South Africa: Fighting Corruption: The Duty To Report

Last Updated: 16 December 2010
Article by Dave Loxton

Corruption is a crime that is not unique to South Africa, but is endemic around the globe. In many instances, white collar crime syndicates have infiltrated companies and defrauded them of millions. The recent economic crisis has no doubt exacerbated the situation and placed financial pressure on many individuals to maintain lifestyles built on credit and ill considered borrowing. These are some of reasons for the increase in corruption the world is faced with today.

South Africa is to be commended for introducing the Prevention and Combating of Corrupt Activities Act No 12 of 2004 ("PACCA"). PACCA, which came into force on 27 April 2004, is the legislature's attempt to combat corruption in South Africa.

In terms of PACCA, a person or body is guilty of the offence of corruption where the offer or acceptance of a "gratification" is for the "unauthorised or improper inducement to do or not to do anything". Apart from this general offence of corruption, PACCA goes further and sets out offences of corruption relating to specific persons (these include public officers, public officials, members of the legislative authority, judicial officers, etc). PACCA also sets out further offences of corruption relating to, inter alia, witnesses and evidential material during certain proceedings, contracts, tenders, auctions, sporting events, etc. Furthermore, the definition of gratification is extremely broad and does not only refer to monetary gain, but includes bonuses, avoidance of a loss or other disadvantage, loans, gifts, donations, contracts of employment or any status, honour, right, privilege, etc.

The duty to report corrupt activities

PACCA, while clearly broadening the definition of corruption in South Africa, has also planted the seed for both the public and private sector to get involved in the fight against corruption. Historically, to protect their reputation and shareholder value, many organisations that found their employees to be involved in corrupt activities opted to persuade such employees to resign rather than to pursue disciplinary enquiries which would bring about undesirable publicity associated with having employees, especially senior employees, of such organisations being found guilty of corrupt activities. Therefore, there was clearly a need for the legislature to address this issue of organisations "sweeping such matters under the carpet" to avoid bad publicity. Section 34 of PACCA is the legislature's attempt to eradicate this issue.

Section 34 places a duty on certain individuals to report corrupt activities to any police official. This duty arises when the relevant individual knows or should reasonably have known, or suspects that a person has committed an offence of corruption, involving R100 000 or more. Failure to report is a criminal offence and carries a penalty of the imposition of a fine or imprisonment of up to 10 years.

This duty is placed on individuals who hold "positions of authority". PACCA sets out a comprehensive list of persons who hold positions of authority. These include:

  • the Director-General or equivalent officer of a national or provincial department
  • a municipal manager of a municipality
  • any public officer in the senior management service of a public body
  • any head, rector or principal of a tertiary institution
  • the manager, company secretary or a director of a company
  • a member of a close corporation
  • the executive manager of any bank or other financial institution
  • any partner in a partnership
  • chief executive officers
  • any other person who is responsible for the overall management and control of the business of an employer

It should be noted that any person who has been appointed to the aforementioned positions in acting or temporary capacities are also regarded as persons who hold positions of authority.

Section 34: a rose or a thorn?

At a cursory glance, Section 34 appears to place an onerous duty on those bound to report corrupt activities to police officials. This section has been criticised on the basis that it would punish a person for negligently failing to realise that an offence was committed on the basis that the person "ought reasonably to have known" that an offence was committed, whereas it may be that the person in question was not even aware of the duty to report.

Notwithstanding the aforementioned criticism, this section should be embraced as it is an attempt by the legislature to weed out and combat corruption in South Africa. Unfortunately there have been no reported cases on Section 34 and it is not clear how the courts will apply the provisions of this section. In any event, the importance of the duty to report should not be taken lightly and persons who hold positions of authority should ensure that they are familiar with the provisions of Section 34. This is so especially in the case of CEOs and directors of companies (who have further fiduciary duties in terms of company law).

The procedure for reporting

The procedure for reporting corruption in terms of Section 34 is relatively simple. Firstly, those people with a duty to report should be aware that they are able to report an offence of corruption to any police official - in practice this would usually be a police officer at a local police station. These reports are then referred to the Commercial Crime Unit of the South African Police Service. An offence of corruption may also be reported directly to a local branch of the Commercial Crime Unit instead of reporting at a local police station.

Once the report has been taken by the relevant police official, it is important to note that the individual that is reporting the offence must receive an acknowledgement of receipt of the report. The acknowledgement of receipt should be on the form prescribed in Annexure B to the Directions by the National Commissioner of the South African Police Service published under Government Notice 837 in Government Gazette 26552 of 16 July 2004. The acknowledgement of receipt should contain a unique reference number (the Crime Administration System (CAS) number). The acknowledgement of receipt is not valid without this number, which is important as it is used for future enquiries and official purposes relating to the report.

Conclusion

It is clear that Section 34 requires individuals obliged to report corrupt activities to be both vigilant and proactive in reporting corruption within their respective organisations.

Individuals with authority within organisations can no longer sweep corruption under the carpet by dismissing the perpetrators of crime. This will ensure that corruption is eradicated through a system of effective reporting.

The legislature has made the first move to stamp out corruption and it is now up to the decision makers in the private and public sectors to take the next step and give PACCA some practical clout.

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.

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