Employers to put in place “adequate procedures” to prevent corruption
It has been almost one year since the establishment of the offence of failing to prevent corruption in section 34A of the Prevention and Combating of Corrupt Activities Act, 2004 (PRECCA), which came into effect on 3 April 2024. Since then, companies in the private sector and state owned entities may be guilty of an offence if anyone associated with them gives, agrees or offers to give a gratification to secure business or a business advantage for that member.
There is a defence available to those alleged to have failed to prevent corruption: no offence is committed if the organisation has put in place “adequate procedures” to prevent such conduct. This shifts the responsibility onto organisations to safeguard against corruption by taking proactive steps to limit corruption risks posed by employees, contractors, and third-party suppliers, all of whom are considered “associated persons.”
Having had almost one year to bring your organisation’s anti-bribery and corruption policies and procedures up to standard, would your organisation escape liability under section 34A of PRECCA if, for example, an impropriety is discovered in a procurement relationship? We provide some guidance below to assist you in answering this question.
What are “adequate procedures”?
The courts have not yet interpreted what constitutes “adequate procedures” to prevent corruption for purposes of section 34A of PRECCA. There are no published guidelines, and regulations have not yet been promulgated to shed light on practical steps an organisation can take to guard against a conviction for failing to prevent corruption.
The language of South Africa’s offence in section 34A of PRECCA is largely based on the UK Bribery Act of 2010 and, therefore, organisations can look to the UK’s six principles for preventing bribery for guidance on what constitutes “adequate procedures” to prevent corruption under PRECCA.
Those six principles are:
- Proportionate Procedures
Anti-corruption measures should match the level of risk the organisation faces. These measures must be practical, clear, and enforceable—and could be part of broader policies, such as recruitment or procurement processes.
2. Top-Level Commitment
Leadership must actively demonstrate a commitment to anti-corruption, both internally and externally. This commitment needs to be more than just a policy; it should be backed by clear statements and involvement from top management in developing anti-corruption measures.
3. Risk Assessment
The organisation must assess the risks of corruption it faces, both internally and externally, and conduct periodic documented assessments. These risks include business opportunity and partnership risks, insufficient training, poor financial controls or unclear policies.
4. Due Diligence
Organisations must carry out due diligence on anyone acting on their behalf. This includes vetting third-party intermediaries and embedding risk assessments into recruitment to mitigate corruption risks.
5. Communication
Prevention policies must be effectively communicated to everyone in the organization. This includes internal and external communication, ongoing training, and ensuring that all employees understand the procedures in place.
6. Monitoring and Review
It’s not enough to implement procedures; these procedures must be monitored. Conduct regular reviews, surveys, and report to senior management. It is also wise to seek independent anti-corruption certification to verify compliance with industry standards. If corruption in an organisation’s supply chain is revealed, service level agreements with offending third party suppliers should be terminated.
Conclusion
With the failure to prevent corruption becoming an offence in section 34A of PRECCA, organisations should act immediately to ensure that they are taking reasonable measures to prevent corruption within their organisations. While the full scope of “adequate procedures” is still unfolding, businesses can start by using the UK’s established anti-bribery principles. By putting in place practical, proportionate measures, demonstrating leadership commitment, conducting regular risk assessments, and fostering a culture of clear communication, education and monitoring, organisations can protect themselves from legal risks and build a reputation of integrity. Addressing corruption proactively not only ensures compliance with the law but also strengthens the organisation’s reputation and long-term success.
Norton Rose Fulbright South Africa Inc assists clients in providing strategic and practical advice on designing, reviewing and implementing anti-corruption policies and procedures. Where there has been impropriety uncovered, NRFSA assists clients in investigating and taking appropriate remedial action to protect the organisation’s interests.
This blog was co-authored by Caroline Cotton, Candidate Attorney.