South African government urged to tackle fraud !-- Economic Crimes on the rise .

South African government urged to tackle fraud

Pretoria, the capital of South Africa: fraud is a hot issue post-World Cup
2010 | Nick Martindale

The South African government must to do more to address the billions of rand lost to corruption in public sector procurement.
The warning comes from fraud analysts speaking to SM at a time when the country is in the spotlight as the host of the football World Cup, the final of which takes place today.

Marko Vogler, chief executive and founder of South Africa-based the Fight Against Corruption and alliance partner to tendering tool supplier Sentigol, estimates around 20 per cent of the government’s annual procurement budget of R150 billion (£13 billion) is lost to corruption.

“Much of the loss is through rip-offs, overpricing, tender rigging and manipulation,” he said.

Legislation to challenge corruption has a limited impact, he said, but deploying effective IT packages to overhaul procurement could make it much harder for people to defraud the system.

Speaking elsewhere, Mike Roos, director at Barnstone Fraud and Risk Services, outlined some of the problem areas: “Bid-rigging, tender irregularities, fronting, and the many different ways to compromise payment processes, including changing bank account details or hacking into the system to change payment details, are all major national trouble spots.”

Developing comprehensive anti-fraud policies and effective risk management strategies were key to stamping out fraud in the country, he added.

But Hilda Mulock Houwer, advisory partner at KPMG Johannesburg, told SM better disclosure practices meant more fraud was now being reported in South Africa.

“There’s not necessarily been an increase in the number of fraudulent transactions,” she said. And much of the fraud that took place in South Africa tended to be lower-value transactions under €15,000 (R144,000), she added.

Meanwhile a global survey by PricewaterhouseCoopers into public sector fraud revealed 37 per cent of government-owned enterprises had seen an increase in economic crime in the past 12 months, higher than any other type of organisation.

Fears over job losses, more difficult targets and a desire among senior management to achieve better results were seen as the main motivations to commit fraud.

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Customs fraud destroys South African jobs
The SA Clothing and Textile Workers' Union (Sactwu) on Thursday, 24 February 2011, said it supported the comprehensive response issued by the Congress of SA Trade Unions (Cosatu) regarding Finance Minister Pravin Gordhan's Budget speech, but wished to draw specific attention to issues affecting the manufacturing sector and the clothing, textile, footwear and leather (CTFL) industry.
"We believe that the allocation towards the production incentive for the CTFL industry, as well as other allocations such as the jobs fund and tax incentives will further help to stabilise this industry by securing employment and industrial capacity," Sactwu said.

The union urged government to ensure that incentives were linked to commitments by businesses to grow employment and comply with tax and labour laws.

Gordhan on Wednesday said that additional allocations had been made in the 2011-12 Budget in support of industrial and economic development over the medium term, and this included clothing and textiles production incentives.

"We are especially encouraged by the announcement of a major programme to tackle customs fraud in the clothing and textile industry. While we have seen some good work recently from the SA Revenue Service to deal with this problem, a better resourced and co-ordinated programme is required. Customs fraud does not only destroy South African jobs, it also deprives the fiscus of income," it said.

One third illegal imports

Sactwu added that the need for this initiative was reflected by the fact that an estimated one third of all clothing and footwear sold in SA was imported illegally.

"For some time, we and Cosatu have been calling for a revision of the mandate of our Development Finance Institutions (DFIs) to allow these to focus much more on the creation of decent work and we appreciate that our call has been heeded with the establishment of a Development Finance Institutions Council," it said.

The union said it feared that the focus on the manufacturing sector, especially the allocations towards it, would be undone by SA's overvalued currency.

"We welcome the fact that the Budget commits government to investigate further tools, including tax and regulatory measures, to deal with the strong rand and we urge government to adopt such tools because while the rand has weakened recently, we fear that this is not because of the current tools utilised, such as the purchase of foreign reserves, but rather because of investment decisions taken by third parties.

"We need to be equipped to deal with future inflows of speculative investments," concluded the union.
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