SOUTH African organisations reported a considerably higher frequency in the incidence of economic crime in comparison to their African and global peers, with more than two in three organisations (69 percent) indicating that they had been victim to economic crime in the last 24 months, according to PwC’s biennial Global Economic Crime Survey issued earlier this month.
Louis Strydom, forensic services leader for PwC Africa, says, ‘Economic crime remains a serious challenge to business leaders, government officials and private individuals in South Africa. In this survey, we have found that the trend has remained unchanged from 2014, with 69 percent of South African respondents reporting that they had experienced economic crime in the last two years.
‘When compared to the global statistic of 36 percent, we are faced with the stark reality that economic crime is at a pandemic level in South Africa. No sector or region is immune from economic crime.’
Sixty-eight percent of French and 55 percent of UK respondents also reported high increases in the rate of economic crime in the past 24 months, both up 25 percent when compared to 2014. Sixty-one percent of Zambian respondents reported economic crime, up 31 percent over 2014. ‘The fact that developed countries are included in the list of the top ten countries reporting the highest rates of economic crime brings home a clear message – economic crime is a global issue and one that affects developed markets as much as it does emerging ones,’ adds Strydom.
According to the survey findings, South Africans also exhibited significantly low levels of confidence in local law enforcement agencies, with 70 percent of organisations believing agencies are inadequately resourced and trained to investigate and fight economic crime. This is almost twice the global rate of 44 percent.
The 2016 Global Economic Crime Survey interviewed 6,337 participants in 115 countries. In South Africa, 232 organisations from a broad spectrum of industries took part in the survey. The main aim of the survey is to inform South African business leaders about developments in the continuously changing landscape of economic crime in the country and to encourage debate around strategic and emerging issues in this sphere.
The survey found that asset misappropriation remains the most prevalent form of economic crime reported by 68 percent of respondents. It is followed by procurement fraud (41 percent), and bribery and corruption (37 percent). Cybercrime has risen to the fourth most reported type of economic crime in South Africa (up two places from 2014), with 32 percent of organisations affected, on par with the global average.
Economic crime is costing businesses billions of dollars. While more than half of the global organisations surveyed reported having lost less than $100,000 to economic crime over the last 24 months, only 43 percent of South African organisations could make that claim. Almost a fifth of local respondents experienced losses of between $100,000 and $1 million, and one in four respondents indicated having suffered losses of more than $1 million.
Trevor White, partner, Forensic Services and Global Survey Leader, PwC says, ‘While it is a positive sign that there has been increased detection by means of whistleblowing hotlines, far too much, is being left to chance by organisations – economic crimes discovered by accident more than doubled from 6 percent in 2014 to 14 percent in 2016. Another eight percent of survey respondents could not even tell us how serious economic crimes against their organisations were detected.
‘With a greater focus in recent years on the responsibility of management and boards insofar as good corporate governance practices are concerned, ignorance of matters affecting your company, and in particular a passive approach to detecting and preventing economic crime – is an open invitation for disaster, not only from a corporate perspective but on a personal level as well.’