The Prevention and Combating of Corrupt Activities Act 2004 (Precca) aims to strengthen measures to prevent and combat corruption in the private and public sectors in South Africa. If an employee is suspected of corrupt activities, employers often overlook the reporting obligations imposed by Precca.

Allegations of corruption against an employee may cause an organisation severe reputational damage and result in further consequences such as criminal prosecution of implicated employees or civil litigation against the organisation due to claims of loss suffered as a result of the corruption.  

Precca sets out various offences in respect of corrupt activities. For example, section 3 contains a detailed definition of the general crime of corruption, which the Supreme Court of Appeal has accepted to mean “anybody who (a) accepts any gratification from anybody else, or (b) gives any gratification to anyone else in order to influence the receiver to conduct herself in a way which amounts to the unlawful exercise of any duties, commits corruption”.

Section 1 defines “gratification” to include (but is not limited to) tangible and intangible benefits, including money, a gift, a loan, an interest in property, any favour or advantage of any description, and any real or pretended aid.

Section 35 also provides for extraterritorial jurisdiction. Therefore, even if an act of corruption is committed outside of South Africa, a South African court will have jurisdiction over the offence, provided that the prescribed requirements are met.

Who’s responsible for reporting corrupt activities in the workplace?

Section 34 of Precca provides that any person who holds a “position of authority” and who knows, or ought to have reasonably known or suspected that any other person has committed an offence as prescribed by Precca which involves an amount of R100,000 or more, must report such knowledge or suspicion, or cause of such knowledge or suspicion, of the offence.

This must be reported to the Hawks – the Directorate for Priority Crime Investigation (DPIC), an independent directorate within the South African Police Service. It is important to note that these mandatory reporting obligations imposed by Precca do not equate to the laying of a criminal charge since the latter has its own separate process.

Persons who hold a position of authority (even in an acting capacity) include:

• Any person who has been appointed as chief executive officer or an equivalent officer of any agency, authority, board, commission, committee, corporation, council, department, entity, financial institution, foundation, fund, institute, service, or any other institution or organisation, whether established by legislation, contract or any other legal means;
• Any partner to a partnership;
• A manager, secretary or director of a company as defined in the Companies Act, and includes a member of a close corporation as defined in the Close Corporations Act;
• The executive manager of any bank or other financial institution;
• Any head, rector or principal of a tertiary institution;
• A municipal manager appointed under the Local Government: Municipal Structures Act, a director-general or an equivalent officer of a national or provincial department and any public officer in the senior management Service of a public body; or
• Any other person responsible for overall management and control of the business of an employer.

When does one have a suspicion or knowledge of corrupt activities?

A person who holds a position of authority is regarded as knowing that another person has committed a corrupt activity if they have actual knowledge of the fact or if a court is satisfied that the person who holds a position of authority (i) believes that there is a reasonable possibility of the existence of that fact; and (ii) the person has failed to obtain information to confirm the existence of that fact.

A person who holds a position of authority “ought reasonably to have known or suspected” corrupt activities if the conclusions that he or she ought to have reached are those which would have been reached by a reasonably diligent and vigilant person having both the general knowledge, skill, training and experience that may reasonably be expected of a person in their position; and the general knowledge, skill, training and experience that they, in fact, have.

In the employment context, examples of where an employer’s knowledge or suspicion of corrupt activities may be triggered are:

• An investigation or findings in an investigation report;
• An employee committing misconduct that has a nefarious undertone;
• Evidence emerging during a disciplinary hearing;
• Complaints, whistle-blower reports or anonymous tip-offs;
• Irregular procurement activities;
• The existence of conflicting interests; or
• Any other evidence implicating an employee.

Practical implications

Precca does not prescribe a specific reporting method that must be followed to comply with the reporting obligation. However, the DPIC has provided a practical reporting guide on the application of section 34, and in particular, providing that a person may report knowledge or suspicion of corrupt activities in person or via email.

There is no prescribed time limit within which reporting obligations must be complied with. However, it is advisable that a person holding a position of authority who has knowledge or suspicion of corrupt activities must submit a report as soon as possible. Failure to do so may have consequences, as Precca imposes a maximum penalty of a fine or imprisonment not exceeding 10 years for failure to comply with reporting obligations.

Read more in Daily Maverick: Anti-bribery — without proper due diligence, you can be held liable for third-party corruption

Employers should accordingly be aware of the circumstances that trigger the duty to report corrupt activities and, importantly, which individuals in their organisation carry the reporting responsibility.

The potential consequences that may flow from a failure to fulfil this reporting obligation under Precca can be avoided with a thorough understanding of what is required and ensuring due and proper compliance. DM

Reviewed by Peter le Roux, Executive Consultant in law firm ENSafrica’s Employment Department. Amy Pawson is a Candidate legal practitioner in the Employment Department. Reitumetse Sebatana is an Associate in the department.