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Africa's energy sector heavily impacted by economic crime - survey

Nov 10 2017 22:00
Carin Smith

Stellenbosch - Africa is heavily impacted by economic crime in the energy sector, according to Chris Bredenhann, PwC Africa's oil and gas advisory leader.

A PwC report shows that in 2016 57% of companies surveyed indicated having experienced economic crime incidents, compared to 50% in 2014.

Corruption was regarded as the second biggest challenge faced by companies in the energy sector in Africa, the report found. The biggest challenge was regulatory frameworks.

In PwC's survey found that 16% of organisations in the energy sector said they had encountered bribery and corruption attempts. PwC said that, in the energy industry, large organisations are more susceptible to procurement and bribery corruption.

'Serious challenge'

"Corruption is consistently a theme raised regarding the energy sector on the continent. It is a serious challenge that needs to be addressed," Bredenhann said at a BEN-Africa conference on ethics and energy, which took place at Stellenbosch University this week.

The top types of economic crimes in the energy sector were identified in the survey as asset misappropriation (66%); procurement fraud (44%); and bribery and corruption (34%).

Increasingly worrisome was the issue of cybercrime in Africa's energy sector. According to Bredenhann, this increase is driven, in part, by the increasing digitisation of the energy industry. In the energy, utilities and mining sector, cybercrime was found to constitute 22% of all economic crime incidents.


Bredenhann said there was a "disconnect" between management's view of a situation, and the reality of what is happening in organisations on the continent. "Large tenders create opportunities and the greater potential of vultures coming in to try and take a share. Sometimes there is also political interest in decisions," he said. 

He emphasised that a passive approach to corruption was not acceptable anymore. Issues should rather be addressed and the opportunities for future similar incidents removed via "proactive programmes".

According to Prof. Divya Singh of Southern Africa and Stadio Holdings, ethics must be regarded as a financial, technology and environmental issue. "Energy has become a very ethical and social issue in SA, for instance regarding nuclear," she said during a panel discussion at the conference.

For Ivershini Reddy, head of enterprise risk and assurance at Engen, ethical issues in the energy industry were, at the end of the day, all about the core values of individuals and organisations.

"Make sure organisations are tested and walk the talk. Understand the gap between what executives believe and what is actually happening on the ground," she said.

"It is not about compliance, but about understanding behaviours and what executives need to do about it. Make sure the first person who behaves wrongly is acted against otherwise you perpetuate the behaviour."

Lukhanyo Ndube, CEO of the Kouga Wind Farm, said an environment should be created where ethical mind sets are changed within communities as part of companies' skills development spending.

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