South Africans are no more or less corrupt than citizens of any other nation on earth. The extent of corruption in any country is almost always inversely proportionate to the strength of the institutions set up to prevent it. Basically, if people think they can get away with it, there is a higher chance they will steal.
The World Bank estimates that international bribery exceeds $1.5 trillion annually, or 2% of global GDP and 10 times more than total global aid funds.
Democratic countries with effective and well-resourced watchdog institutions that operate independently from government have lower levels of corruption, not because their politicians and business leaders are inherently more honest than ours but because they know they’re likely to get caught and see their photo all over the front pages of newspapers, shaming them into resigning before they’re fired. But here at home, people implicated in corrupt dealings somehow still seem to have considerable support, and many are even planning to run for high office.
The weaker the institutions, the higher the levels of corruption. Like South Africa, Brazil, Peru, Indonesia, Malaysia, Guatemala and South Korea have all suffered major corruption scandals that reached the highest office of the land. Notably however, in each case it led to the implicated president’s downfall and most of those countries have launched initiatives to beef up their anti-corruption structures, with SA’s process on that journey being kickstarted by Judge Raymond Zondo’s recommendations following the commission of inquiry into state capture.
Judge Zondo noted how, in state-owned enterprises, the boards of Eskom, Transnet, Denel and SAA, among others, failed spectacularly in meeting their mandate of “protecting shareholders’ interests, establishing policies for management, oversight of the corporation or organisation, and making decisions about important issues a company or organisation faces”, which is how the Corporate Finance Institute defines the role of a board. One of its specific functions is to hire and fire senior executives.
The weakness of our systems was exposed when the Gupta family was able to pick and choose both board members and executive teams, having been handed control of the country by then president Jacob Zuma. There was therefore zero accountability. As good people in SOEs saw these appointments they voted with their feet, contributing further to the dramatic deterioration in delivery of services.
Judge Zondo zeroed in on this weakness with his proposal to set up a statutory, autonomous body to vet prospective director candidates of SOEs for suitable qualifications and integrity. This would put an end to political appointments – but given the widespread private sector collusion in state capture, company boards also need to tighten things up.
Research that BLSA has commissioned into this area recommends numerous measures to improve levels of integrity, including constant reminders to boards of directors of their responsibility to hold to account directors who fail to perform.
If a director is delinquent, it should be the board that initiates proceedings to declare him or her as such. But shareholders, particularly institutional investors, should also be more active in declaring directors delinquent, incorporating that responsibility into their policies governing active custodianship. Company secretaries, as custodians of governance compliance, also have a responsibility to advise the board effectively.
Because SOEs deal with public money, their boards should be obliged to bring delinquency applications if there is any court order that reflects negatively on the integrity or competence of a board member.
The researchers note that despite the rampant misgovernance and corruption at SOEs during the Zuma presidency, only former SAA chairperson Dudu Myeni, who Judge Zondo found was incompetent and acted with corrupt intent, has been declared a delinquent director by a court. “Many, from the boards of SAA, Transnet, Eskom, EOH and others, would also qualify,” they say.
Other recommendations include beefing up the audit committee, establishing a reputational risk committee, ensuring the board has oversight over contracts that are material or involve public sector funds and obliging institutional shareholders to assess skills, experience and availability when voting on a person nominated for a board seat.
All these measures are aimed at preventing dishonourable people from being appointed to or remaining on boards of SOEs and private companies and that’s important because, as we’ve witnessed, they are able to cause profound damage to the country if appointed to key posts.
These measures, however, form just one aspect of a more holistic anti-corruption strategy that BLSA is pursuing. There are many other important areas to get right, including setting up or strengthening structures to combat corruption.
BLSA is fully committed to helping transform South Africa into a country where corruption is considered shameful and people are held accountable. We will keep working tirelessly to ensure we reach that state.
