1. CORPORATE
GOVERNANCE IN AFRICA:
A NEW STRATEGY
Karugor Gatamah
Chief Executive Officer
CENTRE FOR CORPORATE GOVERNANCE
Paper presented at the conference titled “Corporate
Citizenship: The Challenge for Africa” held at the
Nairobi Serena Hotel, Nairobi, Kenya;
January 18–22, 2004
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2. INTRODUCTION
THE CHALLENGE OF DEVELOPMENT IN AFRICA
The challenge of development the world over is to
improve the human condition. As eloquently observed
by the Government of Kenya soon after
independence:
The ultimate objectives of all societies are remarkably similar
and have a universal character. They include political
equality; social justice; human dignity; freedom from want,
disease and exploitation; equal opportunities and high and
growing per capita incomes, equitably distributed . . .
[African
Socialism and its Application to Planning in Kenya; Government of Kenya; Sessional Paper no. 10 of 1965]
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3. This indeed was the dream of all Africans at the
dawn of independence.
Today, Africa is synonymous with grinding
poverty, hunger, disease, illiteracy and death
exacerbated by brutal, ubiquitous conflicts. The
HIV-AIDS pandemic is yet another blow to a
continent already on its knees.
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4. This state of affairs has been attributed to a
number of factors:
 The legacy of colonialism
 The perception of the Government as the provider
and equalizer
 Conflict and insecurity
 Lack of infrastructure as well as the social capacity
for development
 The HIV-Aids Pandemic
 Globalisation
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5. ADDRESSING THE CHALLENGES
The common d has been largely due poor governance
at all levels—public, economic and corporate. The
most immediate priority for Africa therefore is to
develop a system of governance that is suitable to the
needs of the continent; that has the support of an
informed and populace; that elicits the involvement
and participation of all stakeholders and which relies
largely on self-regulation but respects, recognizes and
allows for the coercive power and authority of
government to intervene to protect the public interest,
settle conflicting claims and otherwise safeguard the
security, liberty and freedom of society.
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6. Effective governance will create a
conducive environment for the sustainable
creation and distribution of wealth,
enhance genuine and fruitful economic
activity, improve living standards,
eliminate conflict, facilitate regional
integration and enable Africa claim its
rightful place in the global economy.
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7. THE NEW PARTNERSHIP FOR AFRICA’S
DEVELOPMENT (NEPAD)—A NEW
STRATEGY FOR AFRICA’S DEVELOPMENT
The New Partnership for African
Development [NEPAD] is a refreshing new
approach to the underdevelopment of
Africa:
 It is conceived and driven by Africans.
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8.  It goes beyond the political issues and recognizes
that wealth creation is the business of the private
sector. Sustainable creation and equitable
distribution of wealth is only possible in a conducive
environment that can only be created through the
effective partnerships between the public sector, the
private sector and civil society.
 The African Peer Review Mechanism, NEPAD has
the mechanism through which to monitor and
evaluate progress with the stated objectives of
NEPAD and, through peer pressure to force
remedial action.
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9. Under NEPAD, the political leadership of Africa
has in principle agreed to the following as
priority thrusts:
 Restoration of peace, security and stability with
consolidation of democratic gains and
strengthening of democratic structures and
institutions;
 Establishment and entrenchment of good economic
and corporate governance;
 Bridging the infrastructure gap and creating social
capacity for development;
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10.  Human resource development and capacity
building;
 Reduction of poverty and income inequalities
through accelerated economic growth and
sustainable wealth creation;
 Reconfiguration of global financial architecture with
emphasis on investment promotion and re-definition
of relationships with development partners focusing
on debt reduction, increased aid and aid reform;
 Integration of the continent into the world economy
and enhanced market access; and
 Preservation and conservation of the environment.
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11. The leaders through NEPAD have
gone further to initiate preparatory
actions that would:
 Facilitate negotiations with the developed
world through a united African front;
 Highlight critical infrastructure projects;
 Create and enforce standards of political,
economic and corporate governance;
 Declare 2002 to 2012 the capacity building
decade for Africa;
 Rationalize the institutional framework for
economic integration.
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12. CORPORATE GOVERNANCE AS A
LYNCHPIN OF NEPAD
Corporate governance succinctly
defined as the system by which
corporations are directed, controlled
and held to account embraces:
 Issues of public policy, the overriding national
values and ethics and the national priorities
and consensus under which the “Licence to
Operate” is granted to corporations;
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13.  The system by which the legitimacy, relevance and
compliance of the corporation is monitored,
supervised and regulated—the national laws and
statutes the conventions, standards, practices and
procedures that regulatory authorities, the market,
trade and business associations, professional
bodies and the society promulgate or express to
guide the conduct of business;
 The self regulatory mechanisms by which the
corporation governs and conducts itself to ensure
that it remains legitimate, viable and competitive.
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14. THE KEY OBJECTIVES OF GOOD
CORPORATE GOVERNANCE
• effectiveness of corporations
• transparency, accountability and probity of
corporations
• credibility of corporations
• Sustainability and enhanced competitiveness of
corporations
• Legitimacy, responsibility and responsiveness of
corporations
• Ensuring the highest standards of corporate
responsibility, citizenship and business ethics
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15. Consequently, corporate governance
primarily targets the leadership of
corporations and seeks to promote:





Leadership for efficiency and effectiveness
Leadership for probity
Leadership with responsibility
Leadership that is transparent and accountable
Leadership with focused intelligence
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16. THE ROLE OF CORPORATE GOVERNANCE IN
ENSURING GOOD CORPORATE CITIZENSHIP
AND SOCIAL RESPONSIBILITY
• Corporate governance concerns itself with not just the
conformance of corporations to essential standards of
fiduciary management but also with competitive
performance and their capacity for long term
sustainability.
• The corporation operates in society, on the basis of
the licence granted to it by society through the process
of incorporation, for society. Corporations are
expected to add value to the society (perform) and to
do so in a responsible manner (conform). This is the
basis of corporate citizenship and social responsibility.
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17. • In Africa, corporate citizenship and social
responsibility must be understood against the
backdrop of the concept of African mutual
social responsibility.
• An extension of the African family spirit to the
nation as a whole. It implies a mutual
responsibility by society and its members to do
their very best for each other with the full
knowledge and understanding that society
cannot prosper without the full cooperation of
all its members.
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18. • It is important to bear in mind that the real
power of a corporation to affect society lies in
its primary purpose as the wealth creating and
wealth producing organ of society—primarily
how it goes about this; the extent to which it
achieves this; and the extent to which its
practices impact either positively or negatively
the society in which it operates. Good corporate
citizenship implies meeting, within reason, the
expectations of all stakeholders.
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19. • Corporate social responsibility on the other
hand has been defined by the Commonwealth
Association for Corporate Governance as the
distinctive contribution a company makes to the
advancement of society or alleviation of social
concerns, usually through some form of
investment in partnership with the community
which may include government.
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20. • This is in recognition of the fact that the higher
purpose of private enterprise is to build social and
economic conditions which shall promote the well
being of the community on which the enterprise
depends of its survival and that private enterprise
is financially and technologically equipped to
participate actively in social development in terms
of scientific technology and managerial
competence and that private enterprise, together
with other sectors of society, shares obligations
and responsibilities which it must discharge to the
community.
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21. RAISING THE STANDARDS OF
CORPORATE GOVERNANCE IN AFRICA
• The systems of corporate governance in Africa
have largely been weak and standards low. In
raising these standards to international
standards, the peculiarities that characterize
Africa must be taken into consideration and
approached in such a manner that they are
viewed as African standards, developed,
formulated and ratified by Africans for the well
being of Africa. This indicates the great
diversity of enterprises.
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22. In addition, the following largely country
specific circumstances must be borne in
mind:




Public Governance
The Regulatory and Supervisory Environment
Self Regulatory Corporate Governance
Society expectations and aspirations
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23. Africa first and foremost needs to agree the
guiding principles which should be in line with
the internationally accepted principles and
develop the requisite human and institutional
capacity to implement good corporate
governance at national level as well as the
regional capacity to coordinate the national
initiatives and share learning.
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24. THE ROLE OF THE CENTRE FOR
CORPORATE GOVERNANCE
Headquartered in Nairobi, Kenya, The Centre for Corporate
Governance (previously the Private Sector Corporate
Governance Trust) is an initiative to improve the quality of life of
the people of Africa by fostering the adoption and
implementation of the highest standards of corporate
governance so as to improve the strategic leadership of
enterprises to enhance their profitability, effectiveness and
competitiveness in the borderless global market while ensuring
that they uphold the highest standards of corporate
responsibility, citizenship and ethics. This it does through
capacity building at both the national and regional level.
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25. WITHIN THE BROAD FRAMEWORK OF
NEPAD, THE CENTRE SEES ITS ROLE AS TO:
• Coordinate corporate governance initiatives in Africa
and facilitate agreement on minimum principles of
best practice that are compatible with international
standards.
• Support the establishment of national initiatives on
corporate governance where they do not exist and
help build capacity to implement good corporate
governance practices.
• Facilitate the exchange of information and
experiences and promote joint programmes and
research as would lead to optimal use of limited
resources.
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26. • Support the African Peer Review Panel
develop credible instruments for the
corporate governance review and assist
in implementing and facilitating the incountry reviews.
• Under the auspices of the Pan African
Consultative Forum on Corporate
Governance (PACFCG) of which the
Centre is the Secretariat, the
groundbreaking work is already underway.
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27. • PACFCG is a biennial event that attracts
participation from across all parts of Africa and
from all sectors—the private sector, government,
academia and civil society—and enjoys the
support of multilateral and bilateral development
partners and major international institutional
investors. It brings together parties interested in
the promotion and implementation of corporate
governance in Africa to forge consensus on
concepts, standards and methods of corporate
governance and to formulate action plans for the
continent.
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28. The inaugural meeting held in Johannesburg South
Africa in July, 2001 recognised the criticality of
corporate governance in Africa’s development. It
defined role of the PACFCG as being to:
 raise awareness of the significance of corporate governance
to the sustainable development of Africa;
 forge consensus on concepts and methods of corporate
governance that can usefully be deployed on the continent;
 develop action plans for the implementation of good
corporate governance standards and practices across all
sectors of enterprise in Africa; and
 contribute to, and learn from, the global policy dialogue on
corporate governance and its role in the international
financial architecture.
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29. The second forum held in Nairobi, Kenya in
July, 2003 further agreed that:
Africa needs to promote corporate governance
through the banking system, development finance
institutions, cooperatives, micro-finance institutions
and in small and medium enterprises , in addition to
efforts now being made to promote good corporate
governance through capital and other the equity
markets; the central banks and state owned
enterprises;
 Those countries which have not yet set up national
task forces should be encouraged, facilitated and or
assisted to do so as soon as feasible.

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30. • Since some countries had already commenced
training courses for directors generally and of State
Owned Enterprises in particular [ after recognizing
their socio- economic significance and the need for
specialised induction for their directors] it would be
mutually beneficial if those countries agreed, were
encouraged and enabled to share their experience
with others that are willing to commence similar
programmes.
• A vital role can be played by investor associations,
and all countries with stock exchanges should be
encouraged to form such associations to create
awareness of the rights of stakeholders.
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31. • African countries must do much more to mobilise and
attract domestic savings for investment in their
respective corporate sectors so give greater
confidence to international investment funds seeking
opportunities in African markets.
• There is a critical need to forge trust among all the key
players in the economic system based on ethical
business conduct, and a code of ethics for all who
deal with the enterprise, with particular emphasis
directors, executives, employees, suppliers and any
others who play in the efficient conduct of enterprises.
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32. • There is need to ensure that the views of Africa
are expressed in the global policy dialogue and
especially at the OECD fora.
• PACFCG should work in close collaboration with
NEPAD and the African Union to promote good
corporate governance in parallel with reforms for
improved democratic & political and economic
governance agreed upon by the Summit of the
African Heads of State and Government and
deemed to be preconditions to reverse the abject
poverty, backwardness and marginalisation of the
continent.
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33. Since its establishment, the Centre has:
 Developed generic principles of corporate
governance and sample code of best practice.
 Developed guidelines for state owned corporations
and shareholders.
 Facilitated the set up of the Kenya Shareholders
Association
 Facilitated the set up of the Institute of Directors of
Kenya.
 Trained over 1,500 directors in all the regions of the
continent,
 Developed post graduate programmes in corporate
governance which are ongoing.
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34. • As the secretariat of the Pan African Consultative
Forum on Corporate Governance, the Centre has
worked closely with donors and development partners
to organize the two major fora to deliberate issues of
corporate governance in Africa and to set up an
interactive website
www.corporategovernanceafrica.org, a valuable
resource for information on corporate governance
initiatives and activities in Africa. It also continues to
participate actively in various international fora to
provide the African perspective in the global debate on
corporate governance.
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35. CONCLUSION
Good corporate governance will ensure that
corporate entities provide not just economic
value but also social value. That they truly
become the engines of economic and social
transformation. The Centre is committed and
looks forward to working closely with NEPAD to
raise the standards of corporate governance in
Africa for the economic and social
transformation of the continent.
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