South Africa: No Free Lunches

Last Updated: 2 November 2005
Article by Roger Wakefield

The South African law on corruption has its roots in a Dutch plakaat of July 1651 which provided that-

"certain …. dangerous and mischievous persons do to the …. contempt of the Supreme Government … so much embolden themselves, that, should they have anything to request from the said High Government, they do dare to attempt to present to members of [Government] certain gifts or presents, whilst they, on the contrary, should have such esteem for the faithfulness, sincerity, virtue and uprightness of the member of the Government ….. So therefore, we …. Do most expressly interdict and forbid any person, to give or promise … any gift or presents of anything, however small these may be, …"

The 1992 Corruption Act sought to expand the common law crime of bribery (which concerned benefits given to and received by government officials) by including, under the general label "Corruption," any improper payments made to, and accepted by, individuals in the private sector.

The Act was poorly drafted and it was difficult to obtain convictions under it.

The Prevention and Combating of Corrupt Activities Act (12 of 2004) repealed the Corruption Act. In wide and convoluted language, it creates numerous crimes of corruption, including corruption relating to public officers, foreign public officials, contracts (both with private and public bodies), procurement, auditors and sporting events (the so-called Hansie provision) and constitutes one of the most far reaching anti corruption statutes in the world.

On the face of it, the Act prohibits even lunch invitations offered with an improper motive. The penalties for corruption are dire with a maximum penalty of an unlimited fine or life imprisonment.

A great deal has been written about the Act and its provisions, but how does it affect the common corporate practices of hosting existing (and prospective) customers and clients to lavish lunches, weekends at exclusive game lodges and, in some instances, elaborate holidays abroad? When, in other words, does the giving and receiving of such benefits constitute a crime of corruption? The answer lies in the minds of the giver and the receiver of the benefit.

s3 of the Act creates the general offence of corruption and provides that -

"3 Any person who, directly or indirectly –

(a) accepts or agrees or offers to accept any gratification from any other person, whether for the benefit of himself or herself or for the benefit of another person; or

(b) gives or agreed or offers to give any other person any gratification, whether for the benefit of that other person or for the benefit of another person,

in order to act, personally or by influencing another person so to act, in a manner-

(i) that amounts to the-

(aa) illegal, dishonest, unauthorized, incomplete, or biased; or

(bb) misuse or selling of information or material acquired in the course of the

exercise, carrying out or performance of any powers, duties or functions arising out of a constitutional, statutory, contractual or any other legal obligation;

(ii) that amounts to -

(aa) the abuse of a position of authority;

(bb) a breach of trust; or

(cc) the violation of a legal duty or a set of rules;

(iii) designed to achieve an unjustified result; or

(iv) that amounts to any other unauthorised or improper inducement to do or not to do anything,

is guilty of the offence of corruption".

s12 creates the crime of corruption in respect of activities relating to contracts and provides that-

"12(1) Any person who, directly or indirectly –

(a) accepts or agrees or offers to accept any gratification from any other person, whether for the benefit of himself or herself or for the benefit of that other person or of another person; or

(b) gives or agrees or offers to give to any other person any gratification, whether for the benefit of that other person or for the benefit of another person,

(i) in order to improperly influence, in any way -

(aa) the promotion, execution or procurement of any contract with a public body, private organisation, corporate body or any other organisation or institution; or

(bb) the fixing of the price, consideration or other moneys stipulated or otherwise provided for in any such contract; or

(ii) as a reward for acting as contemplated in paragraph (a),

is guilty of the offence of corrupt activities relating to contracts.

Gratification is broadly defined to include any benefit or advantage of any description.

Take the following simple and commonplace example: The Chief Executive Officer of X Co, which is a client of services company Z Co, is sent on a trip (with representatives of Z Co) to watch a World Cup rugby match abroad. Z Co pays all the expenses associated with the trip.

X Co is party to a 10-year services contract with Z Co which expires in a year's time. X Co has an option to renew the contract which can be exercised six months before the expiry date. Assume that the services are supplied in a fiercely competitive market and that in the normal course it is obvious that X Co will shop around for the best priced provider when the contract expires. Has an offence been committed?

The trip is clearly a gratification (it is a wrongful act). The next enquiry is whether the gratification was given in order "to improperly" influence the promotion, execution or procurement of a contract. This is the enquiry into the minds of the parties to determine their culpability – that is, whether they had the requisite guilty state of mind when the gratification was given and received. It is a subjective test based on inferential reasoning which takes into account the parties actions and the surrounding circumstances.

Having regard to the facts in the example, particularly the impending expiry and possible renewal of the contract, can it be said that the gratification was for any purpose other than to influence its renewal? Can this form of influence be anything other than improper?

In my view, both the conduct of X Co's CEO in accepting the trip and the conduct of Z Co in paying for it may well fall foul of s12. If the state fails to gain a conviction in terms of s12, it has the safety net of s3 – the general crime of corruption. By accepting the gratification, the CEO of X Co has placed himself in a position where, in deciding whether or not to renew the contract, his personal interests conflict with X Co's interests.

He is, in other words, placed in conflict with his duty towards his principal. The receiving of the gratification could obviously influence him to act in a biased manner towards Z Co when considering renewal of the contract. In turn, this would amount to an abuse of his position of authority, a breach of trust towards X Co and a breach of his fiduciary duty to X Co.

The situation might very well be different if the gratification was offered and accepted in the third year of a fixed 10-year contract.

The purpose of the example is to highlight the dangers of offering and receiving such benefits in the face of some of the most stringent anti-corruption laws in the world.

It is a canon of good corporate governance to avoid conflicts of interest. In a free market, there is arguably no room for the giving and receiving of lavish gifts. Price and good service should be the sole factors determining the decision to contract with company X or company Y.

There is no reason why a service provider should be preferred over his competitors because of the size of his gifts. This is precisely what the Act seeks to avoid.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions