As the world continues to respond to growing economic uncertainty, a climate crisis manifesting in various forms across the world and grave effects of the first land war in Europe for decades, it is critical that we also don’t lose sight of and address the issue of corruption.
When it comes to corruption, public sector corruption typically gets most of the attention. Despite the effects of government corruption, corruption in the private sector is also a systematic issue that acts as an enabler of the rampant public sector corruption or what economists refer to as demand-side corruption.
According to the UN, approximately $1 trillion is paid in bribes every year globally while more than two times that $2.6 trillion is stolen annually through corruption. This is equivalent to more than five per cent of the global GDP. A recent study by the International Monetary Fund found that private sector corruption can cost developing countries up to 5 per cent of their GDP each year with small and medium-sized enterprises being particularly vulnerable to corruption.
So, what is private sector corruption? Simply put, private sector corruption refers to unethical or illegal practices that occur within companies or organisations in the private sector such as businesses, non-profit organisations, or other entities that are not owned or operated by the government.
Private sector corruption is frequently referred to as supply-side corruption. Public and private sector corruption is highly intertwined considering government is often the largest spender procuring its goods and services from the private sector. As a result, corruption in the public sector is often mirrored in the private sector.
Private sector corruption can take many forms such as bribery, embezzlement, insider trading, price fixing, money laundering, fraud, tax evasion, commercial bribery, and undisclosed conflicts of interest.
What can be done to address this menace? Undoubtedly, a lot of progress has been made towards slaying the corruption dragon. According to the 2022 Transparency International Perception Index, Kenya is the 123rd least corrupt nation out of 180 countries. The country scored 32 points out of a possible 100, a slight improvement from a score of 30 points in 2021.
The Anti-Bribery law passed in 2016 is a step in the right direction as it provides a framework for the prevention, investigation, and punishment of corruption in both the private and public sector. The Act requires public and private entities to put in place procedures for the prevention of bribery and corruption that match their size, scale, and nature of operations. This prescribes penalties for private entities and individuals who fail to adhere to the provisions of the Act.
One such procedure is whistleblowing. Corporate whistleblowing mechanisms go a long way in addressing corruption in the private sector. Whistleblowing refers to the reporting of activities related to misconduct within an organisation through a designated channel. In recent times, whistleblowing has become an essential tool for companies that are committed to promote a culture of transparency and accountability.
At a regional level, there are numerous instruments that recognise the importance of whistleblowing. These include the African Union Convention on Preventing and Combating Corruption; African Peer Review Mechanism and the Southern African Development Community Protocol. Further, several countries have developed comprehensive policies and laws on whistleblowing. For instance, in South Africa as an administrative measure, organisations are mandated to establish structures that support whistleblowing among employees.
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This requirement encourages employees who notice any illegal activities to report to the established authorities as well as for these authorities to handle the matter before they evolve into a bigger problem. In Sierra Leone, the Anti-Corruption Agency set up a website for anonymous disclosures while the Mauritius Prevention of Corruption Act allows for anonymous reporting of corruption and the protection of whistle-blowers who report corruption in good faith.
Despite tremendous effort in the formulation of laws, procedures, and mechanisms for the protection of whistleblowers at both national and organisational levels, most employees and citizens do not report gross misconduct cases for fear of being ostracised and labelled as traitors.
What can be done to encourage whistleblowing? Efficient whistleblowing mechanisms must inspire more confidence and a sense of security. This will improve trust in the whistleblowing process among employees or partners, assuring them that their disclosures will be adequately addressed.
An employee will only report a wrongdoing or unethical behaviour if they are guaranteed that action will be taken, and their anonymity upheld. An organisation must provide a supportive and trustworthy platform that ensures a whistleblower feels safe to report unethical behaviour within the company. Companies can either operate internal systems or engage independent third-party whistleblowing systems to ensure oversight on what happens within the organisation.
For instance, Jubilee Insurance has put in place a whistleblowing policy that provides various channels for staff to articulate suggestions on process improvements or report any suspected wrongdoing for investigation and appropriate action. Staff can also report violations by suppliers and other stakeholders. The process is centered on safeguarding the whistleblower’s confidentiality.
Besides establishing whistleblowing structures, companies must put in effort to reverse the negative perception of whistleblowers and to advance the greater good of the organisation and public.
Whilst most blue-chip companies have whistleblowing procedures in place, most smaller private companies do not have formal mechanisms to detect and prevent corruption and other malpractice.
At first glance, the mandatory setting up of systems may seem like an extra cost for companies, but problems such as corruption, bribery and unethical behaviour are all risks that will result to loss when left undetected. The Blue Company is consistently running educational drives among its members around the role of whistleblowing structures in building an ethical business.