Wernhil flooding from a corporate governance perspective

Thirty-two years later, Namibia faces what appears to be several development challenges, but it is just fundamentally one challenge: unsustainable corporate governance. The layman's understanding of corporate governance is that it is a matter strictly for the company itself because it entails direction and control of the company by a board of directors. However, this understanding is flawed, to the detriment of the much-desiredeconomicdevelopment because corporate governance failures result in conduct that endangers the environmental, social and economic pillars of sustainability.

Accordingly, sustainable corporate governance refers to those business practices without any or improperly mitigated environmental, social and economic implications. Corporate conduct that triggers such environmental, social and economic implications is not only unsustainable, but is also deemed scandalous in the corporate governance sphere. Corporate scandals refer to unethical business behaviour, whether allegedly or actual.

Wernhil's flooding qualifies as a corporate scandal for several reasons. Firstly, it is indisputable that Wernhil is managed by a corporation, Broll and List Property Management (Namibia) (Pty) Ltd, subject to corporate governance. Secondly, the flooding is consequent to an alleged or actual failure chiefly on the part of Wernhil, but undoubtedly also on the part of several other business entities, inclusive of the relevant regulatory authorities such as the City of Windhoek.

Thirdly, flooding is the materialisation of environmental risk, having a major social and economic impact. Socially, the flooding has endangered lives and property, and may have traumatised customers and staff, some of whom are unlikely to have medical aid benefits and may thus not be able to afford therapy, and will therefore have to rely on public health facilities.

Economically, the shopping mall may have to close temporarily owing to damaged property, and not all shops will return to business as usual immediately.So,temporaryincomeor joblossesintotalityarearealpossibility. Furthermore, flooding may send a bad signal to tourists, thereby affecting the tourism sector. A drop in sales at the mallduringespeciallytherainyseasons shouldalsobeexpected,goingforward.

The Wernhil flooding highlights corporate governance failures that must not go unmentioned and without intellectual engagement on the subject matter, inclusive of warranted governance criticism that the Namibian media is known for in the context of ‘'native'' governed companies (state-owned enterprises and post-1990 “native-owned'' businesses). Specifically, the Wernhil flooding signals that Wernhil failed to properly assess and efficiently mitigate the environmental risks associated with its business practice as a shopping mall, and this facilitated its inability to detectitsstructureorlocationasfloodprone. This failure further meant that

Wernhil could not properly articulate a resilience, continuation or timeous disaster management policy, and this is strengthened by the escalation and duration of the flood implications. As the relevant weather conditions were foreseeable (weather updates were available in advance), it is highly unlikely that Wernhil can successfully rely on force majeure, should the affected customers and staff sue for damaged property, psychological trauma, interrupted sourcesofincome,orjob losses, etc. However, the fact that Wernhil must reasonably be aware of its location (and that includes it being at the bottom of a hill), might make a strong case for negligence rather than a defence, as suggested by a recent tweet by The Namibian newspaper. This is because Wernhil had the responsibility to ensure an appropriate drainage design under its circumstances, a drainage shape in particular that ensures dispersing and not the concentration of water.

This is not just a once-off compliance check, but a continuous one, considering climate change. The relevantdrainagedesignmayhavebeen appropriate under particular climate conditions, and then futile under new climate conditions. Climate change in Namibia has been reported on by major relevant institutions, revealing drought and flood manifestations of late.

GEO Pollution Technologies (Pty) Ltd prepared an “Environmental Management Plan''forWernhil,datedMarch2022,which appears to be aligned with sustainable corporategovernance,theoreticallyatleast. This appears to have been for the purpose of obtaining an environmental clearance certificate for the recent expansion of Wernhil.

Interestingly, under Health, Safety and Security per this plan, flood mitigation or rainwater drainage has not been properly dealt with as a risk(asdonewithfire),despite having hinted at flood risk undertheclimatesection.The “Topography and Drainage” sectionthatfollowedisarather generic descriptive context, and has not made any links to the relevant drainage system in the context of rainwater or storm pipe connectivity. This became more apparent as the surface water section referred to “maintenance of any storm water pipe, channel or work…”, without advising on ensuring an adequately functioning drainage in case of flood, or the related mitigation as done for the other identified environmental risks.

The core issue here is that flooding was not properly identified and addressed as a risk by the relevant corporation or its consultant.Thisisafundamentalcorporate governance failure that has triggered a scandal, with major social and economic implications, as narrated above.

Nonetheless, the Wernhil-associated corporation and its consultant are not entirely to blame for the flood scandal as they have met the requirements of the relevant authorities as far as their corporate practices are concerned. The approval of the plan rather demonstrates the need for anationalcorporategovernanceregulatory and institutional framework. Sustainable development is currently set out by the Sustainable Development Goals' (SDGs) framework and is said to identify the most pressing environmental, social and economic issues globally.

While it is globally understood that companies too must facilitate sustainability through corporate governance, it is the responsibility of the state to properly guide all companies on sustainability issues through appropriate regulatory and institutionalestablishments.Namibianeeds a corporate governance watchdog because the implications of corporate governance failures such as the environmental, social andeconomicimplicationsinthecontextof Wernhilfacilitateriskycorporatebehaviour and consequent cost externalisation.

Cost externalisation refers to the economic/developmental challenges triggered by companies, but paid for by society. For example, reduced economic activity, traumatised customers and staff, and income or job losses, will be felt by the public taxpayer, otherwise referred to as the government budget (increased demand, so potentially increase in prices, strained public health, or unrehabilitated persons, given that state psychological facilities are not necessarily accessible, and a rise in unemployment). The consequences of unregulated corporate governance are clearly underestimated by the political leadership, rendering “national economic plans” useless because one cannot, on one hand, be funding development, and failing tomitigatecostexternalisationontheother. Investing in so-called assets (development) with operational costs that exceed the asset value (cost externalisation) is unintelligent, andevenqualifiesasveryriskybehaviouron the government's part, which governance strives to mitigate. Some may argue that Namibia has a corporate governance framework. However, as I have already addressed this issue through advanced research and a previously published article titled “Corporate Governance Link to Economic hardship”, my response remains the same. Firstly, the relevant framework is erroneously copied and pasted from South Africa and Europe in 1919 during colonisation and as legislated through Apartheid law by the father of Apartheid in NamibiaandSouthAfrica,ChristianSmuts.

Secondly, the same is, therefore, unconstitutional by virtue of Article 140 of the Namibian Constitution, which made all “law in force at the date of independence'' (as in 1919 to 1990), applicable post-independence; why would any law (Apartheid) before independence be “Constitutional” after “independence”? Third, the current framework facilitates the unfair distribution of economic power, the exercise of which continues to neglect especially non-elite ‘'natives'', as apartheid laws prior to independence (Article 140) are designed to oppress natives, and the struggle for “independence'' was for ‘'freedom'' therefrom. The continuation of Apartheid legislation through Article 140 obviously means Namibia has never had to design any law or governing system for itself, inclusive of a corporate governance regulation. Evidently, Article 140 is an easy-to-abolish provision. However, what wouldbeleftofthe“Namibianlegalsystem” thereafter? Absolutely no legislation, whether dated prior to or after 1990 (law dated after 1990 is facilitated by the law dated prior to 1990, so it would also fall away). The existence of Article 140 some 32 yearsafterindependenceisclearlyrootedin scandalouspolitics,whichtheauthorhereof has in-depth knowledge of (Namibian, and South African history during World War 2), but no desire to address in this article. To date, the masters of Article 140 probably view the current corporate governance framework as beneficial. However, the Wernhil flooding demonstrates that even powerful corporations have more to lose than gain from unsustainable regulatory frameworks. The existence of corporate governance regulations in appreciation of the ESG investment criteria would have shielded the Wernhil expansion investor from the G-issues in ESG that have been triggered by the E-in-ESG “blunders” of several regulatory authorities.

A weakness worth noting in the current framework is that while corporate governance is interdisciplinary and incorporatesthereforelaw,finance,business and relevant ESG expertise, the current regulatory framework is composed of several regulators, all of whom cannot holistically consider governance issues. Corporate governance regulations can only be effective when there exists a relevantregulatorcomposedoftherelevant experts from these different fields, working together. An environmental engineer with expertise in water systems and a corporate governance professional with ESG expertise, working within a corporate governance regulator, may have articulated some useful guidelines, and perhaps better assessed the relevant environmental plan; the Wernhil flooding could have been prevented. In summary, a properlyestablishedcorporategovernanceregulator couldhavepreventedtheWernhilflooding, and also Fishrot, SME Bank, Air Namibia, SSC, NCAA and other corporate scandals and collapses. It could have assessed the environmental, social and governance issues relating to the Ramatex investment, and perhaps we could have a relevant national report identifying and addressing the relevant ESG issues associated with the Green Hydrogen investment. The failure to prevent corporate scandals and assess potential investments on an ESG criteria have only taken us a step back on development: cost externalisation. The relevant political leadership must be ready to address Namibians on their proposed solutions to these costly and recurrent corporate governance failures because all economic logic dictates that little will be left of Namibia by the ‘'Vision 2030'' era. Namibiahasnovaluewithouttheeconomy onwhichallNamibians(rich,poor,corrupt, ethical,nationalagent,foreignagent,native, white, elite, etc) depend. All that happens in any economy is business, and business is carried on by, with, or through companies. Therefore, the regulation of the business practices of these companies should be a top priority, and is known as corporate governance regulation.