HILARY JOFFE: Corruption in private sector has not gone unpunished — as it has in the public sector

The Steinhoff scandal came along just in time to give added ammunition for some of the speakers at the ANC’s conference to lay into the private sector and equate private corruption and fraud with the plunder and capture that’s been going on in SA’s public sector.

Even without Steinhoff, 2017 would not have been a great year for corporate SA, particularly for the reputation of professional services firms.

The Guptaleaks and investigations into Eskom scandals exposed the roles played by professional services firm KPMG, and global consultancies McKinsey and SAP in facilitating dodgy behaviour at the Gupta companies and at Eskom. KPMG’s reputation was savaged too by its flawed report for the South African Revenue Service on the "rogue unit".

And all of that came as the late and unlamented UK communications firm Bell Pottinger was put out of business thanks to the outcry against its Gupta-funded role propagating a racially charged "radical economic transformation" narrative.

SAP was quick to fire executives when it emerged that the firm had paid kickbacks to secure contracts, but KPMG and McKinsey, by contrast, were slower to respond to the clamour of protest at their conduct and by the time they took action, the reputational damage had been done. Both could make good case studies on how not to do crisis management.

None of this means, however, that SA’s private sector is just as corrupt as the public sector, and in the same way. It’s not meaningful or accurate to throw all these firms in the same allegedly corrupt pot

McKinsey still has not entirely come clean on its relationship with Trillian and the rich deal it did with Eskom; the consultancy, which was already losing clients even before the Trillian scandal, is believed to have cut the size of its local office by two thirds, shifting professional staff to other offices in its global network. How much damage the scandal has done to its global business is unclear.

KPMG has lost some of its large clients and will lose more business as clients decline to renew contracts. Though the firm did eventually take far-reaching action, shedding all of its top executives as well as its chair and bringing in new local and global executives to clean up the mess, there are still question marks over its survival in the South African market.

Now rival Deloitte is under the spotlight too, because of its role in auditing the Steinhoff companies. None of this has been good for SA’s reputation for high standards of auditing and of governance or for its corporate sector generally, especially given the dominance of the "big four" audit firms. Nor are these the only professional services firms that have shown poor judgment in taking on and retaining clients and taking on questionable projects.

None of this means, however, that SA’s private sector is just as corrupt as the public sector, and in the same way. It’s not meaningful or accurate to throw all these firms in the same allegedly corrupt pot. Indeed, in some cases they are not accused of corruption at all, if corruption means improperly inducing someone to do something they would not otherwise do. They may, instead, be guilty of plain old fraud. Or they may simply be guilty of stupidity, even greed. But corruption? Not necessarily.

So, for example, KPMG’s troubles were primarily about very poor judgment and quality control, from a firm on which clients relied precisely for its judgment and probity. By contrast, Corruption Watch has asked US authorities to investigat McKinsey under corruption legislation. And while at Steinhoff there is still little detail on what exactly Markus Jooste and his accomplices got up to, there can be no question that serious fraud was involved.

It’s not a simple equivalence, then, between corruption that’s become ever more endemic in the public sector and wrongdoing in the private sector.

But the much bigger point is that those private sector firms have been held accountable, at least to an extent. At KPMG, SAP and Steinhoff, executives and directors have been booted out for bad conduct or even just bad judgment. And at Steinhoff, there is a good chance that the ringleaders will go to jail eventually, in Germany if not in SA.

But where are the ministers, officials or state-owned enterprise directors who have been called to account or prosecuted for corruption?

As 2017 draws to a close, there have been clear lessons for corporate SA about the need to instill a much greater culture of integrity and ethical dealing, not just more rules. But as much as certain private sector players have enabled state capture and corruption, so too has the private sector in 2017 stepped up to try and halt it. Business has spoken out more boldly than ever, with organised business committing members to integrity.

At the same time, investors and lenders have used the leverage they have to try to force governance reforms at entities such as South African Airways and Eskom. All of which could make 2018 as eventful as 2017.