The African Peer Review Mechanism (APRM), AU’s specialised agency on governance, has said implementation of the African Principles and Guidelines on Corporate Governance (The African Principles) by African Union member states will play a crucial role in the success of the African Continental Free Trade Area (AfCFTA) hence the need for respective countries to adopt corporate governance standards.
By Adam Alqali
This assertion was made by Tumi Dlamini, a corporate governance expert at the APRM Continental Secretariat on Wednesday while speaking at a media sensitization webinar on the African Principles. Corporate Governance (CG) is one of APRM’s five thematic areas of focus hence the Mechanism was along with its partners responsible for the development of the African Principles.
“The implementation of the African Principles by member states will enhance the coherence and harmonisation of business regulations and governance processes and practices across different countries,” said Dlamini. “Ensuring a seamless application of business processes regardless of the jurisdiction the business operates, will become the cornerstone of the success of AfCFTA as well as an essential component of its success.”
Dlamini said the development of the African Principles was based on the appreciation of the private sector’s role as the engine for sustainable development in Africa, noting that good governance itself was the foundation for private sector development, and more so within the context of the AfCFTA. She stated that APRM’s findings based on CG assessment of 24 African countries revealed their corporate governance to be largely borrowed from developed countries hence did not take into consideration Africa’s socioeconomic and business environment.
“APRM findings have revealed significant commonalities in challenges faced by member states with regard to compliance with corporate governance standards. These include the fact that the private sector is largely dominated by the informal sector and Small, Medium Enterprises (SMEs) whereas the domestic CG frameworks that have been adopted pertain to developed business environments and large companies given that of course they were borrowed from preexisting CG standards in developed countries,” she said.
Consequently, Dlamini said businesses across African countries found little or zero relevance in their respective countries’ CG principles and therefore continue to grapple with a myriad of challenges particularly lack of access to finance, inadequate skills, limited growth prospects as well as limited women’s representation, especially at the highest echelon of Africa’s formal sector. She identified as major obstacles to African businesses the lack of electricity, access to finance, corruption, political instability as well as customs and trade regulations.
“There has been in the past a lot of focus on political governance and democracy which was quite understandable, given that we had a history of political instabilities but the issues at the fore now and the continent’s priority is gradually evolving to become more about economic growth and development, and less about coups, conflicts and political instability,” Dlamini asserted.
According to the African Principles, African CG standards must address the development of the dominant players in Africa’s economy i.e SMEs, informal sector and family-owned businesses, as it does large businesses; entrench governance practices that promote transparency, accountability, protection of shareholders and creation of funding opportunities for all businesses; confirm the fundamental role of businesses to make a positive contribution to development and be involved in improving the livelihoods of local communities; as well as embracing the values of Ubuntu.
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