African companies need proper board oversight and whistleblowing mechanisms if they are to encourage investment and avoid damaging corporate scandals, said lawyers speaking at the IBA Conference.
Africa needs to adopt “corporate governance as a living culture” if it is to attract investment and improve its business climate, according to management consultant and academic Dr Elvis Botah, but the culture is at best “a work in progress” at the moment, warned Nigerian lawyer Chiagozie Hilary-Nwokonko.
Both were speaking at the Annual Conference of the International Bar Association (IBA) on Thursday (8 October) in Copenhagen, where Dr Botah, of the University of Professional Studies in Ghana, was chairing a discussion on corporate governance, anti-corruption and compliance in Africa.
Corporate governance and compliance should be “the price of entry” to the market, Heather Irvine of Bowmans South Africa told the event, highlighting the struggle for implementation and coordination across the existing patchwork of regulation across different countries, regional blocs and the African Continental Free Trade Area.
State-owned entities are particularly vulnerable, because governments often protect them from the worst consequences of their failings, due to “the mingling of interest that plays out in state ownership of corporations”, said Gareth Driver, from Webber Wentzel in South Africa, explaining that “the state often looks for and mandates a social impact”, rather than a simple financial return from state-owned entities, which it views as a key employer of its supporters.
All aboard
The panellists agreed that education of executives, board members and investors is essential to the corporate culture. Driver advised the installation of effective and regularly tested internal governance controls, saying “the biggest risk for non-executive directors in a company is ignorance”, while Caliis Badoo, head of legal and enforcement at the Ghanaian Securities and Exchange Commission highlighted a direct correlation between the proportion of independent non-executive directors and the profitability of a company.
Whistleblowing is also key. Companies need to provide a secure mechanism for complaints and to ensure that they are properly investigated, said Nwokonko, of Streamsowers & Köhn, through “basic commonsense things” such as securing evidence and preventing retaliation. He warned that currently “the cultural setting discourages whistleblowing because people are afraid of retaliation and there is cynicism that nothing will change”.
Essential technology
Installing proper monitoring is getting easier though. AI “brings to the table the combination of volume and speed and reach”, which allows even small companies to understand what their employees and senior managers are doing and how this exposes them to risk, said Irvine.
The human factor remains though: “Technology without culture is really just surveillance,” she said. AI “can detect patterns” but it “can’t tell good from bad, it doesn’t have a moral compass”.
The regulators are already using this technology, Irvine continued. The Competition Authority of Kenya (CAK) has invested in a digital laboratory to provide forensic investigations and prosecutions evidence, while the COMESA Competition and Consumer Commission has joined Stanford University’s Computational Antitrust project.
Many of these tools are built on open-source software which creates an opportunity for Africa to start building its own compliance systems, and “we want to be producers and not only consumers of this technology” she added.
Staying competitive
As a competition lawyer, Irvine pointed out that anticompetitive conduct is “often a symbol of a deep failure of corporate governance”, suggesting that competition enforcement can be used to reduce corruption and bribery levels, while providing African economies with a strong case to attract business. “Corporate governance matters, it really does matter, it is what of drives economic growth. In Africa we need to take it very seriously, as lawyers we need to champion it, because when it goes wrong, everyone ends up paying,” concluded Nwokonko.
Source: www.africanlawbusiness.com
