Small businesses are at a greater risk

Recently, at the Procurement Indaba held in Durban, Lindiwe Zulu, Small Business Development Minister, spoke of how small businesses are being stifled by procurement corruption.

“Corruption in procurement is killing small businesses as their bids are overlooked by procurement officials because they cannot afford to ‘pay the bribe price’.” she said. Zulu emphasized that if we want to build thriving and sustainable businesses that we have to confront procurement corruption head-on.

Secondly,the opportunities for small businesses have not been equal to those of their bigger brothers. This is a result of bureaucratic and costly procurement practices, which have been in favour of larger businesses.

Whistle Blowers Director, Dale Horne, states that, “Small companies are both disproportionately victimised by fraud and significantly under-protected by anti-fraud controls, a combination that could easily put them out of business.” For this reason, it has never been more important than it is now for SMMEs to put systems in place, which include whistle blowing services.

Whistle Blowers is South Africa’s leading independently owned corruption service provider, with 15 years’ experience, which does not only protect large corporates, but also has a cost effective solution for smaller companies. We offer our subscribing clients internationally, a 24/7 call centre, which is manned by highly trained multi-lingual staff. Our subscribing client employees can report irregular activities such as theft, fraud, bribery or any irregularities within an organisation, secure in the knowledge that their identities are protected.

Many of the issues identified by Whistle Blowers & Zulu are echoed in various credible international researches such as the 2014 Report to the Nations on Occupational Fraud and Abuse carried out by the Association of Certified Fraud Examiners (ACFE).

This report was based on 34 615 cases spread across America, Europe, Asia, Canada, Latin America, the Middle East and Africa (including South Africa) from October 2013 to December 2013.

Key findings of the report:

  • Smaller businesses were victimised in the greatest percentage of cases reported.
  • Small businesses are less likely to have hotlines or internal audit departments than their larger business competitors. (In South Africa, by law, listed companies now have to have a whistleblowing system in place. SMMEs do not).
  • Over 40% of all cases were detected by a tip off (more than twice the rate of any other detection method). Tips offs are consistently and by far the most common detection method. Furthermore, employees accounted for nearly half of all tip offs that led to the discovery of fraud.
  • The presence of anti-fraud controls ensure that fraud is detected quicker and hence, costs the unfortunate company less.

Horne feels that there is a growing pressure on small businesses to fall in line when it comes to both ethics and corruption fighting mechanisms. Their bigger clients require them to have whistleblowing mechanisms in place as their larger business competitors do.

When considering the budget of a small business, anti-fraud controls are generally the last thing on their minds. However, it is imperative to highlight that cost-effective solutions can be designed for companies with less than 50 employees. It’s an inexpensive service that provides much needed eyes and ears in an organisation. Investing in such services can therefore help to save SMMEs in the long run.

Going back to what Zulu said, if SMMEs no longer what to be stifled by procurement corruption, they have to tackle the issue head-on. By making use of a service such as Whistle Blowers, SMMEs can begin to make a large difference towards their futures and as a result, ward off potential corruption which could have fatal consequences to their operations.

 

 

 

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