There are few people living in South Africa that have not heard at the very least a passing reference to the Zondo Commission of Inquiry; it has had a significant impact on the country’s psyche since it began in 2018. The commission has further highlighted the plight of corrupt practices within the upper echelons of South African government and the ongoing testimonies continues will undoubtedly continue to do so.

Proclaimed by former president Jacob Zuma in January 2018 to “investigate allegations of State Capture, Corruption, Fraud and other allegations in the Public Sector including Organs of State” within South Africa, the bulk of the testimonies to date, ironically, has focused on allegations of corruption during the administration of Jacob Zuma.

Accusations to date have, unsurprisingly, have detailed allegations of state capture by the controversial Gupta brothers. These have ranged from the running of their media enterprises and contracts that Gupta-associated companies received from state owned companies to the ‘Guptagate’ Waterkloof Airforce base incident.

Other incidents to arise relate to:

  • Corruption and maladministration at the Vrede Dairy Project/Estina
  • Issues relating to lobbying to protect the pay-tv monopoly of MultiChoice.
  • Accusations of maladministration and corruption at:
    • National rail monopoly and state-owned enterprise Transnet.
    • Passenger Rail Agency of South Africa.
    • Law enforcement agencies.
    • National energy utility Eskom.
    • South African Broadcasting Corporation.
    • State owned defence contractor Denel.
    • Former chairperson of South African Airways, Dudu Myeni.

Driving the issues in the rear-view mirror

The hits, of course, keep on coming and will do for months to come, further emphasizing the needs for systems that combat corruption ahead of time, not only after the fact. As we have discussed in previous articles on this blog, State Capture has already cost this country billions of Rands (with some estimates in the trillions).And while the commission is doing good work in uncovering the gross corruption at State level, it is not a mechanism to ultimately prevent and detect corruption.

Other means commonly applied to root out corruption has been forensic investigations, which is something we have become very accustomed to in this country. It is fair to say that in South Africa, there is rarely a day that passes without a media report detailing a forensic investigation that has been undertaken by a company into allegations of wrongdoing.

It is fair to say that in South Africa, there is rarely a day that passes without a media report detailing a forensic investigation that has been undertaken by a company into allegations of wrongdoing.

A forensic investigation is the practice of lawfully establishing evidence and facts that are to be presented in a court of law. The term is used for nearly all investigations, ranging from cases of financial fraud to murder. It is a costly operation and leaves a lasting stain on the business involved.

From our experience, the cost of a forensic investigation is between 10% and 15% of the loss involved. So, for a loss of R100 million, an investigation that takes about 6 to 12 months to complete may cost the company instructing the investigative team a fee between R10 million and R15 million.

Importantly, while necessary to undertake, a forensic investigation is driving the issues in the rear-view mirror. Any action resulting from an investigation, no matter how worthy, is retrospective. Given that the framework detects the critical issues in the examples that we have cited, at a fraction of the cost of an investigation, who would not want to save the costs of an investigation and apply them towards growing their business and brand?

A key deliverable of forensic investigations is to identify and report evidence related to a crime and come to a conclusion about a suspect. The scope of the investigation is usually limited to one or several suspects and one or several groups of transactions. They do not and cannot provide a 360 view of the risk of corruption to the extent to which a business is vulnerable to it. Albeit an investigation may make recommendations for improvement in the control environment, it is not a tool that will predict or monitor risk before the risks manifest themselves.

From our experience, the cost of a forensic investigation is between 10% and 15% of the loss involved. So, for a loss of R100 million, an investigation that takes about 6 to 12 months to complete may cost the company instructing the investigative team a fee between R10 million and R15 million.

Additionally, investigations are intrusive. Investigators spend long periods of time inside an organisation, undertake their duties and tasks confidentially without sharing their findings, for obvious reasons. All these events can lead to suspicion and retrospection within the organisation and take focus away from the key task of a business – growth.

Equally, a report is not a finding of a court of law. Companies have a responsibility to be circumspect not to defame a third party. Sometimes, the reports will form part of a legal process, which means that public disclosure may be embargoed until the report is placed before a judge.

Very occasionally, companies hide behind the veil of legal action because it would be too damaging to them to release the contents of a report. Is this a prevention mechanism?

Will it have a real-world impact?

In short, is investigating after the fact going to fix the damage already done? On the evidence above, we would argue no. To date, nobody has been held to any real account. No damages have been repaid, none of those implicated have been punished, while others continue to sidestep the commission entirely.

The Zondo Commission is a positive step towards assigning some sort of culpability, and revealing the depths to which those we put out trust in have sunk, but in many ways the damage is already done, with huge financial losses and, perhaps more worrying, significant reputational damage to the country.

The Zondo Commission is a positive step towards assigning some sort of culpability, and revealing the depths to which those we put out trust in have sunk, but in many ways the damage is already done, with huge financial losses and, perhaps more worrying, significant reputational damage to the country.

Time, of course, will tell. The commission has yet to run its full course, but unless real action is taken, it may be consigned to the list of inquiries that have done nothing but pay lip service to the ideals of fighting corruption in South Africa.

Protect yourself

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