SA stands out in cor­po­rate gov­er­nance

The Star Early Edition - - BUSINESS NEWS - Ka­belo Khu­malo

SOUTH Africa’s cor­po­rate gov­er­nance frame­work ranks among the best in the world, and this helps the coun­try to fa­cil­i­tate mar­ket con­fi­dence and busi­ness in­tegrity, which helps it at­tract for­eign direct in­vest­ment.

This is ac­cord­ing to the au­dit firm KPMG’s lat­est re­port, Bal­anc­ing Rules and Flex­i­bil­ity for Growth.

The au­dit firm found that when it comes to rules around the role of the board, South Africa and Kenya stood out, with their re­quire­ments to set out clearly the fidu­ciary du­ties of the board.

The re­port fur­ther found South Africa had the most ex­ten­sive guid­ance on fac­tors that should be con­sid­ered when se­lect­ing board mem­bers, while mar­kets such as Kenya, Morocco and Nige­ria men­tioned gen­der di­ver­sity in their re­quire­ments.

Tu­nisia went a step fur­ther re­quir­ing that one-third of board mem­bers should be un­der 40 years old and an­other third more than 60 years old to achieve an in­ter-gen­er­a­tional mix.

Irv­ing Low, the head of risk con­sult­ing at KPMG, said there was suf­fi­cient ev­i­dence to show in­vestors were will­ing to pay a pre­mium for com­pa­nies with good gov­er­nance.

“So­phis­ti­cated and sound cor­po­rate gov­er­nance prac­tices can be help­ful in ob­tain­ing new and much-wel­comed in­vest­ments in Africa, as good-qual­ity cor­po­rate gov­er­nance is es­pe­cially im­por­tant for in­vestors,” Low said.

The re­port fo­cused on 15 coun­tries in Africa and ex­am­ined the cor­po­rate gov­er­nance re­quire­ments for listed com­pa­nies across four pil­lars of cor­po­rate gov­er­nance: lead­er­ship and cul­ture, strat­egy and per­for­mance, com­pli­ance and over­sight, and stake­holder en­gage­ment.

The 15 coun­tries ex­am­ined were South Africa, Egypt, Zam­bia, Ethiopia, Ghana, Kenya, Mau­ri­tius, Tan­za­nia, Morocco, Mozam­bique, Nige­ria, Rwanda, Malawi, Uganda and Tu­nisia.

South Africa was ranked num­ber one among the mar­kets hav­ing adopted the largest num­ber of Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment cor­po­rate gov­er­nance prin­ci­ples. Kenya, Nige­ria, Mau­ri­tius and Uganda com­pleted the top five.

When it came to dis­clo­sures re­lat­ing to fi­nan­cial and non­fi­nan­cial mat­ters fun­da­men­tal for a ro­bust cor­po­rate gov­er­nance frame­work, the Mau­ri­tian code stood out, with an ex­ten­sive list of what should be dis­closed in the an­nual re­port, a de­scrip­tion of items that should be con­sid­ered for dis­clo­sure on the com­pany’s web­site, and a re­quire­ment that the au­di­tor should as­sess the ex­pla­na­tions given for com­pli­ance with the mar­ket’s cor­po­rate gov­er­nance code.

Jamil Am­pomah, the di­rec­tor of sub-Sa­ha­ran Africa mar­kets at the As­so­ci­a­tion of Charted Cer­ti­fied Ac­coun­tants, said that al­though South Africa had re­cently launched the King IV re­port, six of the 15 mar­kets stud­ied were on the first ver­sion of their codes and onethird of the mar­kets stud­ied had only re­cently re­vised their codes.

The coun­try‘s good prac­tice has pos­i­tively rubbed off on a num­ber of other African mar­kets

“South Africa has shown it­self to be an early adopter and is rel­a­tively pro­gres­sive in cor­po­rate gov­er­nance. This has in­flu­enced a num­ber of other African mar­kets, which have ben­e­fited as fast fol­low­ers in cor­po­rate gov­er­nance prac­tice.

“South Africa is clearly a leader and is at the fore­front of cor­po­rate gov­er­nance frame­work de­vel­op­ment when com­pared with de­vel­op­ing, and even most de­vel­oped, economies,” Am­pomah said.

The KPMG re­port found that when it came to share­holder rights, Uganda and Kenya en­cour­aged com­pa­nies to hold reg­u­lar in­vestor brief­ings and re­quired them to dis­close in­for­ma­tion in re­la­tion to share­hold­ers’ rights, in­clud­ing their par­tic­i­pa­tion and vot­ing at an­nual gen­eral meet­ings, re­ceipt of in­for­ma­tion, op­por­tu­nity to ask ques­tions and par­tic­i­pate in ma­jor de­ci­sions, and share in the dis­tri­bu­tion of profit.

And when it comes to per­for­mance eval­u­a­tion, South Africa, Mau­ri­tius, Morocco, Mozam­bique and Nige­ria all had guid­ance on how such per­for­mance eval­u­a­tions should be con­ducted, as well as the re­quire­ment to dis­close the process for eval­u­a­tion, Am­pomah added.

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