Make corrupt companies pay reparations, and use this money to rebuild SA

07 April 2019 - 00:04 By William Gumede

Given the devastating impact of corruption, state capture and crime - the breakdown of society, the collapse of the economy and countless lives lost - the companies and individuals involved should be held publicly responsible, and the assets acquired through such means seized and used to help the victims, the cause of social justice and civil society organisations.
Companies found to have been set up purely to secure government tenders corruptly should of course be closed down and have their assets seized. The corrupt individuals must be prosecuted. At established companies that have been found to be corrupt, the individuals implicated must be held accountable and the company compelled to atone and pay the equivalent of the money corruptly acquired, for reparations.
In Germany, Siemens, after being found guilty of corruption in 2006, donated the equivalent of the funds deemed to have been illegally acquired to social justice initiatives. Siemens' then CEO, Klaus Kleinfeld, and chair Heinrich von Pierer resigned. Siemens dedicated $100m (about R1.4bn) to civil society organisations combating corruption.
Of course, seized assets redistributed for social justice can never fully atone for lives lost, families broken and jobs lost because of corruption. Nor should this absolve the perpetrators of corruption from the consequences of their actions. It is not a substitute for legal punishment.
The next step for the various inquiries into corruption currently in swing in SA should be prosecuting those individuals and companies accused of being corrupt, attaching their assets and freezing income that was corruptly acquired. Such assets and income should be deposited into a public fund, which should be allocated to charities, civil society organisations and community groups.
SA's Competition Tribunal fines companies guilty of collusion and puts the money into the National Revenue Fund or dedicates it for specific empowerment programmes, for example, the support of small, micro and medium enterprises. In 2010, the Competition Tribunal fined Pioneer Foods for price-fixing and used part of the fine to promote small enterprises in the agri-processing value chain.
This Competition Tribunal model of fining guilty companies and transferring the proceeds of the fine to develop small enterprises should be adapted to be used to put the proceeds of crime and corruption into a social justice fund.
Locally, auditing firm KPMG last year set up a public-interest fund, using the equivalent of the money corruptly acquired in dodgy dealings with the public sector, for social justice, social enterprises and educational purposes.
Those implicated at KPMG should still be held accountable - disciplined, fired and prosecuted. Furthermore, like Siemens in Germany, KPMG must prove that it will in future behave as an exemplary democratic, corporate citizen. It must show remorse, act in the broader public interest and change its corporate culture to one driven by ethical standards.
Corruption is systemic in SA, and has permeated the public sector, private sector, civil society and in some cases the media, as well as prosecuting authorities, security agencies and watchdogs. Professions that are supposed to be above malfeasance, such as auditing and medicine, have been tainted.
There are many who argue that established companies - not those specifically set up to benefit from corrupt tenders - that are proven to be corrupt should be closed down. However, this would mean honest, hard-working employees, who were often unaware of the corruption in these companies, would also lose their livelihoods.
It would be more pragmatic to punish those individuals responsible for corruption in private companies and compel these companies to pay reparations and to show penitence by doing good work.
Some argue that the proceeds of corruption should never be used to fund social justice causes. But many companies and business leaders around the world, including in SA, who have been accused of corruption, have as part of their rehabilitation made available funds for civil society organisations, social justice causes and charities. Most South African civil society organisations are beneficiaries of such funding.
SA's civil society organisations, and community groups and charities in many cases have been holding the thin line between mass state, democratic, societal and economic failure. They desperately need funding - not only from reparations from companies that messed up, but also from the government and ordinary citizens.
• Gumede, an associate professor in the School of Governance at Wits University, is the author of 'South Africa in Brics' (Tafelberg)

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