Good corporate governance critical for Africa’s growth

Lazarus Sauti

African Development Bank’s Regional Director for the East Africa Regional Resource Center, Gabriel Negatu believes there are a number of opportunities for countries within and across Africa to unlock their economic values.

These opportunities take in the continued discovery of oil and other natural resources, coupled with a growing global demand for such resources; and a rising middle class.

They also include improved access to information and communications technology that enhances innovation and availability of information; the continent’s increasing access to international capital; and improved participation of the private sector as demonstrated by the increasing foreign direct investment (FDI) inflows into the continent.

However, as noted by Good Governance Africa, a research and advocacy organisation based in South Africa that works to improve government performance on the continent, recent developments in Africa are drawing increased attention to the continent, hence providing grounds for cautious optimism.

This cautious optimism takes in good corporate governance as Africa’s economic transformation will not be sustainable if the continent does not improve its reputation for corporate governance.

Africa, therefore, needs good corporate governance to develop enterprises and businesses that create wealth and employment for Africans. 

Good Governance Africa thus says, “Good governance is needed because bad governance has such devastating consequences on people’s lives. Poverty, short life expectancies, violence, and a loss of personal and civil liberties are all potential consequences of poor public and corporate governance.

Edward Siwela, Executive Director of the Institute of Directors Zimbabwe, further strengthens the assertion that the African continent’s growth will be realised only if the continent develops strong enterprises able to compete successfully in their home and overseas markets.

“We know from the experience of the developed world that governance is essential to sustained corporate success. Therefore, Africa’s growth will be realised only if the continent develops strong enterprises able to compete successfully in national, regional and international markets,” said Siwela.

Sharing same views with Siwela, Request Machimbira, the Group Chief Executive Officer of PCG International Proficiency Consulting Group says without good corporate governance, economic development would falter.

Speaking at a recent seminar organised by the Southern African Association of Accountants in Harare, Machimbira also added that lack of good corporate governance in today’s companies has resulted in a declining economy.

“If we look at most companies in Zimbabwe, there are people who are at certain positions but if we ask what criteria were used for a particular person to be at a particular position we will not find suitable answers. There are a number of people who are doing wrong jobs and the end results are situations like corruption,” said Machimbira.  

The New Partnership for Africa believes that good corporate governance is critical in attracting foreign direct investment inflows. Thus, corporate entities in African countries need to enhance good governance to realise their trade potential.

“Programmes and projects to promote Africa’s development and regional integration can only succeed when implemented where there is good governance. African countries currently face challenges in economic and corporate governance – inflation, debt-to-GDP ratios and budget deficit-to-GDP ratios.

“The NEPAD Agency supports member states and regional economic communities as they tackle these challenges and endeavour to create more favourable environments for development,” noted NEPAD.

The good news is that Africa’s premier multilateral financial partner, the African Development Bank (AfDB), is always at the forefront in pointing out that the African continent needs to enhance good governance to realise its trade potential.

Negatu, the bank’s Regional Director for the East Africa Regional Resource Center, notes that the Bank and the continent are striving to build shared prosperity in African countries, simply by promoting good governance and leadership.

“AfDB and its member countries have taken major strides to improve governance and leadership, necessary for shared prosperity,” he explained, adding that Africa needs “clear, straight forward policies” to enhance good governance and to take the industry forward.

To take African industries forward, corruption must be addressed and curbed as ethics and good corporate governance imply intolerance to corrupt practices in business. To effectively curb corruption, the African business community should, therefore, become increasingly intolerant to corruption of corrupt business practices.

This also means African governments; nongovernmental organisations, strategic stakeholders and civil society organisations across the continent must join hands to address corruption.

Policy decision makers in civil society organisations should also play a watchdog role by being increasingly vocal in fighting corruption tendencies in business enterprises. Empowered by advances in information and communication technology, they should provide a crucial complement to governments and the private sector, and keep both sides accountable to each other and to the people.

To show commitment to principles of corporate governance, there is strong need for Public-Private Partnerships to provide for innovative approaches that could be used to meet the capital requirements for an adequate and sate of the art infrastructure.

More so, political and business leaders must support the development of the code of corporate governance in their respective countries in order to enforce high standards of ethics in public and private sectors. This is so because corporate governance is one area of International Standardisation that covers good managerial and organisational practice.

It is also critical for African countries to combine their respective national codes with international judicial mechanisms.

Frankly, corporate governance is a necessary lever in creating competitive and efficient business enterprises and in enhancing the accountability and performance of those entrusted to manage corporations. Without efficient corporates, countries in Africa will not create wealth. Accordingly, the need for good corporate governance in Africa is a self-evident proposition.