SA procurement fraud double global average – survey


Fraud.jpgA total of 59 per cent of South African respondents to the PricewaterhouseCoopers (PwC) Global Economic Crime Survey indicated that they had experienced procurement fraud, compared with the global figure of 29 per cent.

PwC director Louis Strydom described as “mind-boggling” the loss South Africa suffered owing to economic crime.

Of the 134 surveyed South African respondents, four reported losing more than R1-billion each through fraud, said Strydom.

In terms of financial losses below R1-million, South Africa ranks lower than global averages, but for losses between R10-million and R1-billion and above, South Africa ranks the highest, said Strydom.

Globally, governments accounted for 46 per cent of procurement fraud, followed by energy, utilities and mining (43 per cent) and engineering and construction (42 per cent).

SArespondentCrimes.jpgIn South Africa, vendor selection was the most targeted, said Strydom.

“Just look at how many projects meant to assist the poor fail because of the misappropriation of funds.”

“Procurement fraud cannot happen if there are no internal players. To deal with economic crimes there must be a focus on management. If management doesn’t advocate against such practices, we cannot beat it.”

Fraud-risk management was the most effective means of detection, said Strydom, and South African companies were ahead of their global counterparts in this area.

“Worrying, though, is that 20 per cent of companies do not undertake risk assessments, with 18 per cent of culprits only receiving warnings, while 9 per cent of companies do nothing against perpetrators.

“It is encouraging that more South African companies (82 per cent) than their global counterparts (49 per cent) turn to law-enforcement agents to deal with (internal) culprits.”

Externally, 63 per cent of culprits in South Africa were turned over to the police, versus 61 per cent globally.

Meanwhile, as much as 77 per cent of South African respondents reported experiencing asset misappropriation (69 per cent globally), and 52 per cent bribery and corruption (27 per cent globally).

Africa and Eastern Europe reported the highest prevalence of bribery and corruption (39 per cent), followed by the Middle East (35 per cent), Asia Pacific (30 per cent), Latin America (25 per cent), North America (14 per cent) and Western Europe (12 per cent), Strydom said.

Institute of Accountability director Paul Hoffman estimates that corruption has cost South Africa R700-billion over the last 20 years. Through government’s tendering system, R30-billion is stolen annually through corruption.

Corruption would continue until the government developed the political will to appoint an effective, independent anti-corruption entity, said Hoffman.

“Currently we pursue a multi-agency approach. The problem with this in relation to corruption is that too much falls through the cracks, with no specific agency having the necessary clout to take on corruption in high places.

“The Hawks are not as effective as the Scorpions; they don’t have the clout,” said Hoffman.

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