Tightening the vice on bribery and corruption

Bribery between the public and private sectors is a given, and has been happening in countries across the globe for hundreds and hundreds of years

July 19, 2010

By Jayen Vyravene, CEO of Quency

Bribery between the public and private sectors is a given, and has been happening in countries across the globe for hundreds and hundreds of years.

The prevalence of bribery comes as a direct result of peoples’ desire to make money, gain business and up profits quickly in a competitive environment. Bribery tends to be an extension of the ‘get the business at any cost mentality’ especially when it comes to private sector bribing public sector for tenders on big projects. This is exacerbated by the typically lower salaries of public sectors workers, who then see bribes as a quick way of making additional income.

While this practice has also been illegal in many countries for many years, laws against bribery have proven to be very difficult to enforce for a number of reasons. One of these reasons is that establishing sufficient evidence is extremely difficult, so convicting anyone of bribery seems to be all but impossible as there is usually no ‘paper trail’ of these ‘transactions’. But by far the main reason why bribery has historically been so difficult to control is because it has become imbedded in the business culture of a number of countries, South Africa included.

As with most developing nations, South Africa struggles with bribery, because this has become part of the culture of the country, and almost seems to be an acceptable way of doing business. However this culture of bribery can be damaging not only to individual organisations but to the economy as a whole, and with the global crackdown on the practice, it can also affect international business dealings.

One of the damaging effects of bribery on organisations and the economy as a whole is a dramatic decrease in the levels of innovation. With business practices centred on bribery and the job going to the organisation that provides the most attractive bribe, there is no need to come up with innovative solutions to problems and issues. This in turn can lead to a stagnating economy where there is no development and nothing new being produced. Stagnant economies eventually begin to decay, leading to a decline in productivity and at the end of the day, profits.

Aside from the damage to individual company and country economies, bribery may also lead to a loss of business, especially for multinational organisations and those companies that do business overseas. This is because of an international crackdown on bribery, with the laws to govern this making bribery illegal not only in these countries but also for any organisation that does business in or with that country.

The United States (U.S) is ahead of this curve, with the Foreign Corrupt Practices Act (FCPA) being introduced as early as 1977 to address accounting transparency requirements and the bribery of foreign officials. Since the introduction of this law, it has become so effectively enforced that many U.S. companies now automatically conduct an assessment of any new foreign business partner to ensure that they do not have any history of corruption.

This is important for any South African company that wishes to do business within the US, as if anything flags on this assessment the international company will refuse to do business at all.

More recently the United Kingdom (U.K.) has introduced the Bribery Act 2010, which came into effect in November of 2009, making four aspects of bribery legally enforceable offences. These offences include offering or paying a bribe; requesting or receiving a bribe; bribing a foreign public official; and for corporates, failing to prevent bribery from being undertaken on behalf of the organisation. This fourth aspect is of particular interest, as it holds the entire organisation responsible for preventing bribery from happening in the first place, and means that any U.K. company doing business with South Africa will be very careful going forward.

While neither of these laws are legally enforceable in South Africa, they and others like them including the European Union regulations will govern any local company doing business internationally, and also should serve as best practices for tightening up internal procedures. Added to this, the Companies Act which is coming into effect in South Africa this year makes some provisions for the enforcement of anti-bribery legislation on some levels within organisation.

Corporate governance, ethics and better business practice is the future, not only internationally but within South Africa as well. While anti-bribery laws are not well enforced locally, international business dealings dictate that companies wishing to do business in other countries need to have stricter controls.  It is also only a matter of time before anti-bribery legislation is introduced in South Africa. So companies that adopt these best practices now will set themselves up well for the future, as well as enable them to harness international business opportunity.