SA's company fraud second worst in world

About 62 percent of South African companies were victims of fraud in the last 12 months, more than twice the global average of 30 percent and the second highest in the world after Russia with 71 percent.

These are the findings today of the PricewaterhouseCoopers Global Economic Survey, the world's leading research programme into economic crime.

"We believe that the consistently higher figures for South Africa are indicative of a culture in which transgressions are divulged and increased transparency is divulged," the survey says.

While businesses would be "alarmed" that the majority of economic crimes (62 percent in South Africa compared to 53 percent globally) were perpetrated from within, and while this might be "disheartening," it should not really shock people, the survey says.

This was because employees had a greater understanding of the business being targeted and of the controls in place to prevent fraud.

And the profile of the internal fraudster was changing.

More middle managers were now committing crimes to maintain their living standards than previously (29 percent compared with 22 percent in 2007, the last time the survey was carried out, but 42 percent globally).

Some 3 037 companies in 55 countries took part in the comprehensive survey and Trevor White, the Durban-based director of PricewaterhouseCoopers, who is responsible for forensic services in KwaZulu-Natal and Swaziland, said this was the fifth survey. This time, however, it was carried out against the background of the economic downturn, he pointed out.


Theft was cited by 82 percent of South African companies (67 percent globally) as being the most pervasive form of fraud, followed by bribery and corruption, which at 59 percent was up 6 percent on the previous survey - and was more than twice the global average of 27 percent.

The increase in bribery and corruption...is an area for concern... We expect reported figures could be higher in reality and that there may be a reluctance to report this type of economic crime given the negative media attention that has followed a number of high-profile bribery cases reported in recent years," the survey says.

Some 39 percent of companies reported suffering from financial statement fraud (38 percent globally).

"Economic crime is pervasive, persistent and pernicious. No organisation and no industry is immune from the threat of fraud," White said.

"In these tough times, the temptation to inflate results or take part in other forms of financial statement fraud may overcome ethical values. In an economic downturn, financial targets may be more difficult to achieve, individuals may feel pressured, and their personal financial position may be threatened by reductions in pay or layoffs."

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