South African businesses have earned praise for their resilience in the face of institutional dysfunction, but this adaptability has its limits. As business leaders gathered at the Johannesburg Chamber of Commerce and Industry's annual conference on October 28, they discussed governance, ethical leadership, and economic resilience. The conference highlighted the challenges of building sustainable competitive advantage in an environment where institutions fail to perform their basic functions. With South Africa scoring 41 out of 100 on Transparency International's 2025 Corruption Perceptions Index, ranking 81st among 182 countries and territories, the need for good governance has become increasingly pressing.
The consequences of poor governance are far-reaching, with businesses investing heavily in backup electricity, alternative logistics arrangements, and risk management systems to mitigate the effects of institutional failure. According to institutional economist Douglass North, institutions shape economic performance by structuring incentives and reducing uncertainty. In South Africa, the experience of state capture has demonstrated how institutional failure imposes costs far beyond the immediate diversion of public resources. The Zondo Commission documented extensive manipulation of public procurement and state-owned enterprises, with consequences for electricity supply, transport infrastructure, and institutional credibility.
While resilience may keep individual businesses alive, it cannot compensate indefinitely for an economy that systematically undermines their competitiveness. The challenge is not simply to persuade businesses to behave ethically but to create an economy in which integrity is rewarded rather than penalised. Dr. Max Burger-Scheidlin of the International Chamber of Commerce in Austria introduced an approach known as Corruption Avoidance for Sustainable Competitive Advantage, highlighting the uncomfortable reality that businesses may recognise the harm caused by corruption but feel pressured to participate to remain competitive.
The collective action problem of systemic corruption is a significant obstacle to reform. Political scientists Anna Persson, Bo Rothstein, and Jan Teorell describe this phenomenon, where individual actors have limited incentives to behave differently, even when they recognise the collective harm. Anti-corruption strategies that rely exclusively on moral appeals, compliance requirements, or individual enforcement actions are therefore unlikely to transform environments in which corrupt behaviour remains commercially advantageous.
Four years after the State Capture Commission delivered its final report, South Africa continues to confront the gap between identifying institutional failures and implementing reforms capable of preventing their recurrence. The proposed Public Procurement Anti-Corruption Agency, recommended by the commission, would strengthen the capacity to detect suspicious procurement patterns and intervene before corruption becomes entrenched. However, the Public Procurement Act of 2024 does not establish the independent anti-corruption agency envisaged by the Commission.
Effective procurement oversight is not merely a public administration concern but fundamental to fair competition. Domestic institutional reform is essential, but corruption increasingly operates across borders, exploiting weaknesses between jurisdictions. As a result, international cooperation is necessary to combat corruption. Good Governance Africa's role as Convening Partner for Africa in the movement for a proposed International Anti-Corruption Court reflects the need for a coordinated global response to this challenge.
Ultimately, the solution to South Africa's governance challenges requires a multifaceted approach that addresses the root causes of institutional failure. This includes implementing reforms to strengthen institutions, promoting transparency and accountability, and creating an economy in which integrity is rewarded. By working together, businesses, government, and civil society can build a more competitive and sustainable economy that benefits all South Africans.
Key points
- South African businesses are struggling with governance failure, which hampers their competitiveness despite their resilience.
- The country scored 41 out of 100 on Transparency International's 2025 Corruption Perceptions Index, ranking 81st among 182 countries and territories.
- An independent Public Procurement Anti-Corruption Agency is needed to detect and prevent corruption in public procurement.
