South African corporate governance was once held in high esteem by both local and international investors. The King Codes were cited as proof of our commitment to ethical leadership and the sanctity of good corporate governance. But then the Steinhoff debacle happened, and all bets were suddenly off.

As this, and other corporate scandals illustrate, the King Codes may extol the virtues of ethical leadership by an organisation’s governing body, but codes – and indeed laws – can be easily circumvented by people determined to do so. The issue is that although King IV places huge emphasis on creating an ethical mindset, it is only a voluntary code, and adhering to its principles is basically a matter of choice. Unfortunately for South Africa, an increasing number of public and private sector enterprises are choosing not to follow its guidelines.

As we are seeing, however, failure to do so does not make good business sense, PLUS it also exposes companies to potentially catastrophic risk. Unfortunately, we had to suffer under years of unbelievable corruption before this critical realisation filtered properly into the public consciousness. The cost of getting to where we are now has been staggeringly high.

And so, as we find ourselves at the end of the first decade since the phenomenon of state capture first reared its ugly head in our country, are the painful lessons about the failure of corporate governance, and the lack of ethical leadership, finally starting to sink in?

Falling On Your Sword – Is This The New Corporate Model?

We all know ethical leadership in business is vital. The problem, however, is this: We know ethical behaviour means doing what’s right, but we don’t all agree on what “right” is. You only have to look at the way in which different cultures and religions interpret the “right” treatment of women to gain a small understanding of the issue.

Clearly, there needs to be a broader, more universal standard driving moral and ethical behaviour. And this, despite their massive failings and, occasionally undeniable culpability, is the direction in which many private sector leaders are trying to head. Although not quick to come forward until an inescapable spotlight is thrown onto their questionable carryings on, once exposed, most leaders admitted their mistakes and did the right thing – resigned their positions. At least while investigations into their alleged wrongdoing are ongoing, that is.

Steinhoff CEO Markus Jooste and Tongaat Hulett’s CEO Peter Staude, CFO Murray Munro and Land Conversion And Property MD, Michael Deighton are just a few of the high level private sector management who resigned their positions following the coming to light of the huge accounting fraud allegations against their companies. Even Eskom’s CEO Phakamani Hadebe and SAA’s CEO Vuyani Jarana recently tendered their resignations following months of state capture enquiry pressure.

The private sector, and even some SOEs, are finally paying attention to the desperate need for a new level of social and ethical responsibility. The call must now go out to government to do the same.

Carrying On Regardless – Why Is The Public Sector Not Following The Corporate Example?

Trust. It’s an integral part of a healthy democracy. The very notion of democracy has, at its core, the belief that a small group of people (our government) can ethically and responsibly represent the interests of an entire country. This is why we feel so betrayed when we find out the politicians in whom we’ve placed our trust are doing nothing more than exploiting it for their own private gains.

In 2015, then President Jacob Zuma, apologised for “failing to uphold, honour, respect and protect the Constitution.” Although some reacted to the admission by demanding Zuma be impeached, most applauded him for his admission, and looked forward to a new, honest and transparent era of governance.

We all know how that worked out.

Many of Zuma’s ministers who were, at the time, implicated in a rash of wrongdoings and alleged corrupt behaviour, are now up for positions in President Ramaphosa’s new parliament. They have done the very opposite of honourably falling on their swords – they’ve instead used those same swords to cut a shwashbuckling path into a brand new parliament.

Former North West premier Supra Mahumapelo, accused of awarding millions of Rands’ worth of tenders to the now disgraced Gupta family, is nominated to chair the Tourism Committee.

Bongani Bongo, a former minister of state security facing numerous allegations of bribery and corruption, is nominated to chair the Home Affairs Commmittee. And Tina Joemat-Pettersson, a former minister of energy who allegedly sold strategic fuel reserves without permission, is now being nominated to chair the Police Committee.

These are just a few examples of government officials who seem completely impervious to the serious allegations against them. Instead of taking a valuable leaf out of the private sector’s book, they, and many, many others, seem content to leave one scandal behind them while they take up another position that is equally ripe for the plundering.

Your Comments

What do you think about the issue of the public sector learning lessons from the private sector? Are there indeed lessons to be learned, or are they both as bad as each other? And which is the lesser of the two evils? Leave your comments below.

JGL Forensic Services is a multidisciplinary team of experienced forensic accounting and investigation professionals. We strongly believe in the rule of law and the scientific method as it applies to forensic accounting and investigation. Talk to us in confidence, and let’s work together to prevent corporate corruption and fraud.