How SA companies can fight corruption and transform integrity into competitive advantage

A recent Human Sciences Research Council (HSRC) survey shows that 64% of South Africans believe most or almost all business leaders are corrupt. However, things may be changing. The Ethics Institute reports that companies in South Africa have “improved their overall ethical culture maturity compared to 2019, with a seven-point percentage improvement”.

There are opportunities for the private sector to take a more proactive role in preventing corruption. Ahead of the G20 summit in November, SA will host business leaders from around the world at this year’s B20 Summit in Johannesburg. The B20 Integrity and Compliance Task Force recently released recommendations for greater integrity measures in the private sector in order to reduce corruption. 

New research published by Transparency International proves that anti-corruption measures benefit businesses by promoting sustainable growth, improving profitability and enhancing competitiveness. Companies with anti-corruption compliance programmes generally experience greater commercial success than their counterparts. The research shows that an organisational culture of integrity is linked to more sustainable long-term financial growth and greater stakeholder trust.

Peter Solmssen is a business leader with a track record of cleaning up corruption. He was appointed general counsel at multinational Siemens after one of the world’s biggest ever bribery scandals, in 2008, and tasked with implementing corruption prevention and detection systems at the company.

Having done business with state-owned enterprises all over the world (including Eskom in SA), Solmssen says it makes business sense to fight corruption. 

“I believe that economic incentives can be arranged so that businesses are instrumentalised to fight corruption. I have seen it in my career,” he says.

‘Uncompromising tone from the top’

“New Siemens leadership set an uncompromising tone from the top — only clean business is Siemens business. They invested in improved systems and structures — finance, audit, compliance — and walked the talk. Sales and marketing around the world were given training and support. They stopped paying bribes — and lo and behold the business not only survived, it got better. That gave the sales force confidence in a reinforcing, confirming loop.”

New analysis by the Institute for Security Studies (ISS) and the Anti-Corruption Coalition at the Gordon Institute of Business Science considers ways to shift SA’s private sector towards integrity, making corruption riskier, less profitable and unacceptable.

In the context of widespread systemic corruption, companies in South Africa operate in an environment where competitors frequently win contracts by paying bribes. Directors probably expect others to engage in unethical behaviour — and this may influence their decision making. Under these circumstances, many SA companies are unlikely to choose integrity. 

Initiatives are needed to change the behaviour of the group or sector as a whole. ISS and the Anti-Corruption Coalition outline a proven international approach for businesses to reduce corruption risk in their industry: anti-corruption collective action. Solmssen describes this method as a “cartel of the good”. Companies work together using their market power to drive corruption out of their sectors — in their own financial interests. 

This approach is difficult to implement properly and requires intelligent programmatic design — but it has been shown to work. 

The Special Investigating Unit has started several collective action projects in SA, in sectors such as construction and health. However, evidence shows that such efforts are most effective when business takes the lead, providing resources and innovation. The ISS and Anti-Corruption Coalition recommend that business and civil society establish a working group to identify leverage points for the introduction of anti-corruption collective action.

Another way SA’s business sector can reduce corruption is by implementing good faith anti-corruption compliance programmes. These are internal systems that detect corruption and build genuine cultures of integrity in companies.

Recent legal and policy reforms are intended to incentivise corporate integrity. Section 34A of the Prevention and Combating of Corrupt Activities Act holds companies criminally liable for corruption by associated persons but allows a defence for those demonstrating adequate anti-corruption compliance programmes. 

The National Prosecuting Authority’s corporate alternative dispute resolution policy also incentivises the use of anti-corruption compliance programmes. It does so by providing non-trial resolutions for companies that self-report corruption, pay reparations and implement anti-corruption compliance programmes. 

Compliance programmes

More research is needed into which companies in SA use compliance programmes, and why. Organisation for Economic Co-operation and Development research in other countries finds that the two main drivers of the global increase in anti-corruption compliance programmes are enforcement risk and reputational risk. 

Research by the National Business Initiative in SA shows that small, medium and micro enterprises are playing an increasingly important role in the economy — and are disproportionately affected by corruption. Incentivising the use of anti-corruption compliance programmes will be an important part of the country’s journey towards greater business integrity.

For South African businesses, the message is clear: anti-corruption measures are not just ethical imperatives, but strategic business decisions. By leading the search for solutions through anti-corruption collective action, companies can future-proof themselves against the costs of corruption while contributing to a fairer economy. DM

Colette Ashton is a Research Consultant, Justice and Violence Prevention Programme, Institute for Security Studies (ISS); Erin Klazar is a Researcher, Anti-Corruption Coalition, Gordon Institute of Business Science.

First published by ISS Today.