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Cybercrime on the Rise

PwC’s Global Economic Crime Survey finds economic crime continues to be a significant issue facing South African organisations.

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South African companies have reported a significant increase in tax fraud and market fraud and to a lesser extent, insider trading as well, according to a new report issued by Professional Services Firm PwC today. Louis Strydom, head of PwC’s Forensic Services Practice, says that this increase is also reflected in a shift in the South African perpetrator profile towards senior management. In 2011, 36% of internal economic crimes were carried out by senior management, compared to only 17% in 2009.  “These economic crimes require access to sensitive information and more sophisticated ‘know-how’ which senior management usually possess”.

“These crimes have previously not been as prevalent in South Africa and the increase could suggest that organisations need to revisit their fraud risk management frameworks to ensure that they are able to deal with the emerging threats.”

Latest crime survey results

The Global Economic Crime Survey, which is carried out every two years, was conducted among 3 877 senior representatives from more than 70 countries. In South Africa 123 organisations across 19 industries took part in the survey. The study shows that economic crime remains a challenge for business leaders worldwide, particularly in South Africa where 60 % indicated that they had experienced some form of economic crime in the 12 months preceding the survey, compared to the global average of 34%. On the positive side, the survey found that this overall prevalence of economic crime in South Africa has decreased from 83% in 2005.

The decrease in the overall incidence of economic crime is as a result of corresponding decreases in the misappropriation of assets, bribery and corruption and financial statement fraud.  These three crimes have decreased steadily over the past six years. There can be a number of reasons for this. One of them may be that internal fraud risk management frameworks are making progress in South Africa and are getting better at detecting and preventing economic crime.

Further, given the focus of cybercrime in this year’s survey, some organisations may have classified other economic crimes involving the use of computers and the internet as cybercrimes instead.

Detection is key

Strydom says that detection is a key element in managing the risk of economic crime. The survey found that detection methods under management’s control were responsible for 69% of detections in South Africa, compared to 72% globally. This is encouraging as it vindicates the investment in anti –fraud controls. However, 14% of detections occurred by accident which means there is room for improvement locally.

The most effective detection methods were formal risk management procedures (including fraud risk assessments), automated suspicious transaction reporting (both contributed 16% of the detections) and internal audit (11%). The various tip-off methods (internal tip-off, external tip-off and formal whistle-blowing mechanisms), together contributed 20% of detections.

Given the effectiveness of formal fraud risk management structures, it is surprising that 28% of organisations had not performed a fraud risk assessment at all and 14% indicated that they were unsure whether any fraud risk assessment had been performed. The most common reason given by companies for not carrying out a fraud risk assessment was uncertainty about what such a risk assessment involves.

High levels of fraud

The countries that reported high levels of fraud (40% or more) include Kenya, South Africa, Australia and New Zealand, suggesting that fraud is not only endemic in developing countries. Jurisdictions that reported low levels of fraud (25% or less) include Japan, Indonesia, Italy and Greece. However, these results can be affected or distorted by ineffective fraud detection methods or the reluctance of organisations in those countries to report fraud.

For the first time since PwC carried out the survey, economic crime in South Africa is being committed equally by internal and external perpetrators. Globally, the majority of crimes are still being committed by internal parties.

Overall South African organisations resorted to criminal and civil action more often than their global counterparts. However, with regard to the most serious economic crime committed by insiders, South African companies took no action in 6% of cases, opted for employee transfers in 3% or warnings in 14% of cases. Strydom says this is worrying as it suggests that these perpetrators still remain within the organisation and may be able to commit further transgressions. It is important for organisations to demonstrate zero tolerance for economic crime and set the right tone.

Cybercrime significant

Cybercrime has emerged as a significant contributor to economic crime losses in South Africa and is considered the fourth most common economic crime after the misappropriation of assets, bribery and corruption, and financial statement fraud.  South African respondents indicated that reputational damage and direct financial loss were their two main concerns with regard to cybercrime.

Based on the PwC study, 60% of organisations felt that the risk of cybercrime had increased in the past 12 months, compared to only 39% globally. Strydom noted, “46% of South African respondents see the threat of cybercrime as exclusively external. Cybercrime usually requires access to protected information. Employees, agents, contractors, customers and other individuals that have access to an organisation’s premises and systems are likely to have access to such information.”  It is therefore important that organisations recognise cybercrime as an internal threat as well.

Based on the survey’s findings, South African companies and their global counterparts still have some way to go in dealing with cybercrime.

For instance, the findings also show that few organisations have all the elements of a holistic cybercrime prevention and response mechanism in place. Strydom says that one would expect the overall responsibility of addressing the risk of cybercrime, to lie with senior management.  However, the survey shows that in 10% of South African organisations the respondents were unsure who should be tasked with this responsibility. A further 37% thought the chief information officer should be responsible.

This is an interesting observation, as the King 3 Report on Corporate Governance recommends that the board deal with IT, which includes IT security.

Despite the declining overall prevalence of economic crime in South Africa, the risk remains pervasive and South African organisations will need to remain vigilant, especially in these depressed economic conditions.  Advances in technology are fast-paced, as are fraudsters. Those organisations ready to understand and embrace the risks and opportunities of the cyber world, will be the ones to gain competitive advantage in today’s technology driven environment. Establishing the right ‘tone at the top’ is key in the fight against economic crime.

For more information on the Global Economic Crime Survey, please visit: www.pwc.co.za/crimesurvey

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Great Bunch Of Entrepreneurs Make Top 10 In The Workspace/MiWay Competition

The top 10 in The Workspace/MiWay entrepreneur competition have been selected.

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After an intense four-month process, the top 10 contenders in The Workspace/MiWay Entrepreneur competition have been notified that they’re through to the next round. These entrepreneurs will pitch their businesses to the judges, who will then whittle down the number of contenders to five, from which the winner will be chosen.

“There has been great excitement over the past four months. As every single new entry came in, we would clap our hands and cheer,” said Mari Schourie, CEO of The Workspace. It was a tough job judging all the entries to reach the top 20 submissions, she said, before having to find the top 10.

“We’ve had really strong entries submitted by people with good business knowledge,” said Schourie. “You can see the willingness to work hard and the great amount of effort they have put into their initiatives.”

Schourie said judges saw “wonderful ideas and fabulous business minds and quality people with big dreams shine through the entries”.

The top 10 are:

  1. Loyal 1
  2. Dwyka Mining Services
  3. Minatlou Trading 251
  4. Sindis Best for all
  5. Convergence Three
  6. Zinde Zinde
  7. Matla Risk Management
  8. Artsort Trading
  9. Iconic Talent Agency
  10. Nthedikgwadi Transport Services

Related: How to Name (Or In Some Cases, Rename) Your Company

Schourie said she wished she could tell President Cyril Ramaphosa, who supports the growth of small business as an economic driver, “the ideas and the passion that these business owners have is inspiring and should be focused on more”.

The prize on offer – worth over R350 000 – will help set-up the winning entrepreneur for a period of 12 months, giving them a boost to help build their business.

Morné Stoltz, Head of Business Insurance at MiWay, said the theme that ran throughout the entries was that entrepreneurs wanted to make a difference and contribute to positive change in South Africa. “Many of the submissions focused on technical and developmental fields,” he said.

“Entrepreneurs recognise gaps in the market and see the potential for growth. Getting into the top 10 was not at all easy.”

Stoltz said South Africa had a “great bunch of entrepreneurs” and that standing together to give them a platform to launch was an exciting opportunity. “To grow our economy we need to help with skills development and give whatever assistance we can,” he said.

Part of the finalists’ road to the top includes a skills development programme for the top 10 entrants ahead of their important date to pitch their business plans to the judges.

As Schourie pointed out, it is vital to encourage South African citizens to act on their dreams and passions because “it can be a great success; they just need make that leap”.

Dates to watch:

  • 21 June: Top 10 skills development programme
  • 3 July: Top 10 pitches
  • 6 July: Top 5 announcement
  • 20 July: Final five workshops
  • 10 August: Final five pitches
  • 13 September: Winner announced

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Top 22 Start-ups Chosen For Final Selection Days – Startupbootcamp Africa

After receiving 1,004 applications from all over the world, the SBC team in conjunction with the programme’s corporate sponsors have narrowed the applicants down to 22 top-tier tech start-ups that will be invited to the Final Selection Days on July 11th and 12th at PwC’s headquarters in Cape Town.

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SBC Africa received 1,004 total applications from 77 countries on 5 continents. The start-ups that applied were exceptionally impressive and have gained more traction in the market than the applicants for the 2017 cohort. The talent in Africa is phenomenal and the corporate sponsors and SBC team dedicated 2 weeks to narrow it down to the Top 22 to be invited to Final Selection Days.

“It’s been an intense process due to the exceptionally high calibre of start-ups applying to the programme from across the continent,” states Philip Kiracofe, co-founder and CEO of Startupbootcamp Africa. “From 1,004 applications we have managed to narrow down to 22 of the most creative teams tackling daunting African problems. One of the key differentiators for start-ups that participate in the SBC Accelerator is the opportunity to secure commercial contracts with our sponsors. In order to make it onto our Top 22, each start-up has been chosen by at least 2 sponsors for potential proof of concept projects. The 2018 cohort is already shaping up to be a milestone moment for Africa.”

Related: How to Name (Or In Some Cases, Rename) Your Company

Zachariah George, co-founder and Chief Investment Officer of Startupbootcamp Africa added, “The investment community across Africa is taking note of the significant traction and access to market that being an alumni of a global accelerator programme like ours provides. We are excited to further galvanize venture capital funding into tech startups through significant de-risking of business models and customer validation with our corporate partners globally.”

From the 22 teams that have been invited to the SBC Africa Final Selection Days, 10 will be selected to join the 2018 cohort. Over the span of the two Final Selection Days, the startups in attendance will have the opportunity to present their pitches to high-profile corporate sponsors, investors, thought leaders and industry experts and will have the chance to sit down with mentors and sponsors alike. At the end of Day Two, the Top 10 will be announced and will be welcomed to the Cape Town-based Accelerator that kicks off in August. During the 3-month period, they will have the opportunity to scale at an incredible pace and seal pilot and proof of concept deals with the corporate sponsors to the programme.

The SBC Africa Accelerator is anchored and endorsed by heavyweight corporate sponsors RCS, BNP Paribas Personal Finance, Nedbank, Old Mutual and PwC.

“We’ve seen an increase in the quality of start-ups applying to the programme. The awareness of the value of the programme has increased and the success of the first year of the bootcamp speaks for itself. More mature start-ups are also seeing the benefits of participating in Startupbootcamp Africa,” comments Stanley Gabriel, Head of Innovation at Old Mutual.

The Top 22 start-ups invited to the Final Selection Days come from 7 different countries. The numbers are as follows: 8 from Nigeria, 5 from South Africa, 3 from Uganda, 2 from the Ivory Coast, 2 from Kenya, 1 from Ghana and 1 from Ireland.

Related: Entrepreneurship Is All About Overcoming Obstacles

The names of the start-ups invited to Final Selection Days by country:

  • Nigeria: Bankly Technologies, Biyabot, CredPal, FriendsVow, Kudimoney Bank, Medikal HMS, NebulaPay, and ZEEZZ Planet Solutions.
  • South Africa: Brandbookalytics Big Data, ifileme, LÜLA, Prospa, and Akiba Digital
  • Uganda: CoinPesa Ltd, RoundBob Uganda, and Swipe 2 Pay
  • Ivory Coast: Digitech Group, and DISTRICASH
  • Kenya: Kakbima, and MPost
  • Ghana: Inclusive Financial Technologies
  • Ireland: Pago Payments

It has been an incredible 3-month scouting journey for SBC Africa and now that the Top 22 have been announced, the Final Selection Days is the only hurdle left before the Accelerator officially kicks off on 13 August 2018.

There are high expectations for the Top 10 of 2018 and if the quality of the start-ups at this stage is any indication, 2018 is set to be a great success for the African tech and innovation ecosystem.

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She Works Hard For Her Money – So Pay Her On Time

Sage research finds that female entrepreneurs suffer more negative effects from late payments than men. Charles Pittaway, Managing Director of Sage Pay, comments on the importance of equal pay for equal work.

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Women fight inequality and discrimination every day. They fight for equal pay for equal work. They challenge gender stereotypes in their careers and personal lives. They question unfair social and political norms. They unify under passionate causes, evidenced recently by the #MeToo and #TimesUp campaigns.

With female business builders making up nearly 40% of the global workforce – and heading up 72% of micro-enterprises and 40% of small enterprises in South Africa – any kind of discrimination is unacceptable from a cultural and economic point of view, especially when it involves failure to pay what is owed.

The impact of late payments on small businesses has been widely discussed as an issue that must be eradicated for all entrepreneurs, regardless of gender. But inequality still exists and more needs to be done to eradicate it.

Recent research by Sage highlights that this discrimination doesn’t just impact women in large corporates. Indeed, it identified a worrying trend: female entrepreneurs are more likely to suffer from late payments than their male counterparts.

South Africa was among the six regions (out of 11) surveyed by Sage that reported higher instances of women business builders being paid late. Businesses run by female entrepreneurs in South Africa report that 18% of invoices are paid late and 10% of invoices are written off as bad debt.

Small businesses cannot absorb these costs nor the lost hours spent on admin – amounting to R564 000 in South Africa. The result can be disastrous: in the next 12 months, 1 in 4 female entrepreneurs will prioritise chasing late payments to be more cost efficient, and ironically will become less productive. If these businesses are not paid on time, they will also struggle to pay bonuses and suppliers, and will be forced to delay investments in their businesses.

Related: Watch List: 50 Black African Women Entrepreneurs To Watch

The fact that late or non-payments is a more common occurrence experienced by female entrepreneurs is part of a wider problem. Women report more instances of sexist comments, disregard for their business ambitions and lack of female mentors as significant underlying reasons why there is now a heightened cultural stigma around chasing late payments amongst female entrepreneurs – more so than men.

In South Africa, the stigma extends past culture, with 40% of Small & Medium Businesses failing to follow up on late payments to protect client relationships. Time and resources are also challenges, with 24% of small businesses saying they don’t have a dedicated resource to chase payments and 13% saying they don’t have time.

There is no place for bias in business – all entrepreneurs should be free to pursue their ambitions without suffering the consequences of these cultural barriers that are encountered far too often – regardless of gender.

Now is the time to disrupt and challenge these harmful stereotypes and create a force for good, making sure that small businesses – the engine room of all economies – are paid what they are duly owed for the services they deliver to our economy.

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