Corruption risk in South African mining highlighted by ‘staggering’ Corruption Watch data

Corruption Watch records complaints made by the public about corruption in South Africa and seeks to use the information to hold officials accountable for misuse of public resources. In its annual report for 2023 published earlier this month, it said it received 2,110 such reports last year and that 38% of those reports “focused on issues of wrongdoing and malfeasance in the mining sector”. Corruption Watch said that less than a quarter of the reports made to it about corruption in 2022 related to activity in the mining sector.

Edward James of Pinsent Masons described the data as “staggering” and said it highlighted the need for mining companies to take action to improve their anti-corruption policies and practices, including their whistleblowing procedures.

James said: “According to its data, Corruption Watch received about 800 reports from whistleblowers that related to mining. That is a staggering figure that should make mining companies that operate in South Africa pay attention, particularly in light of the newly introduced failure to prevent corruption offence that came into force last week.”

“The figures for mining-related whistleblowing can be compared with those concerning state-owned entities, which accounted for only 11% of the reports received by Corruption Watch in the same period. With there being widely publicised problems with corruption in South Africa’s public sector, the fact there was a significantly higher proportion of reports made about corruption in mining suggests mining companies face a difficult compliance landscape,” he said.

James said mining companies should ensure their anti-corruption measures are up to date, make sure that their compliance controls are adequate given the new law now in force, and take steps to evaluate their whistleblowing programs – and make sure that they work.

“Many mining companies will have their own whistleblowing hotlines and processes,” James said. “Given the very high number of reports to Corruption Watch, mining companies should evaluate their internal whistleblowing programs and ask themselves whether there are reasons why employees and stakeholders may feel that they need to report to third parties instead of through the internal channels that are available.”

“The risk of distrust or disillusion with the internal whistleblowing programs and investigations is that mines may miss the opportunity to do internal investigations before issues are raised with police or enforcement agencies. This could put them on the back foot as to enter into resolutions with many enforcement agencies usually requires proactive self-disclosure. This opportunity for resolution would be lost if a company has not been aware there was an issue before an enforcement agency comes knocking on the door. Your people need to trust your whistleblowing hotlines and that issues will be taken seriously and investigated properly. If they don’t, they will by-pass internal channels and report concerns elsewhere,” James added.

James has previously advised multiple mining companies on managing corruption risks in Africa, including how to implement effective whistleblowing processes and investigations. He has also investigated corruption cases in response to whistleblowing complaints and helped clients deal with the outcomes.