A significant recommendation of the Zondo Commission, the introduction of a “failure to prevent corruption offence”, is on the cusp of being introduced in South Africa.

The Judicial Matters Amendment Bill was passed by the National Council of Provinces on 6 December 2023 and is currently awaiting presidential assent. The bill includes a proposed amendment to South Africa’s primary anti-corruption legislation, the Prevention and Combating of Corrupt Activities Act, 2004 (Precca) in the form of a new clause 34A, creating a failure to prevent corrupt activities offence.

The wording of the proposed new offence is closely aligned with the version proposed in the State Capture Report and draws inspiration from the failure to prevent bribery offences contained in section 7 of the United Kingdom Bribery Act, 2010. In terms of the proposed section 34A, a “member of the private sector or incorporated state-owned entity” will be guilty of an offence if a person associated with that member gives or agrees, or offers to give any gratification to another person (as currently prohibited in terms of Chapter 2 of Precca) intending to obtain or retain business or an advantage for that member.

While there are many aspects of the proposed new offence which require careful consideration, below are a few key takeaways:

• No offence will be committed in terms of section 34A if the member had in place “adequate procedures” designed to prevent associated persons from committing corrupt activities. Unlike the UK Bribery Act, there is no requirement to publish an accompanying guidance clarifying what will constitute “adequate procedures”. The UK Guidance set out six non-prescriptive fundamental principles that commercial organisations should consider when adopting “adequate procedures” to prevent bribery being committed on their behalf, commonly referred to as the “Six Principles”.

In the absence of further clarity, it would be advisable for South African entities to adopt an approach to adequate procedures which mirrors the “Six Principles” approach. Essentially, the Six Principles call for an approach where the procedures adopted are proportionate to the extent of the corruption risks facing the organisation. Therefore, an important first step will be to conduct a risk assessment to assess the extent of the corruption risks so that procedures can be tailored accordingly.

• The concept of “association” for purposes of the offence is broadly framed and refers to persons who perform services for or on behalf of that member irrespective of the capacity in which such person performs services for or on behalf of that member. The current wording casts the net of association incredibly broadly and would include not only employees but also independent contractors and other third parties providing services to the entity. It will therefore be important to ensure anti-corruption risk mitigation controls are sufficient to cover such third parties.
• Unlike the UK, South Africa does not have a prosecutorial regime which allows for entities to enter into deferred prosecution agreements (DPAs). DPAs have been successfully used in both the US and the UK as a mechanism to encourage organisations to self-report wrongdoing in exchange for the imposition of a reduced fine and avoiding prosecution. The introduction of DPAs is not addressed in the proposed Precca amendment, however, President Cyril Ramaphosa previously confirmed that the South African Law Reform Commission is considering DPAs as part of its review of the criminal justice system. In the interim, the National Prosecuting Authority is relying on the Corporate Alternative Dispute Resolution Directive to reach similar outcomes.

The introduction of a new “failure to prevent corrupt activities offence” will constitute a significant change to South Africa’s anti-corruption legal landscape and will pose a substantial compliance challenge for persons within its scope.

The proposed amendment will also address valid concerns that the government has been slow to implement the State Capture Commission recommendations and may provide further impetus to the concerted efforts currently underway to persuade the Financial Action Task Force to remove South Africa from the ‘Grey List’.

In light of current developments, it is critical for organisations to establish strong anti-corruption compliance programmes. DM 

Steven Powell is Head of the Forensics Department at law firm ENSafrica and Adrian Roux is Senior Associate in the department.