Putting the country and companies at risk
Corruption is the number one risk to South Africa, with unemployment in second place, according to the Institute of Risk Management of South Africa’s (IRMSA’s) Risk Report. MARISKA MORRIS learns more
Corruption and unemployment are the top risks for the country, according to the third edition of IRMSA’s Risk Report. Terry Booysen, co-founder and executive director at the Corporate Governance Framework (CGF) Research Institute, notes in the report that a significant portion of the annual procurement budget is lost to corruption.
“While it is very difficult to accurately state how much corruption has cost South Africa, experts seem to think it could be as much as 20 percent of the annual procurement budget, which tallies to approximately R25 billion a year,” he says. This, in turn, affects the government’s ability to deliver services and provide new employment opportunities.
Unemployment in South Africa is at approximately 27 percent. The United States Central Intelligence Agency (CIA) ranks South Africa 27th among countries with the highest unemployment rate. The country outranks Lesotho (28 percent), Swaziland (40 percent) and Zimbabwe (95 percent). Among employed South Africans, 47 percent earn below the proposed minimum wage of R3 500.
“Companies need to instil awareness in the business community of the need to reform and accelerate skills training,” says James Hall, consultant at In On Africa (IOA). He proposes that the private sector can contribute in terms of skills training programmes and learnerships.
Kris Dobie, manager of organisational ethics at Ethics Institute, notes: “Corruption can also cause political instability and weak government institutions, which translates to lack of clear policy direction and weak implementation of policies.”
PricewaterhouseCoopers (PwC) published a report on economic crimes titled: Global Economic Crime Survey. Half its South African respondents believed they were likely to experience bribery and corruption in the next two years, with 15 percent stating they have been asked to pay a bribe. This report notes that South Africa is the country with the highest reported economic crime.
The most common forms of economic crime in South Africa are asset misappropriation (68 percent), procurement fraud (41 percent) and bribery and corruption (37 percent).
Procurement fraud occurs most often during the bidding and payment process. The most common fraud found in the area of human resources is the submission of false qualifications (68 percent).
Dobie suggests that, in the private sector, collective action is needed to address corruption. “Industry partners should join forces against corruption and promote ethical standards,” he says.
The IRMSA suggests that companies remain versatile so they can easily adapt to the challenges of predicting and managing risks such as corruption.
“Flexibility is a key requirement for South Africa – and for organisations operating within its borders – to remain resilient and thrive in an ever-changing context and associated risk landscape,” the IRMSA notes.