Compliance, corruption, collusion

With government’s aim to create an environment to stimulate economic transformation, has come a plethora of demands upon companies to comply with such initiatives as black economic empowerment (BEE) on top of compliance with local and international financial standards, addressing corruption, tax compliance, labour legislation, social responsibility and skills development expectations and more.

The legislative list is tediously long, the multiple controlling and overseeing councils and bodies potentially overwhelming. However, what is in place is intended to take this country forward for the next 20 years and enable it to competently operate in the fierce global market.

Not all industry sectors are behaving with equal diligence, with South Africa’s wholesale and retail sector the biggest culprit and seriously lacking in compliance with labour legislation.

More than 70% of complaints in the 2013/2013 financial year were related to wage variables in this sector. The Commission for Conciliation, Mediation and Arbitration (CCMA) is also seeing a steady rise in its workload, with a 25% increase over the past five years — probably because South African citizens find access to these types of organisations for support becoming easier.

If South Africa wants to rise above its world-wide ranking as the 72nd most corrupt country out of 177 countries, it needs the government to set the right example in terms of compliance.

Baba Zoumanigul, IBM’s vice-president of software group for Middle East and Africa says: “It is about effective leadership, with leaders who have integrity — who follow the value of having nothing to hide, therefore nothing to fear.

“There has to be framework. It is simple. Understand the requirements and simply get on and deal with them.”

The country has risen from a ranking of 38 in 2001 to its new position, which could also be attributed in part to the level of service delivery protests by a public that is utterly fed-up with extravagent government promises not being met and is intolerant of the abuse of public funds and resources, as well as an increasing desire to report corruption to independent, citizen-serving organisations.

Keeping it simple
On top of any company’s existing internal processes and procedures, company compliance officers — many of whom manage other portfolios such as finance or technology — find the pressure of overseeing external compliance very high, testing their sanity and that of their teams.

Graham Meyer, the financial director of telecommunications company Tellumat says: “The compliance environment has offered us both opportunities and challenges.

“We have tried to keep compliance as simple as possible, but there is a lot of additional work to ensure the correct levels of compliance are maintained.

“Tellumat having a defence division means stringent additional compliances to maintain and having to consider such regulations as disarmaments and arms control policies and conditions.

“The B-BBEE codes have been one of the more noteworthy systems impacting Tellumat, although these we believe have been a positive step forward for the country.

“The speed of implementation especially by government themselves was a hindrance in the early years but more recently the concept has been well embraced.

“However the new codes just gazetted are a major change and only time will tell whether this has been a good move or not. When legislation becomes a stick and not a carrot, its effectiveness can wane.

“Unfortunately it will take a few years before the full change process is complete and businesses have recalibrated themselves to the new levels and what is acceptable. The transition time is often turbulent.”

Meyer says other worthwhile initiatives have been the department of labour workplace skills plans and sector education and training authority contributions, believing these have been a positive step forward for the country and definitely have assisted in focused spend on skills development through training and learnerships and on improving workplace employment equity balance.

Vibrant local manufacturing
“For many years the government spoke of support for local manufacturing but the reality did not match the rhetoric,” says Meyer. “Recently this has definitely improved with the implementation of the Preferential Procurement Policy Framework Act in December 2011 and we have seen the results.

“Recent government tenders demonstrate local manufacturing content actually being achieved, examples of which can be seen with the renewable energy independent power producers and Transnet’s rolling stock replacement project.

“The television and computer monitor manufacturing sector has also definitely benefitted since 2010 from the import duties imposed on imports. This has helped create a vibrant and competitive local manufacturing sector.”

According to Meyer, how to maintain a sane working environment that encompasses applying polices and frameworks is “a difficult question, but one must always ensure that sound business principles are followed first and foremost”.

“We have to ensure that our businesses are positioned and structured to survive through what are challenging economic and social times, particularly in South Africa — and unquestionably meet the needs of our customers.

“These needs are often searching, covering the full spectrum of requirements, from value for money, to quality, to communication and more often than not, compliance with the many transformation requirements.

“We do feel often that we are walking a tightrope and the sanity is in keeping sharp so that we do not fall off along the way.”

Promoting receptivity
Along with financial institutions, information technology and telecommunications, which are among the strictest regulated industries, gambling and casino management is also constantly under scrutiny.

Phumelela Gaming and Leisure’s manager for risk and compliance, Qhinaphi Sitsila, says B-BBEE compliance has become an important aspect to the company over the years.

“We are a highly regulated company and had regulatory requirements to obtain a Level 2 B-BBEE ranking by 2015 and beyond. We were very proud to get our Level 2 two years earlier than the requirement, achieving this in 2013.

“The gambling industry has embedded economic transformation elements as part of the licensing conditions the company needs to comply with and, as a result, the company is highly focussed on these elements and the compliance thereof.

“We try and keep things as simple as possible to promote a receptive culture of compliance in the company. However we do have systems and administrative procedures in place for guidance.

“The compliance division provides an advisory role,” says Sitsila, “while the company also has a risk and compliance committee consisting of all heads of divisions, meeting on a regular basis to discuss and resolve company compliance issues. Strategies and frameworks implementation are also focussed within this forum.”

Like any organisation, when it comes to compliance, the government needs time to make the right adjustments without deviating too far from its objectives. Compliance and legislation driven by government are bearing fruit and things are changing .

However, the government’s challenge will be to ensure it also puts in place the type of incentives to make compliance viable.

Above all, it must gain respect, otherwise business corruption will continue as companies find every possible way to cut through or entirely avoid the red tape involved.

This article has been made possible by the Mail & Guardian's advertisers. Content and photographs were sourced independently by the M&G supplements editorial team, unless otherwise indicated. It forms part of a larger supplement

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