The Cost of Corruption in South Africa
Putting an actual figure on the monetary cost of corruption in South Africa isn’t a simple process. This may actually be a blessing, as any accurate calculation is sure to be so eye-wateringly huge it’s beyond average comprehension.
As far back as 2015, an article in respected publication The Daily Maverick estimated that South Africa had lost R700 billion in public money to corruption since the advent of democracy in 1994. But they go on to say, “[This] amount probably stems from a claim that about 20% of a country’s public procurement budgets disappears into back pockets.” This statistic is apparently attributable to Transparency International, but not backed up by research studies.
“Since then, says the Daily Maverick, “it’s been mangled beyond recognition in South Africa.”
We’re now almost a decade down the line and I shudder to think what kinds of figures might now be in the frame.
Of course, as Hennie van Vuuren, research associate at the Institute for Justice and Reconciliation, said at the time the article was written, “Our constant need to define corruption in monetary terms ignores the much more fundamental costs of corruption – carried by individuals in weakened forms of government.”
Naturally, there is always someone in the government who’s happy to put a “it’s not our fault” spin on it.
Last year, the then Trade, Industry and Competition Minister Ebrahim Patel said the South African economy lost as much as R850 billion between early 2020 and the last quarter of 2023, but that the losses could be attributed to “six successive shocks.”
These were: The global pandemic, the worst civil unrest since apartheid in July 2021, the war in Ukraine, severe flooding in KZN in 2022, loadshedding, and logistics constraints.
No mention of why there was so much loadshedding, or civil unrest, or logistics constraints. But that is perhaps an article for another day…
In the meantime, whatever lens you look through, corruption is costing our country dearly.
One of the most painful of the many thorns in our side is our ongoing greylisting by the Financial Action Task Force (FATF).
South African Reserve Bank Governor, Lesetja Kganyago, said, “Although we are working hard to exit the grey list, the effects of being greylisted are being felt as foreign counterparties apply greater scrutiny to our domestic institutions.”
Economics Professor Jannie Rossouw from the Wits Business School adds, “Being greylisted means South Africa is a less attractive investment destination. [This] results in the country needing to give better returns and paying higher interest on foreign investment.”
FATF identified 22 action items that South Africa needs to address to improve our anti-money laundering initiatives and combat the financing of terrorism regime. At the last review in June this year, only 8 of these had been satisfactorily addressed.
It’s a start, but not, one has to admit, an overly encouraging one. A recent risk assessment by the Financial Intelligence Centre showed that South Africa is still considered a hub for financial flows between terror suspects and groups.
I think it’s safe to assume that the government isn’t going to remedy this on its own. Once again, the private sector is going to have to roll up its sleeves and help.
In recent article for Moneyweb, CEO of Business Leadership South Africa, Busi Mavuso, writes, “Business is strongly committed to the rule of law – it is critical to a business environment that supports growth. That is why we support the criminal justice system through initiatives like Business Against Crime and our memorandum of understanding with the National Prosecuting Authority that enables us to fund technical expertise to support the NPA in building its cases.”
She then goes on to speak of her immense frustration at the ongoing struggle experienced by the NPA to gain access to evidence collected during the Zondo Commission.
“The Department of Justice, under Minister Ronald Lamola, has not provided full and complete access to the database,” she laments. “The department has cited ‘administrative problems’ in providing access, but this issue has been dragging on for years. Naturally, questions are increasingly being asked whether the problem is in fact a lack of will on the side of the department and whether it is frustrating the NPA on purpose.”
Former senior political reporter and political analyst, Ndaedzo Nethonzhe, believes that “the NPA lacks lawyers that have experience in forensic and financial crimes. Because they [don’t] have enough staff, they need to outsource services. This poses a risk because these are independent lawyers that may have, in some instances, been representing the other side, meaning people who have been accused. Because when you are in the NPA, your interests are not questioned.”
Legal commentator, Nthabiseng Dubazana, of Dubazana Attorneys, agrees, believing that before hiring private attorneys, the NPA has a duty to make sure there would be no conflict of interest.
“If the attorney has represented the accused before in his private capacity, there could be lack of objectivity and bias, and such person can be corrupted,” she said.
She also pointed out, however, that hiring a private attorney to represent the NPA at least shows the NPA is not waiting for budgets to be approved is choosing to be pro-active.
As Ndaedzo Nethonzhe adds, if the NPA were to perform its duties without help from the private sector, it would take an enormous budget from the Department of Justice, and this is something that is simply not possible at the moment.
All of which begs the eternal question: What should we (and by that I mean both the government and the private sector C-suite) be doing to improve accountability and promote transparency?
An encouraging step is the fact that South Africa is starting to move towards using non-trial resolutions (NTRs) to resolve multijurisdictional corruption cases. These are a type of public-private cooperation, and have been prescribed by the UN Convention Against Corruption to improve the effectiveness of anti-corruption enforcement.
They have already been used globally – in countries such as Brazil, the UK, Canada, France, Germany, Kenya, Malaysia and the Netherlands – to great effect, helping to resolve corruption cases more transparently and with greater accountability.
Here in South Africa, the wheels are turning a little more slowly, but a statement on the NPA’s website hints that “the Department of Justice and Constitutional Development is in the process of developing [the appropriate] legislation.”
To me, it all smacks a little too much of the red tape and bureaucratic feet dragging with which we are far too familiar in this country. We need action, not more meetings, negotiations and long decision-making processes.
If we are to remove ourselves from the FATF’s grey list before irrevocable damage is done, we need to strengthen the hand of prosecutors, incentivise public-private cooperation, and work together to create conditions for a thriving economy in which companies uphold better standards of corporate governance.