Economic crimes in SA firms soar

JOHANNESBURG – Economic crimes in South Africa have soared 110 per cent since 2005 and companies, some listed on the country’s bourse, have lost on average US$1,1 million each through fraud, a new crime survey shows.

Companies in Africa’s biggest economy reported an average of 23 economic crimes each since 2005, almost three times the global average of eight incidents per company according to the PricewaterhouseCoopers (PwC) Global Economic Crime Survey for 2007, released yesterday. The findings of the study have added to an already worrying image of South Africa as one of the world’s major crime spots.The country has one of the world’s worst murder rates, and its incidence of rapes, carjackings and assaults are also extremely high, with some of the most violent types of crime rising last year despite efforts to beef up police forces.The PwC survey found that while the number of economic crimes almost trebled, the number of affected firms was down 13 per cent from 2005, with 72 per cent of companies reporting that they had fallen victim to economic crime compared to a global average of 43 per cent.PwC did not name the companies it surveyed.Louis Strydom, PwC’s forensics head in South Africa reported that although there were increased efforts to control economic crimes, fraud was still a major threat to local firms.”If we look at controls designed to detect and prevent fraud (they) have not proven to be effective,” Strydom said in a presentation of the findings.Local companies said they were mostly affected by asset theft, accounting fraud, corruption, bribery, money laundering and intellectual property infringement.The global average of financial losses for companies due to fraud was up over 40 per cent to 2,4 million, the report said.”The immediate response of most executives to an instance of fraud is “How much has this cost us?” …and our study has shown these amounts are substantial,” the report said.Apart from direct financial losses, companies affected by economic crime also suffered declines in share prices, poor brand perception and low staff morale.The survey polled executives in 103 companies, 71 per cent of which are listed on the Johannesburg Securities Exchange.More firms were willing to prosecute economic crimes than their global counterparts, the survey showed.Some 64 per cent of South African companies took criminal action against fraudsters compared to 50 per cent globally, while 51 per cent dismissed employees compared to the global average of 40 per cent.Nampa-ReutersThe findings of the study have added to an already worrying image of South Africa as one of the world’s major crime spots.The country has one of the world’s worst murder rates, and its incidence of rapes, carjackings and assaults are also extremely high, with some of the most violent types of crime rising last year despite efforts to beef up police forces.The PwC survey found that while the number of economic crimes almost trebled, the number of affected firms was down 13 per cent from 2005, with 72 per cent of companies reporting that they had fallen victim to economic crime compared to a global average of 43 per cent.PwC did not name the companies it surveyed.Louis Strydom, PwC’s forensics head in South Africa reported that although there were increased efforts to control economic crimes, fraud was still a major threat to local firms.”If we look at controls designed to detect and prevent fraud (they) have not proven to be effective,” Strydom said in a presentation of the findings.Local companies said they were mostly affected by asset theft, accounting fraud, corruption, bribery, money laundering and intellectual property infringement.The global average of financial losses for companies due to fraud was up over 40 per cent to 2,4 million, the report said.”The immediate response of most executives to an instance of fraud is “How much has this cost us?” …and our study has shown these amounts are substantial,” the report said.Apart from direct financial losses, companies affected by economic crime also suffered declines in share prices, poor brand perception and low staff morale.The survey polled executives in 103 companies, 71 per cent of which are listed on the Johannesburg Securities Exchange.More firms were willing to prosecute economic crimes than their global counterparts, the survey showed.Some 64 per cent of South African companies took criminal action against fraudsters compared to 50 per cent globally, while 51 per cent dismissed employees compared to the global average of 40 per cent.Nampa-Reuters