As companies in Africa are becoming international players in both operations and sourcing of capital, the need to meet listing requirements of foreign exchanges and appeal to international investors has elevated the importance of corporate governance in Africa. Generally, favourable economic growth expectations and lack of legacy issues mean that Africa has some advantage in having new governance frameworks fit for the 21st century.
In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards talks with Tinuade Awe, Chief Executive Officer of NGX Regulation Limited - an independent regulatory subsidiary of the Nigerian Exchange Group Plc. The Group was formerly known as The Nigerian Stock Exchange (NSE).
"Entities don't go into business because they want to be regulated"
Tinuade starts by outlining the difficulties of multiple layers of regulation, sometimes with different regulators, each wanting to impose certain obligations, each acting within its mandate by the legislative enactment. She believes that while regulators are already collaborating, there should be more of this.
She describes how sociocultural issues are important because the underpinnings of good governance are transparency and disclosure, but the African approach to disclosure differs. African countries have extremely multi-ethnic cultures, leading to a sense of 'keeping what's yours to yourself.' She believes this leads to people simply 'not wanting to see what is happening,' not because of any wrongdoing, fraud, or cover-up, but because culturally, many people don't believe that type of disclosure is necessary.
"We tend to look at what works in other places and then domesticate for our market"
Tinuade believes that Africa is more similar than different to other countries in regulation. However, when thinking globally and acting locally, there are exceptions, and she gives the example of the demutualisation of the Nigerian Stock Exchange.
"Regulator, don't you really think that you should be looking at this group of us and trying to come up with something?"
Tinuade reports that the very youthful population in Africa are digital natives and thus require access to digital sources of information. They want well-run companies because they can see how governance is helping to improve other economies and providing opportunities. She feels the combination of youth and technology is undoubtedly vital for the furtherance of corporate governance.
"The move from rule-based to principles-based helps moderate the box-ticking"
Tinuade acknowledges that, unfortunately, sometimes corporate governance becomes a box-ticking exercise, and there is not as much time spent on whether the board or the governance processes are effective. But if you have a completely Greenfield country, where there is no corporate governance, she feels people need help to get accustomed to what governance means. At the start, you may want to give a tick-box list. But soon the move should be made to be more principles-based governance. Tinuade advocates the latter because it gives scalability and flexibility, which help to moderate the frustrations companies might feel.
The three top takeaways from this podcast:
1. Corporate governance is global. There is no African or Western corporate governance. Certain immutable principles apply everywhere.
2. Many companies are not taking issues around ESG as seriously as they should, and there are many developments in the world right now that will require mandatory obligations on companies.
3. The regulator is your friend. People should engage more with regulators and develop relationships. It is a two-way street.