Are financial incentives a viable option for whistleblowers in South Africa?


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By Bavukile Magagula & Clarissa Pillay


In recent years, South Africa has found itself in a precarious situation due to the ongoing and prevalent corruption within the public and private sectors. The revelations of former Public Protector Thuli Madonsela regarding state capture in various public institutions resulted in the establishment of the Zondo Commission, to get to the core of the corruption within these institutions, expose the guilty parties, and set out remedies in order to move forward. The Commission has since been finalised and a final State Capture Report (the Report) has been provided to the public. The Report exposed rampant state capture within multiple state-owned enterprises and provided various recommendations to ensure that corruption is eradicated, those responsible are held accountable and the institutions stabilised. The Report highlighted the importance of establishing strong and effective legislation which protects whistleblowers and ultimately encourages whistleblowers to come forward.

Whistleblowing incentives in South Africa

Under the current legislation, whistleblowers are only compensated for the occupational detriment that they suffer as a result of blowing the whistle in terms of the Protected Disclosure Act No. 26 of 2000 (the PDA). Whistleblowers are often marginalised in the workplace and outside the workplace once they are dismissed or have resigned. There is limited protection provided to whistleblowers and limited provision is made for the risk and harm that many whistleblowers suffer as a result of blowing the whistle. Kevin Malunga the former Deputy Public Protector, stated that the current legislation doesn’t make it “worth people’s while to be whistleblowers” as the risks often outweigh the ethical reasons that someone may have for making a disclosure.[i] Thus, it becomes clear that our legislation requires amendment and a shift to focusing on compensating the whistleblower solely for the occupational detriment suffered.

There are growing calls for Parliament to make amendments to legislation and provide more protection to whistleblowers’ to encourage whistleblowers to come forward, expose corruption and ensure whistleblowers safety. One of these recommendations and debates is the possibility of establishing a rewards system to incentivise whistleblowers to come forward.

There have been multiple debates locally and internationally regarding financial incentives for whistleblowers and whether they result in the successful exposure and prosecution of individuals or organisations involved in corrupt practices. Many argue, particularly in the United Kingdom (UK), that incentives result in frivolous claims being brought forward thus overburdening the system, and those assigned to investigate corruption. Whatever side one aligns themselves to, what is clear is that whistleblowers across the globe lack protection and innovative measures need to be implemented to protect whistleblowers’ and encourage them to take the enormous risk which comes with blowing the whistle.

Whistleblowing incentives in the United States

The United States of America (United States) has established one of the most effective incentives for whistleblowers’ legal framework, by giving rewards to whistleblowers who assist in the successful recovery of money which has resulted in the collection and recovery of millions of dollars.

The False Claims Act 31 U.S.C (the False Claims Act) establishes strong whistleblower laws in the United States, particularly the Qui Tam provision, which allows a whistleblower who files a lawsuit in the name of the United States government, to be rewarded for disclosing fraud that results in financial loss to the government.[ii] The provision includes a further requirement that the original information provided must result in a successful prosecution for whistleblowers to be provided with a financial reward. This financial reward is between 15% – 30% of the collected proceeds. Additionally, where the government chooses not to intervene, but a lawsuit is instituted, the whistleblower may be awarded between 25% – 30%.

The introduction of incentives for whistleblowers in the United States was, in part, a response to reforms put in place to “clean up” Wall Street after the 2008 financial crisis.[iii] The intention was to provide an incentive which would encourage people to speak up if they witnessed fraud or corruption and provide them with a financial reward for the risk taken. Under the False Claims Act, the wrongdoer is liable for a civil penalty and “treble damages” ensuring that those who take advantage of the system, government and taxpayer’s money are held accountable.[iv] The False Claims Act has proven to be an effective measure combatting corruption and fraud, with 29 States adopting similar statutes and the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC) and Internal Revenue Service (IRS) now having their whistleblower policies modelled on the False Claims Act.

It is clear that the United States legislature understood the climate within the country and a further understanding that many whistleblowers take extreme risks when deciding to blow the whistle, which ultimately negatively impacts their lives in the workplace and personally. The Qui Tam provisions thus not only provide an incentive but compensates the individual, in some way, for taking the risk and exposing corruption.

Whistleblowing incentives in the United Kingdom

The UK has a different view of the most effective measure to encourage whistleblowers to come forward arguing that instead of focusing on providing the whistleblower with an award, the legal framework should focus on protecting the whistleblower.[v] The UK has been highly critical of the Qui Tam provisions, particularly that the incentive will result in the influx of frivolous claims. The Bank of England has been a vocal critic of the provisions, stating that providing financial incentives to whistleblowers won’t increase the number, quality of disclosures or transparency within financial markets.[vi] They further state that there has not been an increase in the number of disclosures with the introduction of the Qui Tam provisions, contrary to the SEC’s statistics.[vii] In 2020, internal whistleblower reports within companies decreased, however, claims brought to the SEC increased by 33% compared to 2019.[viii] Additionally, more than 80% of the whistleblowers who received awards, reported their concerns internally to their supervisor or another internal reporting mechanism before approaching the SEC.[ix]

The Bank of England further raised the concern that offering financial incentives could lead to malicious reporting and individuals reporting rumours rather than facts.[x] There was a further concern that some people could “entrap” others into committing illegal or fraudulent conduct to blow the whistle and subsequently benefit financially.[xi] These are valid concerns, particularly when one considers that the SEC in 2018 had to sift through almost 5300 applications, some of these being “half-baked submissions”.[xii] Despite this, what is evident is that the number of successful collections has increased as a result of the Qui Tam provisions. Although there are concerns that courts would question the reliability of the evidence given by the individual as they stand to benefit financially,[xiii] it is important that the legislature, in any jurisdiction, ensures that the legal provisions are clear that the reward will be awarded only where the whistleblower acted in the public interest or good faith, was not involved in the illegal conduct and that the information provided leads to a successful collection or prosecution. Whistleblowers often act in the public interest rather than their own and do so knowing that they will likely suffer personal and professional detriment. Not implementing measures which reward and protect them for the risk taken, discourages whistleblowers from coming forward and maintains the status quo of corruption within these institutions.

Despite the Bank of England’s reservations, the UK Competition and Market Authority (CMA) introduced a campaign to “crackdown on cartels” with a programme offering up to £100 000 to whistleblowers who provide information on cartel behaviour.[xiv] There are limitations regarding how the reward shall be paid including; how valuable the information is to the investigation, the risk associated with the whistleblowers’ disclosure, the level of cooperation by the whistleblower and the amount of harm to the economy and the consumer that the information helped to prevent.[xv] The PDA has measures like these, particularly in section 6(1) which refers to a disclosure made in good faith and section 9B where an individual who intentionally discloses false information is guilty of an offence and conviction to a fine or imprisonment. The CMA further provides that those who are directly involved in the cartel cannot benefit from the financial reward but must instead make use of the CMA leniency policy.[xvi]


The Qui Tam provisions have proven to be an effective tool in combating corruption which leads one to opine that the incentives are an effective tool against fraud. With rampant corruption within South Africa, further highlighted by the State Capture Report, the establishment of an incentive program may lead to whistleblowers coming forward and exposing corruption within the public and private sectors.

Reservations about the introduction of incentives are valid, but measures can be put in place to guard against them. The current PDA has measures in place which would prevent frivolous claims and is explicit that disclosures must be made in good faith, ensuring that those who come forward do so for the public benefit and not for personal gain. Therefore, the existing laws should be enhanced to ensure that whistleblowers’ are further protected and are provided with a sufficient remedy for the hardships experienced physically, emotionally and financially as a result of making a disclosure.


[i] Greg Nicolson “Time to sweeten the deal for whistleblowers?” (2015) The Daily Maverick.

[ii] What is the False Claims Act? National Whistleblower Center accessed on 31 January 2022 at

[iii] Ben McLannahan “Best Way to encourage whistleblowers? Reward them” (2019) Financial Times.

[iv] Ibid Whistleblower Center.

[v] S Lubisi and H Bezuidenhout Blowing the whistle for personal gain in the Republic of South Africa: an option for consideration in the fight against fraud? (2016) University of Pretoria.

[vi] Bank of England: Prudential Regulation Authority Financial Incentives for Whistleblowers (2014).

[vii] Ibid Bank of England.

[viii] Jones Day SEC Awards $28 Million+ to Whistleblower for Tip Relating to 2018 FCPA Settlements (2021) Lexology.

[ix] Ibid Jones Day.

[x] Ibid Bank of England.

[xi] Ibid Bank of England.

[xii] Supra note 3 McLannahan.

[xiii] Ibid Bank of England.

[xiv] T Caspary, M Küttner & J Martini The CMAs New (an Improved) £100k Reward Scheme for Cartel Whistleblowers (2017) Lexology.

[xv] Ibid Caspary.

[xvi] Ibid Caspary.

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