Corporate Governance will help unlock Africa’s potential


By Jane Valls, CEO and chairperson, African Corporate Governance Network (ACGN)                                                                                                                                                                           


No matter who you speak to these days, Africa is seen as an exciting investment frontier. To ensure that this investment indeed occurs and then translates into benefits for Africa’s people, it’s vital that the continent’s businesses are able to compete successfully. Creating a corporate governance framework that is effective will help achieve both those goals.

The International Monetary Fund says that, in growth terms, Sub-Saharan Africa trails behind only emerging Asia, with growth set to rise to 5.5 percent in 2013-14 from 5 percent. However, it also makes the point that growth patterns within the region vary considerably and that investment is a key driver of that growth.

Effective corporate governance has been shown to be something that is associated with higher levels of investment and with better performance by individual companies. One example is a survey by the International Finance Corporation, part of the World Bank, which found that governance is an important factor in making investment decisions in emerging markets. In fact, investors will pay a premium for firms in emerging markets that can demonstrate better governance[1]. Multiple other studies make the same basic point.

The fact that a company’s performance over the medium to long term is linked to its corporate governance, a link that research confirms. For example, a study by Deutsche Bank of Standard & Poor 500 firms found that those with strong or improving corporate governance outperformed those with poor or deteriorating governance practices by about 19 percent over a two-year period[2].


“Many potential investors simply don’t realise that there is no broad standard of corporate governance”


The African Corporate Governance Network (ACGN) was founded in 2013 to promote corporate governance by developing the corporate governance capabilities of its institutional members, by creating a forum to exchange views and by acting as advocate for corporate governance in both government and civil society. The ACGN will also conduct research and store information on corporate governance. Already four meetings have been held and a mission and value statement have been accepted by its members. The 10 founding members have grown to 13, and we have 12 partners, affiliates and collaborators, among them leading banks, consultants and law firms.

Overcoming road blocks to corporate governance

However strong the case for corporate governance in Africa is, it’s equally true that we face significant challenges. One of the most important is the fact of Africa’s sheer size and diversity in terms of a range of factors, among them economic and political maturity as well as culture. Many potential investors simply don’t realise that there is no broad standard of corporate governance, and that, for example, political buy-in to corporate governance varies significantly across the region.

By the same token, corruption levels across Africa vary quite considerably although, according to Transparency International’s Corruption Index, Sub-Saharan Africa remains the most corrupt place on earth[3].

Aside from political buy-in, other barriers to turning this around would have to include a lack of shareholder activism across the region. A true shareholder culture, in which companies are held accountable for their performance, has yet to be built. It is particularly evident when it comes to many of the state-owned enterprises, which play important roles in most of the economies—at least in part because the shareholder, the state, is itself not yet committed to corporate governance.

These varying levels of governance maturity mean that existing systems of corporate governance cannot simply be implemented, especially as the regulatory frameworks are often not in place. As a result, corporate governance principles have to be applied in ways that are appropriate to the individual geographies. The ACGN has an important lobbying role to play in influencing legislators, as well as educating both the private and public sectors about the benefits of corporate governance.

Another important barrier is the lack of experienced and skilled directors, without whom corporate governance cannot take place. Here, too, the ACGN has a critical role to play in building these vital skills. 

Africans are excited by the possibilities of growth. The ACGN is focused on showing them the link between corporate governance and their ability to participate in that growth by improving how their companies perform.


[1]Vikramaditya Khanna and Roman Zyla, Corporate Governance Matters to Investors in Emerging Market Companies, available at

[2] For this and other studies, see International Finance Corporation, The irresistible case for corporate governance, March 2006 and available at

[3] For the 2013 Index and its infographics, see


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