Out-Law Analysis 5 min. read

Zondo Commission: US-style bounties could boost South Africa whistleblowing

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The Zondo Commission report includes a recommendation that bounties be introduced to encourage whistleblowers in South Africa to lift the lid on corruption.

Bounties for whistleblowers have long been a point of debate for enforcement agencies and compliance practitioners, and are a well-developed part of the system in the US. The idea behind paying whistleblowers bounties is that there should be some incentive for them to take the personal and professional risk of blowing the whistle over and above simply doing the right thing. Some argue that without this incentive, many whistle-blowers will consider the adverse consequences of whistleblowing and simply choose to turn a blind eye.

While bounties alone will not solve South Africa’s anti-corruption challenges overnight, they will undoubtedly strengthen what commission chair Raymond Zondo described as “one of the most effective weapons” against corruption. If the recommendation is adopted, companies that operate in South Africa will need to be even more vigilant to ensure that they do not engage in any form of corruption as any employee may be lured to blow the whistle not only because it is the right thing to do, but also based on the prospect of huge financial rewards.

What has Zondo recommended?

As part of his inquiry into alleged ‘state capture’, Zondo reviewed the current legislation that applies to whistleblowers in South Africa and their protection. He concluded that the legislation, “although well intended”, is “deficient” in a number of areas: “It does not provide a clear-cut procedure for the whistle blower to follow; it does not sufficiently guarantee that the disclosures will be protected; it is not pro-active in providing physical protection; it offers no incentives to the whistle blower and it does not ensure that all such information finds its way to a destination with specialised skills in receiving, investigating and utilising such information effectively”.

Zondo described whistleblowers as “one of the most effective weapons against corruption”. We completely agree with this sentiment and, in our experience, reports by bona fide whistleblowers and subsequent investigation of concerns raised is the most common mechanism through which companies discover wrongdoing.

James Edward

Edward James


The idea behind paying whistleblowers bounties is that there should be some incentive for them to take the personal and professional risk of blowing the whistle over and above simply doing the right thing

Zondo’s observations, and recommendations to address the deficiencies he identified, extend beyond the issue of incentivising whistleblowers and include the mechanism of receiving allegations of public sector corruption, the agency that should be established to receive such reports and investigate concerns and the steps that should be taken to protect whistle-blowers. We do not deal with these aspects in this article and focus only on Zondo’s assessment of whether or not whistle-blowers should be “incentivised” to provide information.

In the report, Zondo provides details of a paper published in 2020 by the Public Affairs Research Institute (PARI). That paper recommended that South Africa should adopt a form of law called ‘qui tam’ to give private persons the right to sue perpetrators on behalf of the state and share in the reward if the civil litigation is successful. However, after considering this view, Zondo does not recommend the privatisation of recoveries from perpetrators in South Africa. Instead, he recommends that the contemplated regulatory body the Anti-Corruption Agency of South Africa (ACASA) should be empowered to enter into agreements to reward whistleblowers on the basis that they will receive a percentage of the proceeds recovered based on the strength of information provided.

We agree with Zondo that placing the burden on private parties to pursue civil litigation for some form of reward is not appropriate. In our view, this would not incentivise whistleblowing as intended given the costs, risks and other hurdles that would be faced.

How do bounties work in the US?

The most prominent example of a well-developed whistleblower bounty system is that of the US. There are many programmes and statutes in the US relating to whistleblowing, including:

  • the Internal Revenue Services (IRS) Whistleblower Program, which allows whistleblowers who report violations of tax laws to recover a percentage of the amount the Government is able to recover;
  • under statutes known as the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and the Financial Institutions Anti-Fraud Enforcement Act (FIAFEA), whistleblowers who report bank fraud may collect part of the recovery; and
  • the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) is the statue that some authors and commentators consider to be the most important piece of legislation relating to whistleblowers in the US. The Dodd-Frank Act contains a “bounty” provision for whistle-blowers who report violations to the Securities and Exchange Commission (SEC).

The Dodd-Frank laws are perhaps the most relevant as a comparison for the Zondo recommendations. According to the SEC, whistleblowers may be eligible for awards of between 10-30% of any monetary penalty when they voluntarily provide “original, timely and credible information that leads to a successful enforcement action”.

The SEC has paid out more than US$1 billion to 207 whistleblowers since 2012, with $500 million paid out in 2021 alone. However, as the purview of the SEC extends well beyond the enforcement of anti-bribery and corruption legislation, it is not clear how many of these payments related to corruption-based enforcement actions.

Under the circumstances, it is difficult to assess what impact the Dodd-Frank bounty laws have had on anti-corruption enforcement in the US. That said, we believe that the prospect of lottery level pay-outs certainly provides strong incentive for whistleblowers to come forward and report suspected corruption against the interests of their employers.

Should South Africa implement bounties?

Whistleblowers in South Africa often put themselves at great risk by speaking out against corruption and other illegal activities. Many whistleblowers face retaliation from their companies and are often suspended, facing disciplinary action, and possible risks to their personal safety. There is little to encourage whistleblowers from lifting the lid on corruption other than doing the right thing, which is often accompanied by significant occupational detriment and no prospect of any reward.

The implementation of bounties would help create incentive for bona fide whistle‑blowers and counterbalance the many negative considerations that whistle-blowers face. Their introduction will, however, require some careful consideration by the South African government.

A challenge that companies with well-developed whistleblowing systems have faced for many years is the submission of unfounded whistleblowing reports that are made in bad faith or without proper merit. Whilst bounties would incentivise bona fide whistleblowers to come forward, it could also incentivise speculative claims that may overload the new ACASA. As such, the ACASA would need to consider how it manages whistleblowing reports to efficiently filter out baseless claims as quickly as possible, to avoid dedicating more resources to investigations that should not continue.

At the same time, the expectations of whistleblowers will need to be managed. It typically takes years to properly investigate and prosecute corruption. This means that whistleblowers will likely not see any benefit for an extended period from the time when they blow the whistle, if at all. The ACASA will accordingly need to manage expectations, along with the public perception that may develop if whistleblowers report negative personal experiences based on misinformed views.

Finally, bounties alone will not solve the current challenges, including the personal risk to safety that a South African whistleblower may face. Zondo has made observations and recommendations on this that are not dealt with in this article. In our view the recommendations on bounties should not be considered in isolation and the government should consider the full set of inter-dependent recommendations made.

Additional research by Evaendren Naidoo of Pinsent Masons

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