12th Global Fraud Survey Growing Beyond: a place for integrity
Regional insights: Africa
Perception of regulators and law enforcement authorities
Q: Thinking about regulators and law enforcement authorities in your country, which of the following statements best describes their approach to cases of bribery/corruption?
Base: All respondents (1,758) / Base: Africa respondents (125) (Africa countries surveyed: Kenya, Namibia, Nigeria and South Africa)
Africa respondents are the most likely to have experienced a significant fraud in the last two years.
Africa has some of the fastest growing economies in the world, in large measure driven by the extractive industries.
High commodity prices and demographic trends continue to attract substantial investment. The resulting strong GDP growth, including positive consumer spending trends, creates further investment opportunities.
Our Africa Attractiveness Survey 2012 estimated that new foreign direct investment projects will amount to US$150 billion by 2015.
This growth could be ever stronger if not for constraints arising from high levels of fraud and corruption. Across all the geographies surveyed, Africa respondents are the most likely to have experienced a significant fraud in the last two years. Similarly, corruption is consistently named in our Africa Attractiveness Surveys as one of the main perceptual barriers to investing in Africa. High-profile enforcement actions by Western regulators for corrupt conduct in Africa reinforce this perception. However, according to data from our respondents, many African companies seem unaware of the risks they take.
For example, while 85% of our Africa respondents are confident that their company is effectively managing the risks associated with third parties, only 55% reported that all their third parties are required to comply with their ABAC policy.
Towards greater accountability?
Until recently, African regulators launched comparatively few enforcement actions. Our survey shows significant concerns about resource or legal constraints hampering the effectiveness of local regulators with 36% of our respondents in Africa thinking that the authorities are not willing to prosecute. The two main reasons for this are insufficient resources (39%) and inadequate legal powers (35%).
In fact, many African countries already have robust ABAC legislation, a number of which include extra-territorial reach and ban facilitation payments. Additionally, in the last few years we have started to see African regulators commencing derivative actions against companies already under investigation by US prosecutors for alleged FCPA violations. Nigerian authorities, for example, have imposed multi-million dollar fines, comparable in size to US penalties, on companies and senior executives that have also settled cases with the US DoJ.
It remains to be seen whether these prosecutions foreshadow a more robust enforcement environment. In any case, the boards of companies with African operations need to be aware that they risk costly and possibly uncoordinated investigations by multiple enforcement agencies.