SA second for fraud, corruption: BDO

Company fraud, theft and corruption in South Africa is costing the business community over 100 billion rand per year, according to new data out by audit firm BDO.

According to James Roberts, director at BDO, global statistics revealed that as much as 7% of a company's annual turnover was being lost to fraud, theft and corruption.

"Assuming the South African private sector and quasi private sector companies are losing just 5% of annual turnover - extrapolated from nominal estimated GDP of South Africa - the total annual leakage is 100 billion rand," he said.

Roberts pointed to research, which indicated that South Africa boasted the world's second highest incidence of corporate fraud and corruption.

"And our experience is that company fraud in South Africa is escalating at an alarming rate," he said.

"This is partly as a consequence of our contracting economy and reduced disposable income which is seeing people turn to crime and partly due to less vigilance on the part of companies."

On the latter point Roberts said that despite the fact that theft was on the increase, companies were becoming increasingly focused on cutting operating costs. For many, risk management is being viewed as a cost.

"Flip that on its head and it is easy to see that if leakages were eradicated, there would be less pressure to drive up revenues in order to achieve profits," he said.

Roberts advised companies to invest in establishing and managing good corporate governance. At a macro level this means establishing governance structures and ensuring that business and risk strategies are aligned.

"At a more operational level it is crucial to heighten risk consciousness and introduce best risk practices such as sharing good quality risk information in a timeous fashion and regularly reviewing risk analysis trends," he concluded.