OECD Convention on Combating of Bribery of Foreign Public Officials in International Business Transactions: discussion

Meeting report

PORTFOLIO COMMITTEE ON PUBLIC SERVICE AND ADMINISTRATION
20 October 2005
OECD COVENTION ON COMBATING OF BRIBERY OF FOREIGN PUBLIC OFFICIALS IN INTERNATIONAL BUSINESS TRANSACTIONS: DISCUSSION

Chairperson: Mr R Baloyi (ANC) (Acting Chair in the absence of Mr P Gomomo)

Documents handed out:
Department Presentation: OCED Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
Department’s presentation

SUMMARY
The Committee was briefed by the Department of Public Service and Administration on the OECD Convention on the Combating of Bribery of Foreign Public Officials in International Business Transactions. Parliament’s approval was required before formal accession to the Convention could take place.

Members were concerned by the Convention’s specific focus on the bribery of foreign officials, and questioned whether other forms of corruption were sufficiently dealt with in national legislation or multilateral instruments to which South Africa was a party. Members questioned South Africa participation in the Convention given the lack of involvement by other African countries. The Department responded that South Africa had been invited to the accede to the Convention and participate in the respective OECD Working Group because of its economic, political and social relations with the rest of the continent. Implications of accession in terms of changes to legislation and budgetary matters were queried. The Department assured the Committee that no changes to national laws would be required, and budgetary implications would extend only to a membership fee payable to the OECD that could easily be accommodated by the Department’s budget.

The Department stressed the potential non-legal benefits of South Africa acceding to the Convention. As a Working Group member, South Africa would be strategically placed to influence debate within the OECD, in particular, on the issue of the business dealings by multi national companies in Africa. The OECD was also an important potential source of knowledge and expertise that South Africa could draw on.

MINUTES
Presentation by the Department of Public Service and Administration (DPSA)
Mr R Kitshoff (DPSA, Manager: Public Sector Anti-Corruption Unit) explained that in 2004 the Minister had submitted to the United Nation South Africa’s wish for South Africa to accede to the OECD Convention on the Combating of Bribery of Foreign Public Officials in International Business Transactions. The Secretary General had set out the requirements for accession, and South Africa had agreed in principle. South Africa’s legislative framework needed to be engaged to ensure compliance with OECD requirements. The OECD Committee had completed its evaluation and had decided to invite South Africa to accede to the Convention. The purpose of the meeting was for Parliament to express its views before South Africa could formally accede to the Convention.

Ms I Bodasing (DPSA, Public Sector Anti-Corruption Unit) provided a background to the OECD and South Africa’s relations with it to date. The Convention was outlined in brief, both in terms of its main goal to utilise domestic laws to criminalise the bribery of foreign public officials, and also in terms of activities to which the Convention did not apply. The role of non-members of the OECD was explained. The OECD engages in a number of outreach activities in order to secure the accession of a broad range of non-OECD countries and to provide a forum for consultations with those countries that have not yet adhered to the Conventions requirements. It was against this background that South Africa had been invited to accede and the factors that would have influenced the OECD’s invitation were set out. The benefits of being a non-member participant in the Working Group on Bribery in International Business Transactions were highlighted. The implications of accession were outlined in brief. Potential gains for South Africa and the continent as a whole were listed, and the fact that South Africa had existing legislation to meet the demands of accession was demonstrated.

Mr Kitshoff added that historically the OECD was a rich source of information for the practical training of government and private sector employees. This was a good opportunity to gain knowledge. He also stressed that the target reviews of OECD were developmental in their approach. This opportunity to draw on the expertise and advice of peers would be beneficial to South Africa.

Discussion
Mr R Ntuli (DA) stated that this topic was pertinent to the whole continent. He found the fact that the Convention did not apply to forms of corruption other than bribery disturbing. What was the explanation for this technical exclusivity? What would be done about the private sector and economic imperialism?

Mr N Gcwabaza (ANC) wanted to know how forms of corruption other than bribery would be covered if this Convention did not do so. The effect of corruption was the same. The mention of the involvement of the private sector with regard to training was noted. However, the Convention seemed to ensure that a Public Official could be disciplined but seemed to exclude officials in the private sector from such discipline. The Convention did not appear strong on dealing with corruption in the private sector. He questioned what the implication would be for BEE and SMMEs who may not have the financial power to deal with Multi National Companies (MNCs). He felt that it was not clear whether the task team (as mentioned in the presentation) was already in existence or whether it would be formed after South Africa’s accession to the Convention.

Ms M Matsomela (ANC) noted that South Africa was currently not a member of the OECD and asked what it would take for South Africa to become a member and how far the country was from becoming a member. On the assumption that the implications outlined were based on South Africa’s position as a non-member, she what the implication would be, should South Africa become a member of the OECD.

Mr Kitshoff began by explaining the basic function of the Convention with an example. If a South African businessman wanted to open a franchise in Senegal and bribed an official from that country for a permit to do so, he would be guilty under this Convention. The Convention therefore dealt with private businessmen bribing public officials to gain access to markets in other countries. It was a specific convention. However, there were a range of regional and international instruments dealing with other forms of corruption. Additionally, national legislation dealt with other forms of corruption.

In answer to the concern regarding the implications for SMMEs, Mr Kitshoff pointed out that history had shown the MNCs to be largely responsible for such bribery. When such behaviour was eradicated SMMEs would be able to compete on a more equal footing and the previous advantage of MNCs would be removed. However, it was also necessary for MNCs countries of origin to criminalise such behaviour in their domestic legislation. Most MNCs were from OECD members countries.

The Working Group on bribery did already exist. If Parliament agreed that South Africa should accede to the Convention, South Africa would become a member of the Working Group. This would place South Africa in a position to influence the debates and, in particular, the debate on how MNCs affect businesses in developing countries. It was easier to influence a debate from the inside.

The chairperson enquired about other instruments that covered corruption. He referred to the AU, UN and SADC Conventions, all of which spoke of crime and corruption. However, he was not aware of other examples that emphasised single manifestations of corruption to the extent that the OECD Convention did. He asked if there was a reason for this specific focus, or if it was based on prevalence, which would suggest this form of corruption to be the most common. If this were so, he asked what were the indicators had been.

Mr Gcwabaza asked what the budgetary implications of acceding to the Convention would be.

Mr Kitshoff stated that part of the reason to the specificity of this Convention was historical. The OECD Convention had been the first legal initiative dealing with corruption. The SADC Protocol had followed the OECD Convention, followed by the AU had then the UN. At the time of drafting, that specific problem had been identified and the OECD Convention had sought to deal with that issue alone. However, the world quickly recognised the problem of corruption to be much wider. Each of the following conventions had dealt with the issue in an increasingly comprehensive manner. It was therefore difficult for a country to define a narrow legal definition in terms of its national legislation, within the wider framework provided by regional and international instruments. The nature of corruption meant that new permutations would continue to arise, requiring different policy reactions.

There were two potential budgetary implications. The most obvious was the need to pay a membership fee to the OECD. The benefits gained would far exceed this annual subscription which would be easily absorbed by the Department’s budget. The second potential implication was on the capacity of the South Africa Police Services and the Scorpions to police and enforce the new laws. The Department viewed the current capacity as adequate for this purpose.

Ms Matsomela asked about the level of participation of other African countries. She questioned why they were not members of the OECD, as South Africa was one of the youngest countries in the continent to be liberated. She asked why other countries had not participated.

The chairperson asked, with reference to Article 5 of the OECD Convention, what the implications for South Africa’s domestic law would be if the country acceded to the Convention and became a member of the Working Group. He asked for clarification on the question of punishment, in particular the proportionality requirement. He queried the mention of an ‘adequate period of time for investigation’ in Article 6 and asked for further information on this. Referring to Article 10 of the Convention he asked whether acceding to the Convention would result in other treaty obligations being overridden. He enquired as to the possible challenges that South Africa would face against the background of Ariticle 10, and asked if these had been weighed against the anticipated gains.

Mr Kitshoff replied that although the Convention dealt with this specific form of bribery, it could be argued that later conventions had surpassed it, rendering it unnecessary. However, the material benefits of South Africa acceding to it went beyond the technical legal reasons for doing so. As an example, interest from foreign investors would probably increase as a result of South Africa’s accession to the Convention.

It was difficult to comment on the degree to which other African countries were attempting to participate in the Convention. For years, many African countries had viewed the OECD suspiciously as being an ‘old boys club’. Although there was truth to this, there were real benefits to be had from joining.

Ms Bodasing added that the reason for South Africa being a focus of the OECD, despite its young democracy, was that it had a major role to play in political, economic and social relations on the continent. The OECD stood to gain from this and that was why South Africa, rather than other African countries, had been targeted.

The process leading up to the decision to invite South Africa to accede to the Convention had involved a rigorous assessment of South Africa’s national legislation. It was therefore unlikely to require changes following accession. This would be subject to review and assessment throughout their membership, but the approach of the OECD was developmental and aimed at providing support.

The requirements of Article 6 would not affect national law. Given that this was a trans-national offence, there was a need for countries to cooperate with each other. A short time limit for the investigation into such a matter would therefore not be appropriate. South Africa’s current national laws complied with the requirement.

Article 10 did not expressly say whether the Convention took precedence over other agreements. However, if a convention wished this to be the case, it usually expressly stated so. Article 10 simply said that if no agreement existed in another treaty, the Convention could be considered as the basis for cooperation and did not refer to precedence.

As far as sanctions were concerned, the provision in the Convention was general. The punishment must equal the offence. It might often be the found that the offence was not serious enough to be worth prosecuting. However, if the nature of the offence were serious enough, the monetary value of the claim may be irrelevant. The Convention provided that processes or property of equivalent value would be subject to search and seizure powers. Money laundering laws should also come into play. In essence, relevant laws governing all aspects of the offence would be available for application.

Mr Kitshoff stated that the challenge faced when crafting regional or international instruments was that they could not be too narrow in binding states or else no one would enter into them. However, they must not be so wide as to make them meaningless. Flexibility was needed to enable states to create national legislation which was both acceptable to each state and within the spirit of the convention.

Mr Gcwabaza questioned the relevance of the tax deduction clause.

Ms Bodasing explained that in the years preceding 1997, developed countries had operated in developing countries in a manner where it was accepted practice for MNCs to pay bribes to public officials. Such payment had allowed as a tax deduction according to the national tax laws in developed countries. Based on public outcry as a result of this practice, the Convention had come into force. Such behaviour had therefore been specifically included as an offence, and could not be deducted against tax liabilities. South Africa had never been in this position and therefore did not provide for the disallowance of bribe money as a tax deduction. There would therefore be no need to mention it as it was only a obligation belonging to European countries.

The chairperson thanked the Department for their briefing.
The meeting was adjourned.