SA stands out in corporate governance
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.