While it is important to distinguish between what is legal and what is ethical, there is undeniably a relationship between the two. Earl Warren, who served as US Chief Justice from 1953 to 1969, famously said that “the law floats on a sea of ethics”. This means that all laws have an underlying ethical foundation and are derived from ethical principles.

However, not all ethical issues can or should be legislated. For this reason, we still need sound moral reasoning in both our professional and personal lives to provide context to the legislative environment we find ourselves in.

On the other hand, legislation and regulation can also give impetus to the management of ethics in organisations. In South Africa, the Companies Act has elevated the importance of Social and Ethics Committees, while the King IV™ Report on Corporate Governance has promoted both the governance and management of ethics. In the Public Service, the Public Service Regulations require the ‘designation or appointment’ of Ethics Officers and place specific ethics management responsibilities on the Accounting Officer.

There is also a strong connection between ethics management and corruption prevention. Ethics Officers should be particularly mindful of the new requirement for companies to take steps to prevent corruption. This change, published in the Judicial Matters Amendment Act (Act 15 of 2023), creates a compelling incentive for companies to prevent corruption, not just among their staff, but also among third parties.

This legislation introduces Section 34A to the Prevention and Combatting of Corrupt Activities Act (PRECCA). Many will be familiar with Section 34, which required any person in a position of authority to report corruption involving R100 000 or more. Section 34A takes this a step further.

In essence, it states that any private sector company or incorporated state-owned entity will be guilty of corruption if it (or a person associated with it) is involved in corruption. (The full wording is included below.)

Prevention and Combatting of Corrupt Activities Act

“34A. (1) Any member of the private sector or incorporated state-owned entity is guilty of an offence if a person associated with that member of the private sector or that incorporated state-owned entity gives or agrees, or offers to give any gratification prohibited in terms of Chapter 2 to another person, intending to obtain or retain—

(a) business for that member of the private sector or that incorporated state-owned entity; or

(b) an advantage in the conduct of business for that member of the private sector or that incorporated state-owned entity: Provided that no offence shall be committed where that member of the private sector or that incorporated state-owned entity had in place adequate procedures designed to prevent persons associated with that member of the private sector or that incorporated state-owned entity from giving, agreeing or offering to give any gratification prohibited in terms of Chapter 2.

(2) For the purposes of section 34A(1), a person is associated with a member of the private sector or an incorporated state-owned entity if, disregarding any gratification under consideration, that person performs services for or on behalf of that member of the private sector or that incorporated state-owned entity, irrespective of the capacity in which such person performs services for or on behalf of that member of the private sector or that incorporated state-owned entity.’’.

There are two key aspects to this legislation:

Firstly, a company will be held liable if anyone associated with it is involved in corruption benefiting the company. This includes not only employees but also third parties providing services.

Secondly, (and possibly the most impactful aspect) is that no crime would have been committed if the organisation had in place “adequate procedures” to prevent corruption.

Some have interpreted this to mean that it is a crime not to prevent corruption. Some international legislation (notably France’s Sapin II) specifies that large companies commit a crime simply by failing to prevent corruption. South African law takes a slightly different approach, stating that if a crime is committed, it will be a defence if the company can prove it had “adequate procedures” in place to prevent corruption. This aligns more closely with the UK Bribery Act of 2010.

While PRECCA does not provide guidance on what constitutes adequate procedures, the UK Ministry of Justice has published extensive guidance for the UK Bribery Act.

It outlines six principles:

1. Proportionate procedures
2. Top-level commitment
3. Risk assessment
4. Due diligence
5. Communication
6. Monitoring and review

Importantly, it is not enough for an organisation to merely have these procedures in place on paper. They must be effectively implemented in practice and become an integral part of the organisational culture.

The changes in PRECCA are therefore crucial for Ethics Officers to be aware of. It provides a useful tool for highlighting the importance of ethics and anti-corruption work and serves as an impetus for promoting ethical culture within organisations.

On 5 March 2025, TEI is hosting a workshop on the Regulatory Frameworks for Governing and Managing Ethics. We will cover this legislation, as well as other laws, regulations, and codes relevant to Ethics Officers. Click here for more information.