White collar crime wave: Three in four SAs have experienced fraud, theft, bribery, corruption – PWC
It's no secret that South Africans experience a lot of bribery and corruption, but we often associate these crimes with government – money greasing an application at Home Affairs or tender irregularities. However, the reality is that a lot of the fraud, theft, and bribery that happens in the country happens at businesses. According to PWC, almost 70% of South Africans experience some type of economic crime, and a lot of that crime is at the business level. Yet businesses are often reluctant to pursue legal remedies for these crimes, leaving criminals unpunished. Listening to this interview, it seems clear that, if SA is to free itself of the scourge of bribery and corruption, businesses must start taking such crimes seriously and seeking to punish perpetrators to the fullest extent of the law. – FD
ALEC HOGG: According to PWC 69 percent of South Africans have experience economic crime at some point: that's nine percent higher now, than it was just two years ago. Joining us for more insights is Colum Tonge who is a Partner at PWC. I was in Cape Town as I said a little earlier, yesterday. I had a fantastic conference, amongst whom was Professor Antony Butler from UCT. He's the Political Science Head, and he was talking about the political world, seemingly existent for the first time in ages, to address economic crime or crime further down the ranks – we'll talk about the topic later – but further down the ranks. Are you seeing this happening now that the public service is starting to say 'we can't let this continue'?
COLUM TONGE: Well Alec, I think the first thing we should say is economic crime isn't simply a public sector problem. It's a big private sector problem as well. I think the comment is fair. We are seeing some appetites, commitment, and some positive signs from government to address this. Our survey shows an increase in South African economic crime for the first time since we started this. There are some worrying signs in South Africa in terms of the seniority of people reporting it, in terms of the race, and increase in bribery and corruption, but I think the appetite is there. The people are aware that it is everybody's responsibility; not just government's or the public sector's but all of ours.
ALEC HOGG: What do you define as economic crime?
COLUM TONGE: Anything which affects a business due to fraud, misrepresentation, and dishonesty etcetera… It's quite a broad definition: misappropriation of assets, bribery corruption, and human resources fraud, procurement fraud right down to intellectual property theft, mortgage bond fraud, and competition infringements. It's quite a broad definition.
GUGULETHU MFUPHI: You've evidently seen a pickup in this as Alec stated, from two years ago. Has it sparked up more in different sectors now?
COLUM TONGE: The sectors where it's most prevalent are the same and in terms of bribery and corruption, we're talking about construction, which I think is obvious in the South African context and energy and mining. The risk across the board in public sector is also very high. What we need to remember is we came from a very high base in South Africa in terms of…we were at 82 percent when the survey started in terms of people who had experienced economic crime. We're at 69 now, which is a reduction since inception in 2003, but it's an increase since 2011, when we were at 60 percent. We're still very high in a global context, but there are other places like Australia, which are also quite high in the reporting rate of incidents, and they are more developed markets…or perceived to be more developed than we are.
ALEC HOGG: Colum, I'm a survey of one, but in the business that I ran – a public company, listed on the stock market – I had three incidences of economic crime. In all three cases, the people concerned got away scott-free. The first…the directors decided not to challenge them. With the other two, the companies on the other end of the scale decided not to press charges. It doesn't surprise me that economic crime is rising if people aren't actually brought to account.
COLUM TONGE: It's unfortunate Alec, when people don't see their complaints through. In South Africa, law enforcement is very involved in the sense that we're one of the highest reporters of crime to law enforcement in the world – up at 80 percent. Unfortunately, experience shows us that not all of those cases go through the justice system, which has been overloaded from time to time. There have been some good developments in the commercial crime courts etcetera. I hear what you're saying. You need to have quite a strong appetite to see it through, but we also take a lot of civil action to resolve things in South Africa. We're not shy to look for a resolution to try to recover our funds.
ALEC HOGG: So if a guy steals money from you and as long as he pays it back its okay…that's civil action. Surely, that is not a disincentive to not steal next time.
COLUM TONGE: Well, first of all it's not okay if he stole the money. Regardless of whether he pays it back, a crime has been committed and he should be prosecuted for that. If he makes reparation, then that might impact the sentencing aspect, but a crime has still been committed and should be prosecuted to the full… I think that refers to the question you asked earlier about the commitment to stamp this out. A zero tolerance approach is the only one that can be effective.
ALEC HOGG: But businesses are not doing it.
COLUM TONGE: Businesses are quite active in terms of various organisations. Business against Crime springs to mind. There have been some good initiatives over the years to help. Obviously, the problem doesn't go away. The subtitle of this survey is 'the changing face of economic crime and how we confront it', so it's an evolving threat. It won't disappear tomorrow morning, and we all have to remain vigilant and do what we can to minimise it.
ALEC HOGG: Those are great words, and it's getting back to 'businesses aren't doing anything about it'. Businesses are expedient in this regard. They are making deals on the side 'pay the money back and we won't press charges, because if we press charges it's going to take five years to get to court anyway'. Those are the issues. Surely, from all the work you've done here and in other parts of the world – PWC… How do we start grabbing this thing properly and start addressing it in a way that will make a difference?
COLUM TONGE: Well first of all, 'repay the money and it will go no further' is not consistent with good corporate governance and a zero tolerance approach.
ALEC HOGG: Sure, but what happens to those boards of directors who do that? They are applauded by their shareholders.
COLUM TONGE: We would not encourage that and certainly, the guidance – such as King 3 – would not encourage that behaviour.
ALEC HOGG: So what do you do, as a shareholder of a company that does that?
COLUM TONGE: Well, shareholders have a voice. They can vote and they can influence how decisions are made. It's not advisable and we certainly wouldn't recommend that anybody let any form of economic crime go. It must be dealt with and it must be seen to be dealt with. This should be communicated throughout the organisation. That's part of a good fraud-risk management program. Complaints for example, through whistleblowing lines, are seen to be dealt with even-handedly, fairly and thoroughly, and there's a resolution that everyone is aware of. Whether the person is guilty or not, is actually not the issue as long as the process is followed, is fair, and gives everybody an opportunity.
GUGULETHU MFUPHI: What about professionals like yourself, who deal with forensic investigations like these: aren't you concerned about your safety?
COLUM TONGE: Well, that's an interesting question. We're fortunate that we are experienced in this level of crime, and if you work for an organisation like PWC, it's not a one-man show. We have machinery behind investigations where many people are involved, where documents are shared and backed up. I don't think…certainly, I'm not concerned on a day-to-day basis about safety and security. There have been incidents in other countries.
ALEC HOGG: Well, Lawrence Moepi, one of your counterparts at SNG was murdered…shot dead in the parking lot of that firm. If I were in your line of business, I'd have at least two bodyguards.
COLUM TONGE: In fact, Lawrence Moepi was a former partner at our firm, so I knew him quite well, but I don't think it would be fair to comment on that particular incident at the moment because I know there are proceedings, court cases, and things that are still going to happen. We'll hear the full story in court.
ALEC HOGG: Yes, but Gugu's question is, aren't you nervous given that that could happen to one of your counterparts?
COLUM TONGE: I've worked in this business for 17 years in South Africa: ten as a partner at PWC, and fortunately not had incidents of that nature. That's not to say that we don't take precautions on occasion or that there haven't been incidents involving witnesses and cases over those years but fortunately, nothing serious to this point. I think it is our responsibility to take precautions where they are necessary but hopefully, the law will prevail.
ALEC HOGG: Has anyone been arrested in the Lawrence Moepi matter?
COLUM TONGE: My understanding from the media is that there has been an arrest and there's a reward out for a second suspect. The suspect who's been arrested is on bail and we'll hear more about that in due course.