Doing Business In South Africa Requires Effective Due Diligence

Sadly, corruption is on the lips of virtually every South African in today’s world. In April 2022, the Civil Society Group Corruption Watch published its annual report for 2021, highlighting the types of corruption that have continued to affect the country post-pandemic.

Corruption Watch stressed that South Africa’s government has failed in its efforts to make real inroads against the root causes of corruption for the last decade. For the year in review, the group reported high levels of maladministration at 18% of all reports, procurement corruption (16%) and abuse of authority (16%).

These corruption acts include fraudulent activities in state institutions, compliance issues, procurement irregularities, and kickbacks.

Sadly this is not only happening in the government sector, and fraud and corruption in the procurement function of corporate organisations- such as illicit rebates, kickbacks and dubious vendor relationships are all too common. While the risk can never be entirely eliminated, a company can implement controls to reduce the likelihood of this occurring.

In South Africa, the basic due diligence checks that can be done include:
COMPANY

1. Company office search (CIPC) to understand the registration status of the company and the associated directors and auditors
2. Verification of the Broad Based Black Economic Empowerment (BBBEE) Certificate
3. Verification of the South African Revenue Service (tax) clearance certificate, which will show that the company is compliant in terms of company tax, employee tax and Value Added Tax
4. Verification of Unemployment Insurance Fund compliance certificate
5. Verification of the company bank account details
6. Company credit check to indicate any possible adverse financial information

Once the company information has been obtained and verified, the due diligence process can continue to assess details of the individuals involved in the negotiations or supply of products or services.

INDIVIDUAL DIRECTORS / SHAREHOLDERS

1. Verification of identity and contact details
2. Verification of bank account details
3. Credit check to indicate any possible adverse financial information
4. Reference checks
5. Social media risk assessment to determine reputation risk
6. Verification of association / industry registrations
7. Check against the South African Fraud Prevention Database
8. Checks against the list of Politically Exposed Person & Sanctions list