South African lessons from UK Bribery Act

February 1st, 2013

By Nomfundo Manyathi

In a Gordon Institute of Business Science seminar titled: ‘Drawing local lessons from the UK’s Bribery Act’, local and international experts discussed the impact of the United Kingdom (UK) Bribery Act 2010 (c 23) (the Act) on business and civil society.

One of the aims of the seminar was to interpret the Act and question whether South African legislators should look at replicating aspects of it in an attempt to tackle corruption.

Speakers at the seminar were criminal law adviser at the UK Justice Ministry, Roderick Macauley; chief executive officer of the Ethics Institute of South Africa, Professor Deon Rossouw; executive director of anti-corruption watchdog Corruption Watch, David Lewis; executive director of the Open Democracy Advice Centre, Alison Tilley; and Matthew Woodford, a partner at UK-based law firm Browne Jacobson.

Mr Macauley defined ‘bribery’ as ‘an inducement for someone to perform a function or an activity such as activities associated with an official function, as well as economic functions dealing with businesses’.

Mr Macauley said that bribery was bad for business and that it was ‘an ongoing, market-distorting, incredibly expensive, world-spanning drain on legitimate businesses’. He said that the main focus of the Act is commercial bribery and it encourages private sectors to establish bribery-prevention policies as part of corporate good governance.

Mr Macauley said that the Act, which came into effect in July 2011, was an important piece of legislation, adding that bribery was becoming endemic. He said that bribery prevents meaningful business development and destabilises international markets as it damages public health, sanitation and education.

Mr Woodford spoke on how the Act affects the ordinary person; the consequences of non-compliance with the Act; and ‘adequate’ defence procedures. He noted that the Act had extra-territorial application in certain circumstances.

Mr Woodford said that the Act had not been in place for long and there were some areas of uncertainty in respect of its application, interpretation and enforcement. He added that people were taking a ‘wait-and-see approach’ to the Act, which he said was ‘dangerous’ as people should be educating themselves about the legislation and complying with it.

Mr Woodford said that the consequences of non-compliance with the Act included, for companies, unlimited fines, reputational damage and expenses on investigation, which can drain management time and resources.

He said that individuals faced up to ten years’ imprisonment or a fine, while directors and executives could also face disqualification from acting as a director for a specific period.

Mr Woodford said that the only defence for failing to prevent bribery is to show adequate preventative measures were put in place. He added that the UK government had introduced six guiding principles in s 7 of the Act that offer help in structuring anti-bribery policies.

These are –

  • top-level commitment;
  • risk assessment;
  • due diligence;
  • communication; and
  • monitoring and review.

He said that companies should ensure that they have adequate procedures in place and that they maintain detailed records of their policy implementation and application in the event of legal action.

Mr Rossouw spoke about the application of the Act to South Africa. He said that anti-bribery efforts in the country needed to be embedded in an ethical culture in order to have an effective anti-bribery programme.

He said that aspects of the Act were not new to South Africa as they were found in the Prevention and Combating of Corrupt Activities Act 12 of 2004; the Companies Act 71 of 2008 and the King III Report on Corporate Governance.

‘What I really like about the UK Bribery Act is that the consolidation of all of this has been drawn together and it is presented in an understandable way,’ he said.

Mr Rossouw said that the law was good at dealing with irresponsible behaviour but was not as good at promoting responsible behaviour.

Speaking on the role of business in combating corruption, Mr Lewis said that South Africa had a strong legislative framework to combat bribery and corruption but that it had not achieved what it had set out to achieve.

He outlined some of the applicable legislation, including:

  • The Constitution, which he said laid down the principles regarding procurement. ‘It requires public procurement to be fair, equitable, transparent, cost effective and competitive,’ he said.
  • The Public Finance Management Act 1 of 1999 and the Municipal Finance Management Act 56 of 2003, which aim to ensure transparency and accountability in the financial management of state entities.
  • The Promotion of Administrative Justice Act 3 of 2000, which aims to promote good governance, openness, transparency and accountability in the exercise of public power.

Mr Lewis said that legislation directed at combating corruption in South Africa included:

  • The Prevention and Combating of Corrupt Activities Act. He said that this Act requires people in positions of authority to report corruption over R 100 000, adding that failure to report this is an offence. Mr Lewis said that the Act also creates a register for tender defaulters to prevent them tendering for government contracts.
  • The Companies Act, which Mr Lewis said incorporates anti-corruption measures. He said that reg 43 of the regulations to the Act requires the establishment of social and ethics committees, which are required to perform a wide range of activities, including monitoring the company’s anti-corruption activities.
  • The Financial Intelligence Centre Act 38 of 2001.

Mr Lewis said that other relevant Acts were:

  • The Promotion of Access to Information Act 2 of 2000, which is intended to foster a culture of transparency and accountability in public and private bodies and promote a society where people have access to information in order to protect their rights.
  • The Protected Disclosures Act 26 of 2000, which aims to promote the eradication of criminal and irregular conduct in the workplace; provide statutory guidelines for the disclosure of information; and protect employees from occupational detriment for making a protected disclosure. Mr Lewis said that he believed this was a ‘weak’ piece of legislation in terms of protecting whistle-blowers.

In respect of extra-territoriality, Mr Lewis said that the UK Bribery Act creates a separate offence of bribery of a foreign public official. The Act also criminalises a corporate that fails to prevent bribery by those who perform services on its behalf and states that businesses must have adequate procedures in place to prevent bribery.

He also referred to the United States Foreign Corrupt Practices Act of 1977, which prohibits bribery of a foreign official, requires the maintenance of a system of control over books of account and records, and applies to any corporation that has securities registered under the US Securities Exchange Act of 1934.

Mr Lewis concluded by saying that South Africa had ‘strong laws but weak enforcement’. He added that in respect of the Promotion of Administrative Justice Act, there was disregard for the spirit of the law: ‘It is a strong piece of legislation but the people from who information is being sought do not comply with the Act, which makes implementation difficult.’ He added that weak systems lead to vulnerability to corruption.

Mr Lewis said that, as of 15 November 2012, Corruption Watch had received 2 700 complaints, of which 1 000 were related to corruption. He added that the corruption cases investigated related mostly to corruption in small towns, schools, health care, the criminal justice system, the Johannesburg Metropolitan Police Department and procurement.

Ms Tilley said that South Africa ‘had a long way to go’ in strengthening anti-corruption systems as legislation ‘was not strong enough’. She added that there was much work to be done by civil society, government and businesses.

Ms Tilley concluded by calling on government to implement comprehensive protection for whistle-blowers and the right to access to information in line with the Constitution as, in her opinion, the Protected Disclosures Act was insufficient.

Nomfundo Manyathi,

This article was first published in De Rebus in 2013 (Jan/Feb) DR 10.