As a South African, the concept of corruption is well-understood and all too often evident across both private and public sectors.
The inappropriate use of resources and funds to line personal pockets is something to which we’ve sadly become accustomed. Yet at a time when widespread financial pressure and economic uncertainty reign, corruption remains a key issue that inhibits the growth of South Africa’s economy.
According to the Global Organised Crime Index (OCIndex), nearly 80% of the world’s population lives in countries with high levels of corruption. The report, which is updated every two years, shows that crime is driven by geopolitical, economic, and technological factors and that organised crime, such as corruption, is one of the biggest threats to society.
According to the OCIndex, South Africa ranks at number 19 out of 193 countries worldwide for its high crime levels, and according to a report done by the Association of Certified Fraud Examiners (AFCE), the Occupational Fraud 2022: A Report to the nations, corruption ranks at 62% as the top-ranking occupational fraud scheme in sub-Saharan Africa, which includes South Africa.
“South Africa is a country with high levels of organised crime, of which corruption can form an integral part. The Zondo Commission has done well thus far in highlighting those who played a role in State Capture, but we now need to see that these role players are prosecuted and convicted for their criminal conduct,” says Christo Snyman, director of forensic services at Mazars South Africa and an accredited certified fraud examiner.
The Special investigation Unit (SIU) was tasked in 2020 to investigate Covid-19 contracts at all levels of Government for possible corruption and irregularities. The investigation found that almost two-thirds of the contracts investigated had irregularities, meaning that out of 5 467 contracts awarded, irregularities were found in 2,803, with Gauteng coming out as the biggest offender. The equivalent rand value to be recovered is R551-million, and thus far, only R34-million has been recovered.
The Democratic Republic of Congo was identified as the country most affected by organized crime, followed by Colombia, Myanmar, Mexico and Nigeria. “In Mexico, the majority of crime is not reported anymore, the government is avoiding confrontation and a large portion of the country is controlled by Cartels”, says Snyman.
“South Africa might not be too far off from this paradigm. Nefarious individuals within the business and public sector who exploit people and systems for personal gain are the main culprits, as well as those who enable or turn a blind eye. People are increasingly experiencing more financial pressure, so for many, the only way out is through unlawful activity.”
Understanding occupational fraud
When it comes to forensic investigation within the private and public sector, certain forms of occupational fraud stand out. These include asset misappropriation, corruption, and financial statement fraud.
“Corruption cases are in most cases difficult to investigate because they mostly consist of cash being exchanged for favours, extortion and blackmail”. This means that investigating and prosecuting this type of criminal activity can be difficult, which is why so many get away with it,” says Snyman.
Other typical fraudulent behaviour includes the falsifying of invoices or paying employees who don’t exist, also referred to as “ghost employees”.
How do we prevent occupational fraud?
The AFCE’s Report to the nations shows tip-offs as the highest rating form of how occupational fraud is initially detected. Snyman says that engaging a reputable and independent forensic expert could minimise the risk of misappropriation.
“It’s vital that we empower employees in reporting any suspicious activity.”
One such way is through Employee Fraud Awareness training to increase awareness, reduce risk, and promote a culture of employees who speak up, creating transparency by encouraging all stakeholders to take responsibility.
Snyman concludes: “Although the government shows all intention of fighting corruption and fraud, the issue still balances on a knife’s edge. This is a vital part of getting South Africa to turn the corner and build a safer and stronger political and economic state.”