeds of organized crime.

Other bodies utilized in investigating and prosecuting corruption are the following:

  • The Public Protector, which accepts complaints of corruption that involve government departments, agencies or officials who violate their ethical codes or codes of conduct, as long as it is not a criminal case
  • Auditor General, which audits all government departments and state institutions to oversee whether funds are being used for a proper purpose
  • The Public Service Commission, which accepts complaints from individuals regarding maladministration, dishonesty, improper behaviour or financial misconduct by government employees
  • The Magistrates’ Commission, which investigates complaints of corruption involving magistrates
  • The Judicial Service Commission, which receives and investigates complaints of corruption involving judges
  • The Independent Police Investigative Directorate, which investigates complaints of misconduct, including corruption, involving the SAPS and metro police services
  • The Special Investigating Unit, which investigates corruption and maladministration in government
  • The Multi-Agency Working Group, which was set up by the Minister of Finance to coordinate and investigate corruption related to supply chain management practices
  • The Anti-Corruption Task Team, which fast tracks high priority corruption investigations and prosecutions and co- ordinates all government anti-corruption agencies and initiatives
  • he Special Anti-Corruption Unit in the Department of Public Service and Administration, which focuses on the investigation and prosecution of disciplinary cases against senior public servants involved in corruption

Baker McKenzie Johannesburg
1 Commerce Square
39 Rivonia Road, Sandhurst
Sandton.2196, South Africa

Darryl Bernstein

Darryl Bernstein is a partner in the dispute resolution department in Johannesburg. He has advised corporate clients, both locally and abroad, across a broad spectrum of commercial interests and ventures. In addition to advising clients though complex local and international disputes, including litigation and arbitration proceedings, Darryl advises clients on a range of transactions. His practice areas are extensive within the commercial litigation sphere and include, among others, aviation, banking, insurance, construction and engineering, mining and resources, information technology, labour law and insolvency.

darryl.bernstein@bakermckenzie.com

Tel: +27 11 911 4367

Baker McKenzie Johannesburg
1 Commerce Square
39 Rivonia Road, Sandhurst
Sandton.2196, South Africa

Nikita Shaw

Nikita Shaw is a senior associate in the employment department in Johannesburg, and she focuses her practice primarily in the corporate and commercial area. Nikita has extensive experience in anti- corruption and compliance issues in the employment context and routinely advises multinational clients on compliance and risk mitigation measures in the workplace.

nikita.shaw@bakermckenzie.com

Tel: +27 11 911 4376