Former Steinhoff CEO Markus Jooste. Picture: ESA AEXANDER
Former Steinhoff CEO Markus Jooste. Picture: ESA AEXANDER

"Not my problem,” is probably the typical CEO's response when it comes to the epidemic of corruption in SA.

It’s not that they don’t believe corruption impacts their business. You just have to look at Eskom and the litany of scandals there that have proved costly for the economy and legitimate businesses employing thousands of South Africans. There are too many to start counting, but among the most notable would involve the implementation of a procurement policy that said it would only buy coal only from companies that were at least 50% black-owned. 

While this led to a significant amount of damage as major players left the sector, it transpired in October that it was anything but a legitimate procurement policy.

Rather, it was a random verbal directive decreed during the reign of then CEO Brian Molefe. The new board that was installed in February to clean up the utility couldn’t find any evidence of the directive in any policy documents.

While the public sector is full of stories of graft like this, it would be wrong for the private sector to be smug or complacent, or perceive itself as victim rather than a big part of the problem. 

It only took a vigilant press for McKinsey to finally admit its moral failings and return more than R1bn it was paid by Eskom for consulting work of dubious value.

Revelations in the Nugent and Zondo commissions have laid bare how endemic and widespread the crisis of morality in the country is. Even before the inquiries started, names such as McKinsey and KPMG, previously reputable global brands, emerged as key players in facilitating state capture.

It only took a vigilant press for McKinsey to finally admit its moral failings and return more than R1bn it was paid by Eskom for consulting work of dubious value. And KPMG is facing claims of millions of rands after a Reserve Bank-commissioned report found that a partner signed off falsified audits on behalf of VBS Mutual Bank directors, enabling them to steal almost R2bn.

The list of rogues has expanded in recent months, with the reputation of Bain & Co emerging as one of the main casualties of the Nugent commission into the destruction of the SA Revenue Service, once the envy of its international counterparts.

Anyone who thought that corruption was a disease inflicting only politicians and managers in the state-owned enterprises should have had their eyes opened by the spectacular collapse of Steinhoff International late in 2017, which has cost shareholders, just on the share price depreciation alone, about R200bn.

Investors are also still waiting for clarity on the share price collapse that saw investors in the Resilient Group of property companies lose north of R100bn. The Financial Sector Conduct Authority has been investigating — including allegations of share price manipulation and insider trading in the companies' shares  — that debacle since March.

The lack of meaningful progress isn’t inspiring confidence that investors will get answers, with the companies having resisted calls by some of the country’s biggest asset managers for a forensic probe. The apparent weakness of the regulatory environment also means citizens are losing hope that former CEO Markus Jooste will be held to account for what happened at Steinhoff.

In the light of these, likely to be the tip of the iceberg, comments by Mervyn King that the country’s private sector has “high levels of governance despite being an island in a sea of corruption” might strike one as being a touch complacent, or even naive.  

The people who have skin in the game, so to speak, tell a different story. That insurance companies are demanding more to cover themselves against potential claims resulting from unethical and negligent behaviour by South African executives should be a wake-up call. 

According to Marsh, the world’s largest insurance broker, the cost of directors’ and officers’ liability was doubling and even tripling in some cases in the light of recent struggles.

In simple language, SA Inc. is becoming toxic. 

When it comes to the challenge of attracting investment, much of the attention has been on government and the need for sound policy.  The moral failings of our business leaders should get more attention, as that may prove to be an even bigger deterrent to foreign investors. 

Please sign in or register to comment.