The recent revelations about McKinsey & Company, SAP, and KMPG in South Africa over possible allegations of corruption have driven home a truism that many in the compliance space have known for some time: South Africa has become one of the most corrupt countries on earth. When you couple a structural requirement that is in every government contract with a non-South African company for a local content partner with an already corrupt system, you get a recipe for rampant corruption. Such would appear to be the situation in South Africa today.
Calls are ringing out for the resignation of the president of the country, as the Gupta family (brothers Ajay, Atul and Rajesh Gupta known for using the sitting President Jacob Zuma to control state business) is widely viewed as the true power behind Zuma. The Guptas’ fingerprints are on all the transactions involving McKinsey, SAP, and KPMG. Yet, this is only the highest profile allegations of corruption claimed to be ongoing in the country. Foreign companies are routinely directed to certain players under the requirement of the Black Economic Enterprise (BEE) requirement for a local South African partner. This alone is a well-known red flag under any anti-corruption compliance program.
With all the public information coming out of South Africa, it is not surprising to see reports that the FBI is now investigating U.S. companies with ties to the Gupta family. Is a Foreing Corrupt Practices Act country sweep with the Justice Department focusing on South Africa just around the corner? With South Africa’s continuing connection to Great Britain, the same question might be asked of the U.K. government and authorities under the U.K. Bribery Act.
For U.S. and U.K. companies doing business with the South African government, now is the time review your third-party risk management protocol for any local agents, distributors, or partners in South Africa. If your company comes under scrutiny through a follow-on case, it may well fare much worse than a company that cleans itself up sooner rather than later.