SA risk body calls for more action

By Christopher Palm, Chief Risk Advisor, Institute of Risk Management South Africa

Corruption remains a pervasive and detrimental problem in South Africa and is continuing to undermine economic growth, diminishes public trust, and hinders social progress. Even after the interrogative Zondo Commission laid bare the extent of the problem, conventional wisdom suggests we have still not addressed fraud and corruption at a systemic level.

It seems as if we have become desensitised to the breakdown of ethical and legal principles, institutions, and their mechanisms to hold people accountable. The legal and law-enforcement system, among others, has been compromised and needs to be reformed to give effect to the risk response strategies that are so important to systemically eradicate fraud and corruption. For the risk community in South Africa corruption remains a red-needle problem and needs to be factored into every facet of strategy setting, planning, and forecasting as well as the revision of their systems of internal control.

Key is weak visionary and ethical leadership right across the public and private sector and it seems South Africans have become more willing than other nations to tolerate breaches of ethical standards by their leaders.

Tolerating unethical and illegal practises increases the cost of doing business and makes SA less attractive as investment destination and redirects money that is meant to address growing inequality and poverty, unemployment, failing infrastructure - pursuing the South African National Development Plan. It is difficult of course to estimate it accurately, as it is a complex issue with both direct and indirect costs. According to a recent report published by the Institute of Internal Auditors South Africa, corruption is estimated to cost the South African economy between R26 billion and R100 billion per year.

And this figure only considers direct costs such as embezzlement, bribery, and other illicit financial flows. The indirect costs of corruption, such as reduced foreign investment, decreased economic growth, and increased poverty, are much more difficult to quantify but are likely to be even higher. Corruption has also had a profound impact on South Africa's social fabric, eroding public trust in institutions and exacerbating inequality.

So, what needs to happen? IRMSA is suggesting the following five steps that are as relevant to large multi nationals as small, medium, and micro businesses:

• Call out and be vocal about unethical behaviour to counter complacency.
• Restore accountability and acknowledge those who do the right thing as well as implementing strong consequence management in response to unethical behaviour. This will include dependable disciplinary and grievance processes.
• Normalise proper ethical behaviour and set the right tone at the top. This will include whistleblowing, empowered by clear policies and procedures to protect all stakeholders in the whistle blowing process.
• Focus organisational ethics management programmes on creating an ethical culture, awareness, and accountability to the social and ethics committee of the board.
• Insist on the restoration, strengthening, and legitimising of law-enforcement agencies.

An effective way to begin is promoting an internal culture of integrity. This involves educating staff about the costs of corruption, and instilling values such as honesty and fairness. Additionally, codes of conduct and ethical guidelines should be established and widely disseminated. Often these documents are developed and then largely ignored. Companies and the public sector also need to think more deeply about leveraging technology to combat corruption. Digital platforms can be used to enhance transparency and accountability. For instance, e-government platforms can streamline public service delivery, reduce bureaucratic red tape, and minimise opportunities for corruption. Implementation of this strategy by the SA Government has been patchy and ineffective.

Additionally, electronic payment systems can reduce cash transactions, which are often associated with corruption. Open data initiatives can promote transparency and enable citizens to monitor government activities.

While corruption remains a major challenge it is not insurmountable. We must recognise that tackling corruption requires a sustained effort over the long term, and that progress will not be achieved overnight.

Nevertheless, with determination and perseverance, we can create a more transparent, accountable, and just society. At this point in our low growth trajectory journey, we simply have no choice.