MAJOR US and UK investors will look for stronger regulation against corruption if they are to maintain their investments in South Africa, especially after concern about the security of their investments has been heightened by the Marikana protests, international corporate lawyers say.
Traditional investors from the US and Western Europe want to see effective anticorruption law enforcement coupled with improved standards of business ethics to ensure their investments do not expose them to prosecution in their own jurisdiction, as well as in South Africa, for breach of their countries’ anticorruption laws.
Because the US and UK antibribery legislation applies across borders, they are increasingly reaching into Africa, with a criminal fine of more than $54m recently paid relating to a contract in Nigeria where government officials were bribed.
"With security of investment tenure being raised as an issue through the Marikana protests, and with other African countries competing for their place as the gateway into Africa, South Africa can no longer be complacent when it comes to investor concerns, especially as the global marketplace takes stock of the lessons to be learnt from the recession," says Andrew Legg, UK Bribery Act specialist at international law firm Eversheds UK.
Eversheds says changes in South Africa’s new Companies Act — which will require large listed companies to establish a social and ethics committee to review the alignment of the company’s activities with global standards of ethics — need more "teeth" if South Africa wishes to secure future investment from traditional investors such as the UK and US.
These jurisdictions are taking strong statutory stances against corruption via the UK Bribery Act and the US Foreign Corrupt Practices Act (FCPA).
"What we hope to see, from a South African perspective, is that further legislative requirements are passed that add to and strengthen the ethics-related provisions within the new act, similar to those found within the UK Bribery Act for instance," says Murray Stewart, head of forensics at Eversheds South Africa.
At a news conference in Brussels this week with South African President Jacob Zuma, Herman van Rompuy, the president of the European Council, registered growing concern abroad about mining violence in South Africa, where 46 people died during recent protests at Lonmin’s Marikana mine and protests spread.
South Africa ranks 64th out of 183 countries in Transparency International’s corruption index, and has been sliding for five years as business and government corruption continues to plague the economy.
"South Africa’s reputation globally of being unable to prevent bribery can and will impact its long-term trade relations with traditional investors, such as the UK, that have instituted stringent and far-reaching legislative penalties against companies that breach its UK Bribery Act," says Mr Legg.
Advocate and contractor to the Ethics Institute of South Africa, Janette Minnaar-van Veijeren, says increases in prosecutions and cases resolved under the auspices of the US Foreign Corrupt Practices Act are making Africa an increasingly risky place to pay bribes.
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