HOW DOES THE NEW CORRUPTION REPORTING LAW AFFECT YOUR BUSINESS
“In defence of Madiba’s legacy, we will continue to wage a relentless war on corruption…” (President Cyril Ramaphosa)
You may have seen mention of the new amendment to the Prevention and Combatting of Corrupt Activities Act (PRECCA) that imposes significant penalties for failures to report corruption.
If you did see it, you quite possibly thought “Doesn’t apply to me, I’m just a small business”.
Wrong! This act is technical and rather complex for those not familiar with it and the terms used. Get in touch with Goldberg & De Villiers and let them demystify this very important law and its impact on you and your business.
Let’s have a very brief look at who the new law applies to, what it requires of you, the risk you run if you don’t pay it due attention, and how you should manage this new risk.
WHO DOES THIS LAW APPLY TO?
It applies not only to big companies, multinational businesses, and officials in the employ of the State.
It also applies to persons and entities in the private sector, including (without limitation): any partner in a partnership, any person who has been appointed as CEO or an equivalent officer, and any other person who is responsible for the overall management and control of the business of an employer.
In short, it applies to you!
WHAT DOES IT REQUIRE OF YOU?
Simply put, –
- You (any person who holds a position of authority) must report any corrupt activity (which is very widely defined and includes an offer to give), involving an amount of more than R100,000, that such person knows or ought reasonably to have known or suspected has been committed.
- You (any person who holds a position of authority) must report any offence of theft, fraud, extortion, forgery or uttering a forged document, involving an amount of R100,000 or more, that such person knows or ought reasonably to have known or suspected has been committed.
An amendment to PRECCA, in 2023, introduced a new section to the effect that an offence will not be committed where the member of the private sector (or incorporated state-owned entity), had in place adequate procedures designed to prevent persons associated with that entity from giving, agreeing or offering to give any gratification prohibited. It can thus be said to adequately protect yourself and your business, you need to put adequate procedures in place to detect and avoid corrupt activities.
It is important to note that “gratification” / benefit offered or given, is very widely defined, and includes several monetary or non-monetary advantages. The agreement or offer in question must relate to an attempt to either obtain or retain a business advantage of some kind.
PRECCA penalises not just active knowledge of corruption and wrongdoing but introduces the concept of “should have known”.
WHAT PENALTIES APPLY?
In theory, the sky’s the limit here – unlimited fines and life imprisonment! In practice, courts will of course tailor the punishment to fit the crime. The bottom line: there are very clear indications that the authorities mean business, so beware.
HOW SHOULD YOU PROTECT YOURSELF?
The new law pulls no punches. Fortunately, as set out earlier, provision is now made for the defence of having in place adequate procedures designed to prevent corrupt activities, which will allow you to escape liability. There’s no definition of what this might entail, so it’s up to you to use common sense based on your business and circumstances. Local experts suggest that to be safe businesses should follow international best practice, such as the UK’s “Six Principles” – proportionality (procedures tailored to the level of your risk), top-level commitment, risk assessment, due diligence, communication, and monitoring and review.
Need help with drafting a corruption prevention protocol? Call John Lizamore at our offices. Goldberg & de Villiers Inc. 041-5019800.
