South Africa is a highly regulated market which places an onerous burden on corporates to stay abreast of frequent changes in the regulatory landscape – and failure to comply could have costly consequences such as hefty fines and jail time, with boards and directors principally held accountable for non-compliance with applicable laws.
Recent major legislative updates that could potentially place non-compliant businesses at risk pertain to – but are not limited to – the Employment Equity Act, the Basic Conditions of Employment Amendment Act, the Broad-Based Black Economic Empowerment Act, the Protection of Personal Information Act, the Financial Intelligence Centre Act (FICA), the Competition Act, the Public Finance Management Act, King III Principle 6.2 and the impending King IV Code on Corporate Governance, together with various laws applicable to health and safety and environmental compliance.
“A well-coordinated compliance management system is therefore critical for business efficiency and for meeting the requirements of a myriad of legislation in today’s fast paced, competitive and regulated environment,” says Raffael Beires, business developer at LexisNexis South Africa.
The firm recently conducted research into what companies are doing to manage risk and compliance. This went on to inform its development of a new compliance management solution called LexisAssure.
“We found that the current approach in the market is very reactive, rather than preventive and pro-active, with very few if any directors or employees able or willing to spend time reading hundreds of pages of regulations,” he says.
Beires adds that, without insight into relevant legislation, companies could not recognise compliance threats in advance, nor know how to practically implement and monitor compliance – which can be costly.
To illustrate this, recent punitive measures against non-compliance include MTN’s $5,2-billion (about R72-billion) fine from the Nigerian Communications Commission. The South African Reserve Bank (SARB) imposed a R125-million total fine against the country’s four largest banks, as well as smaller fines against Frankfurt-based Deutsche Bank and Capitec for inadequate FICA controls. A major airline was fined R900 000 for failing to comply with the Employment Equity Act (EEA). The Competition Commission has levied fines against cartels and price collusion in sectors ranging from construction to aviation. More recently ICASA levied penalties against eight South African companies for non-compliance with licence regulations. There is also the ongoing struggle to get South Africa’s industrial giants to comply with environmental regulations.
“Even where companies invest in internal compliance and legal teams, there is still the risk of missing something crucial, which could be a costly mistake. Based on our findings, we realised that companies really needed help to identify threats before they impacted their business,” says Beires.
He says the new LexisAssure compliance solution aims to fill that gap in the market by addressing many of the compliance pain points for businesses. The digital solution has attracted leading corporate clients even ahead of its official launch in March 2016.