Corruption taints S.Africa's business community - CNBC Africa

Corruption taints S.Africa's business community

Southern Africa

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Fraud and corruption still mar South Africa's business community despite strict legislation.

Levenstein was recently found guilty and convicted of six counts of fraud and two on contravening the Companies Act. This was after the discovery of crimes committed between 1996, when Regal Bank first begun, and 2001, when it collapsed.  The company was then liquidated in 2004.

“We quite regularly see fraud moving into criminal liability, but we don’t often see criminal liability in terms of the Companies Act. I think that is particularly noteworthy,” Cynthia Schoeman, managing director of Ethics Monitoring and Management Services, told CNBC Africa on Thursday.

Company fraud, theft and corruption in South Africa is said to be costing the business community over 100 billion rand per year, and Levenstein’s case has set the precedent for the severe repercussions of fraud and corruption in business.

Another notable case of fraud is that of former Fidentia Asset Management CEO J Arthur Brown. Brown spent over a billion rand worth of widows’ and orphans’ money, which was kept in a trust, which had been invested in the company. He was then convicted of fraud and fined 150,000 rand. 

“While there are a number of fraud charges[in the Levenstein case], for me, it comes down to that Companies Act charge of reckless trading. It cost depositors and shareholders a fair amount of money,” Schoeman explained. 

“With the new Companies Act and the increased liability, the amount of insight and knowledge one needs to have of the company is far higher than perhaps it was in the past, and I think that’s appropriate, given what is expected of a director.”

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Levenstien was initially sentenced to 14 years in prison and a 500 000 rands fine for fraud, but his sentence was reduced to eight years by the country’s Supreme Court of Appeal.

“We see a lot in our press and we tend to view it almost as if South Africa’s cornered the market on corruption, especially in the public sector. In fact, that’s not entirely true,” said Schoeman.

“I think an organisation like Transparency International does very credible research and the sad news out of that, [is] about 70 plus per cent [of countries surveyed] fall below the halfway mark where one’s moving to very high levels of corruption.” 

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