SA’s endemic corruption requires a ‘biting’ response

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South Africa is bedevilled by endemic corruption, but its response skirts around key issues required to reform public procurement and shine a light on people benefitting from state money.

This was the word from Karam Singh, the head of Corruption Watch, who joined a host of public accountability experts at a conference which started in Cape Town on Monday.

The Beneficial Ownership Transparency (BOT) conference attracted a host of non-governmental organisations committed to pressuring the government to help citizens easily identify the people behind companies.

Complicated corporate structures, trusts and other legal mechanisms are often used to mask the real ownership or control of companies.

But “people ultimately benefit from the money — it goes into an individual’s account,” said Favour Ime of Open Ownership.

Ime’s organisation is helping governments create more accessible public registers of who owns, controls, and benefits from companies and their profits. 

This information, known as beneficial ownership transparency (BOT) helps tackle corruption, reduce investment risk, and improve national and global governance.

Singh, Ime and a host of other participants are attending the two-day conference aimed at helping change local laws and procedures that favour anonymous companies which remain a major obstacle in the fight against money laundering and corruption. 

Criminal actors often hide behind chains of companies registered in multiple jurisdictions.  The Zondo commission has demonstrated the close links between opaque corporate structures and the misappropriation of public funds in procurement. 

South Africa is committed to international standards set by such bodies as the G7’s Financial Action Task Force and the Open Government Partnership, but participants at the conference said that while the country’s progress towards BOT is promising, more is needed.

The aim of the conference is to learn about various interdepartmental initiatives in South Africa and to consider them in relation to international best practice. 

Defining the collaborative role of government, civil society, and the private sector in actioning BOT commitments is key. 

BOT needs a better legal framework and a multi-stakeholder approach to get high-quality, usable data that can be made easily and quickly accessible.

The conference opened with a keynote address from Lieutenant-General Godfrey Lebeya, the police’s Directorate for Priority Crime Investigation boss, who said there was political will to improve its systems.

He said it was accepted that “identification of adequate, accurate, current and reliable information on beneficial ownership is the golden thread that runs through every initiative and regulatory regime, seeking to enhance transparency, reduce illicit financial flows and reverse harmful capital flight.”

Lebeya joined a chorus of state representatives who, while acknowledging South Africa had a way to go, were adamant its efforts to improve BOT were earnest and bearing fruit.

Financial Intelligence Centre director Xolisile Khanyile said South Africa had made good progress in implementing global standards “but more work needs to be done to demonstrate the effectiveness” of BOT.

Khanyile said South Africa was not unique in this regard. A recent international report that looked at 100 countries that submitted themselves for peer evaluation found that only 52 had the right laws in place.

Effective BOT implementation was still “a sad story”. 

“That we are having this dialogue means we are prioritising the issue, but we are not looking good. Publicly available information is there, but it is basic and not up to date … it doesn’t help us identify criminals and hidden assets.”

A key challenge identified by Khanyile and others was harmony beyond the law — creating uniform data sets that allow for easy collection of information and rapid and efficient access to it. 

This requires a high skill set and coordination among a host of entities, including the Department of Justice, the Deeds Office and the CIPC company registration office.

Pleasure Matshego, the director of ethics and integrity management at the Department of Public Administration, said the United Nations Convention Against Corruption required state parties to adopt measures to enable transparency around beneficial ownership. 

The cabinet’s commitment to this was evidenced by the work of an interdepartmental committee that oversaw a BOT action plan.

Lebeya said once there was harmony in laws and data registers “nobody will stand in the way of this”.

However, arriving at this point was something else, said Corruption Watch’s Singh.

While he applauded the efforts of stakeholders, he said noble sentiments and the national anti-corruption strategy weren’t matched by action.

The Zondo Commission showed great case studies of corruption and highlighted major issues around transparency lapses and procurement vulnerabilities.

“This is an incredibly important gathering and huge credit to everybody involved in pulling this together. It is a very timely discussion … but I don’t know that we’re at the moment on BOT where we can flip the switch and we can get to implementation.”

Singh said there wasn’t sufficient understanding of the culture of endemic corruption and it required a “biting” response.

Political will to respond to corruption was not “commensurate” with the problem.

He pointed to public anxiety around the government’s post-flood rebuild plans in KwaZulu-Natal, where before money was even allocated, people worried about it being stolen.

“We’re living with the long shadow of the governing party’s party conference at the end of the year, which should hopefully bring back into power those committed to the fight against corruption.” 

Singh said things could go the other way and it felt as though there was a “hesitancy and resistance to strongly driving the kind of reform that we need from our political principals because they’re not sure if they’re going to retain their positions at the end of the year.” 

He said stronger political will needed to be matched with the “realisation that this is a burning issue”. 

“And then we need coordination to drive a collective response to something which in government is not as coordinated and driven in the way that it needs to be.”