CORPORATE GOVERNANCE: THE TOOL ENTREPRENEURS NEED TO STREAMLINE THEIR BUSINESS MANAGEMENT ACTIVITIES

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As a businessman or an entrepreneur, your days are either fulfilling or frustrating. When you have had a fulfilling day, you gain more confidence, you are happy and feel encouraged. This may be because your first quarter profits were up; a new outlet for your business has been opened, or the organization has secured a bank loan, et cetera.

However, sometimes you may also have a dad or sad day. For instance, you may have received a resignation letter from one of your departmental heads; a lawsuit has been filled against your company for environmental pollution, or losses have been incurred and this has extensively affected the bottom line of the organization. These are circumstances and experiences that you as a business owner may face and are not good.

Although the above situations are common for most business owners the world over, African business owners have their unique situations. For an entrepreneur in Africa, or one who operates in the Nile valley areas, two key concerns come to mind: political instability and government corruption. This means that the problem of corporate governance, which may be considered both as a challenge and an opportunity, is particularly critical for the development and growth of your business. But what is corporate governance anyway?

According to the Institute of Chartered Secretaries and Administrators(ICSA), The Chartered Governance Institute, “Corporate governance is the system of rules, practices and processes by which a company is directed and controlled” Therefore, for an effective corporate governance system to work in your organization, you need to look not only at the internal rules, practices and processes; but also how your enterprise is directed and controlled. These interplay of corporate governance factors must be taken as a whole, not as isolated activities.

In addition, you need not only the skills and knowledge about corporate governance, but also a mindset according the Institute of Directors. Your skills, knowledge and mindset must work to achieve the following four key purposes of corporate governance.
1. Ensure that your business has a clear purpose that guides you as to how customers’ needs are met in specific ways.
2. Have the ability to identify those who have the power and accountabilities to perform what, at what time, and in what manner throughout your organization.
3. Since corporate governance shapes the decision-making mechanisms in your business, this will not only be beneficial to your management team, but also the board of directors.
4. Corporate governance also entails the ability of your business to manage multivariate needs of other stakeholders including the community in which you do business, employees, suppliers, as well as government. In other words, an effective corporate governance system ensures that government is also accountable.

However, one of the real threats to African businesses is government corruption which can actually curtail your business growth. This means that there must be a way which encourages government to be accountable and corruption free.

A decade ago, The African Development Bank (AfDB) and the Organization for Economic Co-operation and Development (OECD) set up a joint initiative to support business integrity and anti-bribery efforts in Africa that targeted government corruption. The objectives of this initiative were to:

• Increase the capacity of governments to enforce anti-bribery laws
• Strengthen global anti-bribery efforts
• Improve public sector integrity
• Initiate the beginning of a new era of transparency and accountable business in Africa.

As a result of this action, it was expected that by creating an enabling business environment to attract foreign investment, such an initiative would also foster and boost economic growth in all regions of Africa, including the Nile valley countries.

The reality is that for most countries along the Nile valley, corporate governance in respect of corruption indices has been relatively poor. Most of the countries within the Nile valley still show poor scores on corruption perception index(CPI) according to Transparency International. For example, in 2019 only Ethiopia seems to have done a little better in comparative terms, scoring 96 out of 180 countries surveyed worldwide. Egypt also tried and scored 106 out of 180. For Sudan, the results were rather more disappointing, scooping 173 out of 180. In the case of South Sudan, it has a long way to go since it scored 179 out of 180.

However, one needs to note that South Sudan is still young in democratic terms and chances are that with time, there will be room for improvement. What is rather disturbing is that with a weak corporate governance system and political instability in South Sudan will have to work harder to improve its prospects for business growth. This requires an integrated way where both businesses and governments need to work together and use the tool of corporate governance for the benefit of both parties. This is because, an effective corporate governance system streamlines your business management activities as a whole; hence affecting both internal and external stakeholders.

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Okumu p'Okech Luryan

Okumu p'Okech Luryan, Managing Partner, Noh-Vald Consultancy.
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