Improving business behaviour in Africa


Improving business behaviour in Africa Ethical BoardroomBy Monica Dowie – Programme Manager of the African Corporate Governance Network at the NEPAD Business Foundation




Africa will host seven of the top 10 fastest growing economies in the world in the next five years, according to the International Monetary Fund. In countries, such as Côte d’Ivoire, Kenya, Rwanda, Senegal and Tanzania, ongoing investment in infrastructure and strong consumption are expected to drive growth at rates of six to seven per cent or more.

So it has become imperative to come up with initiatives that guide the formulation of Africa-specific guidelines to economic and corporate governance that champion the business dynamics of the continent and align to global standards.

With the current focus on growth and development in Africa, good corporate governance and capacity building in this area is vitally important; greater transparency and accountability will lead to increased interest in investment and economic development in Africa.

Effective implementation of corporate governance is not merely a compliance issue, but should be embedded in corporate culture. Good corporate governance does have a wider impact, documented by research, because it:

  • Encourages investment
  • Enhances investor confidence and interest while lowering cost of capital
  • Boosts companies’ competitiveness
  • Better equips companies to survive economic crises
  • Makes corruption less likely
  • Ensures fairness to shareholders
  • Forms part of the overall checks and balances on business that ultimately benefit society

Africa clearly has diverse corporate governance systems and practices across the continent owing in large part to varying historic customs and origins (French, Portuguese and English), rich cultural heritage, natural resources (oil, minerals and gases) and geography.

“A lack of confidence in African institutions and poor corporate structures have been among the major reasons why many investors have tended to shy away from investing in the continent”

Corporate governance needs to be improved in Africa through developing mechanisms and strategies unique to the African landscape. This does not mean different standards of corporate governance apply to Africa, but that some characteristics exist which include a large number of state-owned enterprises (SOEs) and SMEs, a culture of corruption or pursuit of easy wealth, weak nature of the business environment and low financial intermediation.

The level of development of country-level corporate governance frameworks and their implementation is largely dependent on the level of political development and governance; economic development and governance; strength of regulatory institutions; and private sector and capital market development.

Challenges to face

Africa has not escaped the adverse effects of the global economic crisis, mostly due to the prevalence and importance of international trade, foreign capital inflows, development assistance and diaspora contributions to national economies.

A lack of confidence in African institutions and poor corporate structures have been among the major reasons why many investors have tended to shy away from investing in the continent. There are a number of challenges facing corporate governance reform in Africa that include:

  • Diversity – Africa consists of 54 individual countries
  • Corruption
  • Regulatory issues with varying levels of strength of regulatory bodies
  • Inactive shareholders
  • State-owned enterprises differing in size, market share and number
  • Board weakness
  • One-size-fits-all governance codes
  • Political instability
  • Lack of institutional capacity

The best to way to address these reform challenges is to have sustainable and legitimate institutes of directors and corporate governance, sound capacity building initiatives of those charged with corporate governance, focussed and relevant research that is easily accessible and continued lobbying for improved corporate governance.

Corporate governance on the African continent is moving forward and there are a number of examples of progress and innovation in developing appropriate governance models for Africa. However, for a host of reasons, Africa still needs to lift its investment in corporate governance.

A number of measures implemented to improve corporate governance across the continent include:

  • Corporate governance codes, such as the King Reports in South Africa
  • Amendment of legislation to ease business registration and improve corporate reporting
  • Legislation that targets economic and financial crimes e.g. anti-bribery and money laundering
  • Strengthening of banking and financial regulation and supervision
  • Entrepreneurial and SME development
  • Increasing the pool of qualified directors through training programmes
  • Widening the representation of women on boards
  • Implementing measures to improve the efficiency of SOEs, including divestiture of state interest and corporatisation

Deepening governance

On a continental level, the African Peer Review Mechanism (APRM) was initiated in 2002 and established in 2003 by the African Union in the framework of the implementation of the New Partnership for Africa’s Development (NEPAD). The APRM is a voluntary self-assessment tool instituted by African heads of state and was designed to promote more effective governance across the four thematic areas of democracy and political governance, corporate governance, economic governance and management, and socio-economic development.

The primary purpose of the APRM is to foster adoption of policies, standards and practices that lead to political stability, high economic growth, sustainable development and accelerated economic integration, in line with the NEPAD strategic framework goals. The specific aim of the APRM corporate governance pillar, is to align as much as possible the interests of individuals, corporations and society within a framework of sound governance and common good.

The World Bank’s Country Assessments of Observance of Standards and Codes and the associated reports (ROSCs) also have a significant influence on country-level development of corporate governance and act as an important tool for influencing policy development at a national level.

The African Corporate Governance Network (ACGN) which was launched in October 2013, currently represents 19 African countries and is a network of institutes of directors and corporate governance, including affiliate members committed to good economic and corporate governance.

The ACGN was formed to develop institutional member capacity for enhancing effective corporate governance practices, building better organisations and corporate citizens in Africa, and seeks to provide policy makers and market participants with an important forum to exchange experiences and best practices aimed at addressing ongoing corporate governance challenges in Africa.

In February 2016, the ACGN launched a report with the support of EY, on the State of Corporate Governance in 13 African countries. Some key conclusions drawn and lessons learned can inform future corporate governance reform work in Africa:

  • The designing of corporate governance programmes and frameworks should take into account the diversity of the continent
  • Greater emphasis should be given to small and medium-sized enterprise and other forms of enterprise in those countries with relatively small capital markets
  • Good corporate governance principles and ethical leadership should be equally applicable to both the public sector, private sector and civil society
  • A conducive policy environment is essential, with a reciprocal focus on enhancing or supporting governance processes and structure at a government level
  • There is a need for more public-private sector consultation for effective reform to bridge the link between corporate governance and wider macro and systemic governance
  • The responsibility for promoting good governance practices should be a collaborative effort between board directors, management, policy makers, regulators and market participants
  • Adequate sensitisation and capacity building programmes are required to support the role of civil society

In order to achieve the goals and objectives of the African Union’s Agenda 2063, which is a 50-year plan towards Africa’s development, growth and prosperity to eradicate poverty, proper governance structures must be in place to succeed in attaining the ‘Africa we want’.

Going forward, Africa’s potential and ability to maintain current growth trajectories and high investor confidence, is going to hinge on good corporate, political and economic governance.

It is therefore the responsibility of both public and private sector role players to cooperate in efforts to change the perception that corporate governance is a ‘soft issue’ and to work together to ensure that good governance is a priority, if the long-term sustainability of Africa’s development is to be realised.


About the Author:

Monica is currently the Programme Manager of the African Corporate Governance Network at the NEPAD Business Foundation (NBF) where she previously held the position of Financial & Operations Controller. Monica is a Chartered Accountant and has over 18 years’ experience in the profession, 10 of which were spent at PwC and the remainder working in the retail industry at a listed company.

Prior to her employment at the NBF, Monica was a Manager at PwC within their Finance and Treasury Consulting practice – part of the Advisory Practice.  She has experience in external audit, internal audit as well as other financial and business advisory services. Her experience spans international as well as local assignments where she has gained a number of years’ experience as an Accountant, Financial Consultant and Business Advisor.

Monica is part of the team at the NBF – a pan-African non-profit organisation, which mobilises private sector to drive economic growth aligned to the NEPAD strategic framework by playing the role of neutral facilitator to execute strategic projects of sustainable developmental importance that deliver real impact across the African continent.

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