SOUTH African businesses are buckling under the cost of crime during tough economic times – but the perpetrators are often where companies least expect to find them.
“The threat comes from within,” warns Reg Horne, managing director of Justicia Investigations, one of South Africa’s largest privately owned investigation agencies.
Horne says that businesses often spend large amounts on security to combat external threats without putting in place systems to counter internal ones.
“Yes, you need visible security. But it will not matter if you have three or 20 security guards. If you do not know where the problem is, the threat remains. Currently, on-the-ground investigators have noted two interesting trends”, he says.
“The problem is not large corporate frauds but the ever growing number of smaller crimes that constantly add up – and these are usually perpetrated by employees further down the line and not by top management as might be expected,” he said.
A 2016 PricewaterhouseCoopers (PwC) Global Economic Crime Survey showed that commercial crime was on the rise but had reached crisis proportions in this region. More than two out of three (69 per cent) South African companies reported having been victims of crime during the 24 months preceding the survey.
At double the global average of 36%, this positioned South Africa as the top country reporting economic crime.
Horne says that recent Justicia cases, which have included the disappearance of large amounts of fertilizer between storage facilities at an agricultural processing company, the presentation of signed delivery notes for oil that never arrived at its destination but had been sold off to a syndicate en route, the diversion of supplier payments to the banking account of an accountant’s relative and the “sale” of fabrics from a clothing company warehouse were just the tip of the iceberg.
“Unfortunately, cases like this happen daily. Businesses need to fight back to survive. Right now, they’re under siege from their own staff as well as from opportunists who know how to exploit employees when times are difficult,” he observes.
Horne says many fraudulent schemes are often only detected by accident when losses have accumulated over longer periods. This is particularly true during tough times as companies tend to keep a closer eye on cash flow and look inward to better manage processes in order to cut costs.
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