The key features of this article are:

New Legislation: South Africa is considering a new amendment, part of the Prevention and Combating of Corrupt Activities Act (PRECCA), which introduces an offence for failing to prevent corrupt activities.

Implications: This legislation goes beyond reporting corruption. It targets organisations that fail to prevent associated individuals, like employees or contractors, from engaging in corrupt activities.

Inspiration: The proposed legislation, inspired by the UK’s Bribery Act, is a crucial step in holding private sector entities accountable for preventing corruption within their ranks.

Significance: If passed, this amendment would mark a significant change in South Africa’s anti-corruption legal landscape, posing a substantial compliance challenge for organisations.

New Legislation

The introduction of a new failure to prevent corrupt activities offence will constitute a significant change to South Africa’s anti-corruption legal landscape and would pose a substantial compliance challenge for organisations. The proposed amendment will also address valid concerns that the government has been slow to implement the State Capture Commission recommendations and should provide further impetus to the concerted efforts currently under way to persuade the Financial Task Force to remove South Africa from the ‘Grey List’.

The proposed amendment of the Judicial Matters Amendment Bill which covers the failure to prevent corrupt activities is set to be considered on November 29 by the National Council of Provinces. This amendment, part of the Prevention and Combating of Corrupt Activities Act (PRECCA), is a direct response to the far-reaching recommendations of the State Capture Commission.

The proposed offence, as outlined in section 34A, establishes that an entity will be held accountable if a person associated with it provides or agrees to provide gratification to another person with the intent to obtain or retain business or an advantage for that entity. Drawing inspiration from the UK’s Bribery Act, this legislation is a crucial step in holding private sector entities responsible for preventing corrupt activities within their ranks.

This legislation transcends the obligation to report corruption; it targets Organisations that fail to prevent individuals associated with them, such as employees or independent contractors, from engaging in corrupt activities. Even if the organization was unaware of the misconduct, it can be convicted of the offence.

Contextualising this development, lessons learned from the Zondo Commission highlight that corruption was traditionally viewed as a public sector issue. However, the extent of state capture and corruption witnessed required complicity from the private sector. This legislation aims to encourage private sector entities to actively participate in reducing corruption, acknowledging that both the corruptive parties must be addressed.

The potential new offence introduces a significant incentive for companies to combat corruption proactively. Companies can defend themselves by demonstrating that they have in place adequate procedures to prevent corruption. This not only aligns with the objectives of Directive 8 FIC (Financial Intelligence Centre) of the but also encourages Organisations to implement robust anti-corruption programs.

It’s important to note that this legislation does not replace existing mechanisms for prosecuting individuals engaged in corrupt practices. Instead, it places the company itself in the crosshairs, allowing for convictions accompanied by fines and potential consequences such as blacklisting. This includes state-owned companies, emphasizing the legislation’s broad applicability to all members of the private sector and incorporated state-owned entities.

As South Africa moves toward a new era of anti-corruption measures, continuous lifestyle assessments, conflict of interest checks, and the proactive implementation of anti-corruption programs emerge as essential components for Organisations seeking to navigate this transformative legal landscape. By embracing these practices, companies not only protect themselves from legal consequences but actively contribute to the nation’s efforts in combating corruption from within.