A time to rethink Corporate Governance in Africa under the AfCFTA

By Tumi Dlamini

Until the early 1990s, most African countries did not attach particular importance to corporate governance policies and practices. In 1994, South Africa became the first country in Africa to adopt a Code of Corporate Governance and it was not until nine years later in 2003 that the leading economy on the continent, Nigeria followed suit. According to research “Corporate Governance is the combination of rules, processes or laws by which businesses are operated, regulated or controlled”. Notwithstanding research by leading academics and practitioners that well governed companies deliver better economic performance and long-term sustainability, it is concerning that so far, only 19 out of 55 African member states have adopted a framework for Corporate Governance. Far more concerning is the fact that most corporate governance frameworks in Africa have been imported from Western and global standards and are geared to be applicable to business and commercial environments that exist in developed countries. As such the Codes in Africa remain largely irrelevant, compliance is minimal and the standards are ill equipped to support the development of an African private sector that is dominated by SMMEs and the informal sector. The fact that such a small number of countries have taken critical steps to improve good corporate governance coupled with the fact that the existing Codes seemingly do little to improve the competitiveness of enterprises raises some serious questions about the business sector’s readiness to rise to the occasion and participate meaningfully in the implementation of the African Continental free Trade Area.

During the past couple of weeks, the South African government has accelerated with renewed vigour, its focus on expanding trade and exploring new African markets for South Africa’s private sector. The recently concluded four nation State-visit to West Africa by President Cyril Ramaphosa was well timed and comes soon after the conclusion of a very successful Intra-Africa Trade Fair in Durban. Much more significant in terms of timing is the fact that trading has begun in earnest under the African Continental Free Trade Agreement which came into effect in January 2021. By all accounts, South Africa seems to have finally decided to put its money where its mouth is and facilitate the expansion of South African enterprises into the rest of Africa. Notwithstanding that the West Africa State Visits took place at the onset of the emergence of the Omicron variant, the move by South Africa to undertake the visits and promote Intra-Africa trade must be applauded.

With the South African business focus on Intra-Africa trade gaining momentum and with 54 out of 55 African countries having already signed on the AfCFTA, Africa has to begin to place significant focus on corporate governance standards and practices of enterprises, sooner rather than later. The recent corporate scandals such as Steinhoff, Tongaat Hulett financial reporting saga and the widespread collusion of the construction industry during the building of the 2010 World Cup stadia cannot be allowed to taint the implementation of the AfCFTA before it has even gained steam nor should it characterise the conduct of businesses under the AfCFTA. In addition, the African Peer Review Mechanism, an organ of the African Union has conducted reviews and assessments of in 24 member states to assess the level of compliance with corporate governance standards. The APRM findings reveal that the business sector in Africa is dominated by SMMEs and the informal sector and that these sectors continue to face a myriad of challenges, including lack of access to finance, inadequate skills, limited growth prospects and the continuing extractive nature of multinational doing business in Africa.
Amidst these observations, there is an urgent need to ask ourselves some serious and deep questions on whether corporate governance actually serves the developmental needs of Africa or whether these are a set of rules and practices developed to protect the interests of those from whom we have imported the rules. In its efforts to address these governance challenges within the private sector and to promote good practices, the APRM has developed the African Principles and Guidelines on Corporate Governance. The development of the African Principles has come at an opportune time in the lifespan of the implementation of the AfCTA and in the intensified momentum by African governments, including South Africa to promote Intra-Africa Trade.

These African Principles have been developed to adopt a strong paradigm shift that embraces an approach that is premised on African shared values of Ubuntu. Corporate Governance in Africa must fully embrace African Values and ensure that Indigenous Knowledge Systems are used as a tool to enhance and promote Africa-grown philosophies. These practices must serve as a resource for economic regeneration and as a driving force of African economic recovery post Covid-19 . We cannot solve Africa’s problems by cutting European policies and pasting them onto Africa’s rulebooks. Our challenges are different and solutions in Africa must be Africa-centred. Whilst we have to continue to collaborate with our international partners, we must steer away from the dictates of the external world.

Accordingly, African Principles that suit the needs of Africa, as developed by the APRM must confirm the commitment of business to citizenship, to make a positive contribution to development and be involved in improving the livelihoods of local communities; it must confirm ethical leadership with a conscience and intellectual honesty in business; it must address the development and empowerment of the dominant sectors- SMMEs, informal sector and family-owned businesses in equal measure as it does large businesses; it must entrench governance practices that promote transparency, accountability, digitalisation, protection of shareholders and the creation of funding opportunities for all businesses. The African Principles must take into account best practices in business governance in the world while remaining cognisant and respectful of the realities of Africa’s socio-cultural context. They must be underpinned by values that promote cooperation, dignity, respect, inclusivity, diversity, responsibility for each other, humaneneness and compassion. These are the African shared values that underpin all form of human conduct in life, business, politics applying equally to natural and juristic persons.

With the AfCFTA, Africans have set themselves on a developmental path that when realised, will change the lives of African generations to come. If we do not take the bull by the horns now at the inception of the AfCFTA and redefine the manner in which we conduct business but continue to blindly copy and follow the Western entrenched practices of doing business – at the expense of our shared values – we will have failed before we have even started.

Let us seize this moment to reconstruct and reconfirm our systems of doing business to ensure that the private sector in Africa makes a meaningful contribution towards sustainable development. African leaders must act boldly. Now is not the time to pander to the dictates of the external countries. Afterall, if anything, the COVID-19 pandemic has illustrated the ease with which leading economies in the world will go to exclude, shun and eschew African nations when quite evidently the challenge at hand calls for a more cooperative and collective approach to fight the pandemic and to make vaccines accessible to all nations.
Unless corporate governance practices on the continent are addressed as a matter of urgency and with the seriousness that they deserve, the AfCFTA and aspirations of an integrated African market will remain but a distant dream. Corporate Governance rules will either be the biggest enabler of the Intra Africa Trade or they will be the hindrance to the success of increased Intra-Africa Trade.

Dlamini a corporate lawyer, a former partner at Bowmans, is an Advisor on Corporate Governance at APRM and Chairperson of the Committee on African Principles and Guidelines on Corporate Governance.