This document summarizes a presentation on corporate governance and poverty alleviation in Africa. It discusses how full employment is needed to create wealth and alleviate poverty. It also addresses challenges facing Africa like weak leadership, inequality, and corruption. Solutions proposed include the government providing infrastructure and enabling policies, partnerships between public, private and civil sectors, and initiatives like NEPAD promoting economic and corporate governance reforms. The role of corporate governance in promoting transparency, accountability and probity is also emphasized to help strengthen businesses and reduce poverty.

1. CORPORATE
GOVERNACE AND
POVERTY ALLEVIATION
IN AFRICA
Paper presented by Mr. Karugor Gatamah, E.D.
PSCGT at the International Seminar on Corporate
Governance & Development of Appropriate Codes
and
Accountants’ Annual Dinner, Tanzania
October 31, 2002 to November 1, 2002

2. Introduction
Creating adequate opportunities for fully
productive employment of all members of
society who are willing and able to work, is
central to the economic development of a
country. Full and productive employment is
the only means of creating a society in which
all individuals have a share in the creation of
the wealth of the nation. Unless wealth is
created, poverty cannot be alleviated.

3. Employment enables the people to provide
for themselves. Such people may in turn,
also create employment for others, by
enlisting their services for various
purposes.
In
addition,
employment
ensures that the spending power so
created,

4. expands the market for goods and
services, and there is a chance for people
to invest some of their earnings, in effect
leading to creation of wealth. It is from such
investments from the productive sector of
the economy that the government earns its
revenue in the form of taxes and other
levies.
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5. It has been stressed that focused
intelligence is the new source of wealth. It
is vital to have persons with focused
intelligence in leadership positions of
business enterprises or other positions of
decision-making in society. There is need
for accountability, transparency and
leadership for probity from people in
management positions in society.

6. Leaders of business enterprises and
corporations must be of the cadre that can
propel enterprises from where they are
presently, to a higher position in future. It
is only in this way that various businesses
can grow, hence forming a basis for
wealth creation in a country.
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7. Challenges to development in Africa
Africa has over the years been characterized
by extremely low productivity and generally,
poor performances of business enterprises.
This has been due to a number of debilitating
factors, prime amongst them being the crisis
in leadership.

8. There is a lack of political commitment and
crisis of legitimacy largely due to the
concentration of political and economic
power as well as wealth in the hands of a
small, privileged and entrenched political
and economic elite. This scenario has
bred mistrust and suspicion.
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9. All over the world, countries are struggling to
expand their economies and improve living
standards. This struggle is particularly poignant
in Africa, which has for a long time been mired
in declining economic performance, rising
unemployment, deteriorating national
infrastructure and increasing and abject
poverty.

10. The primacy of peace and security, both at
national and regional levels as a prerequisite
to sustainable development, cannot be overemphasized. Without durable peace and the
security of life, property and national borders, it
is not possible for citizens, economic actors
and governments alike to plan, implement and
undertake all the necessary activities that are
required so urgently to arrest the protracted
decline and stagnation in the region.

11. Persistent internal conflicts and strife as
well as external aggression, have forced
the poorest region in the world to divert
such vast proportions of its resources that
the very survival of an increasing number
of African countries may be at risk.
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12. The greatest threat to peace in Africa and
developing countries generally, remains
internal conflict. Although external factors
play important roles in these conflicts, by and
large, most of the internal wars and threats to
national peace including civil wars and border
conflicts have been perpetrated by Africans
themselves.

13. Social inequalities and ethnic conflicts are
also characteristic of Africa. The inequalities
inherent in African societies are principally
visited upon social groups that unfortunately
also bear the brunt of economic and social
difficulties. Social inequalities are more often
than not, intricately tied to the ethnic conflicts
which rather than being the main cause of
social upheaval, are largely a façade for the
much more complex social or political
situations of injustice, inequality and
domination.

14. Entrenched corruption, lack of respect for
human rights, inefficient bureaucracies and
weak commitment to undertaking policy and
institutional reforms are all inimical to the
reduction of poverty. AIDS has only emerged
to aggravate the situation further.

15. Addressing the challenges
The role of government
The role of government is to put in place the
necessary infrastructure that allows for
investments from business enterprises to thrive.
It should put in place mechanisms for ensuring
that the individual’s enterprise and initiative is
rewarded and that people who put in hard work
into their ventures have the opportunity of
reaping the fruits of their labour.

16. To effectively play its role, government
must strive to go further than just
providing physical infrastructure. It must
also put in place effective legal and
policy frameworks and the social
capacity for development. It must ensure
security and stability by mobilizing the
citizenry and ensuring their effective
involvement in the development process.

17. This involvement must not be illusory.
People must feel that they have a real
influence over the production and
distribution of wealth. This will engender
trust and encourage not just the
consumption, but also the production of
wealth.
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18. It is by inculcating in individuals the feeling
that they have a stake in the well-being of
the country, that peace would be
maintained. Employment of the citizens is
critical in this regard.
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19. In the past, governments in Africa have
tended to perpetuate the dependency
syndrome in their citizens, where it is
always
assumed
that it is
the
governments’ role to provide virtually
everything to the citizen. This is not
appropriate and citizens who rest on their
laurels waiting for government to provide,
must be disabused of this notion.

20. It is important to note that an enabling
environment
cannot
be
created
by
government alone. It calls for the
establishment of effective partnerships
between the public sector, the private sector
and the civil society that enhances the spirit
of participatory development and increases
citizen engagement in creating a secure and
stable environment in which corporations can
grow and thrive.

21. An array of business practices, corporate
attitudes, societal and institutional values all
determine the so called competitive advantage
of societies. Proactive efforts must be made to
inculcate the culture of transparency and
accountability. There has to be in place a
philosophy which regards the common good of
society as the most crucial success factor.
Business will then begin to flourish, more wealth
will be created and will be more equitably
distributed, and development in the broadest
meaning of the word will be accelerated and
sustained.

22. Forging effective poverty reduction
partnerships
While government bears a substantial
responsibility in ensuring that the alleviation
of poverty is implemented successfully, it is
also recognized that it may require help in
executing this role satisfactorily. It is for this
reason that governments should enter into
effective partnerships with other partners in
development.

23. The Role of the Private sector
The private sector must be looked at as the
engine of economic growth in any country. It
is well placed to play the role of wealth
creation in the country because it is primarily
concerned with doing business, unlike
government.
For the private sector to play any meaningful
role, it must be driven by good corporate
governance principles. It is only such
practices that can ensure increased
productivity and sustainability of enterprises.

24. The role of civil society
The civil society has a duty to ensure that
it demands from the government, and all
public institutions, proper management of
resources vested in such institutions or
government. To this end, it is vital that
advocacy programmes are put in place to
enlighten citizens on their rights.

25. The role of NEPAD
The political leadership of Africa under the
New Partnership for Africa’s Development
[NEPAD] is another important vehicle
through which these challenges to the
alleviation of poverty can be addressed.
The leaders working under the NEPAD
framework have in principle agreed to the
following as key priority thrusts to
addressing the challenges facing Africa:

26. • Restoration of peace, security and stability
with consolidation of democratic gains and
strengthening of democratic structures and
institutions;
• Establishment and entrenchment of good
economic and corporate governance;
• Bridging the infrastructure gap and creating
social capacity for development;
• Human resource development and capacity
building;

27. • Reduction of poverty and income
inequalities through accelerated economic
growth and sustainable wealth creation;
• Reconfiguration of global financial
architecture with emphasis on investment
promotion and re-definition of relationships
with development partners focusing on debt
reduction, increased aid and aid reform;
• Integration of the continent into the world
economy and enhanced market access; and
• Preservation and conservation of the
environment.

28. Among the key strategic thrusts of NEPAD is
the improvement of economic and corporate
governance. The leaders have repeatedly
underscored the importance of good corporate
governance in the sustainable development of
Africa. These proposed measures by NEPAD,
if put in place, would make the implementation
of poverty eradication measures easier and
more effective.

29. The African Peer Review Mechanism is a tool
within the NEPAD framework that is designed
to provide an independent assessment of a
country’s performance and diversity with
respect to political, economic and corporate
governance. It would also validate and qualify
external assessments by bodies such as the
World Bank and the IMF. It is an idea that is
long overdue.

30. In assessing governance, it is useful to engage
a set of indicators. Indicators can be defined
as the visible manifestations of the state of
governance of a corporation. This would
provide information as to the level of
compliance with codes and standards as well
as the nature of the remedies that could be
applied.
In terms of corporate governance, possible
indicators include:
At a country level:

31. • Information, monetary and fiscal transparency.
• The enforcement of law including the
efficiency of the judiciary and the police.
• The effectiveness of the regulatory framework
of both government [particularly banking,
insurance and security markets] and self
regulatory authorities [including the stock
exchange, professional and trade
associations], etc.

32. • Presence and effectiveness of
anticorruption measures and measures
to inculcate ethics, such as the code of
ethics for holders of public and the civil
service and the extent of enforcement
of the same.
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33. Marshalling all potential development
partners to ensure ownership,
sustainability and effectiveness
Civil society, the private sector, parliaments,
trade unions, and external agencies and the
civil society should all participate in
designing and implementing strategies for
reducing poverty. This diversity of actors
demands better communication, reinforced
by strong cooperation, and a good
understanding of the relative strengths and
comparative advantages of each of them.

34. Development agencies can play an important
role in strengthening the capacity of civil
society to engage with government, and in
supporting consultation mechanisms. Due
consideration should be given to the scope for
non-governmental organizations, chambers of
commerce and the enterprise sector to
spearhead effective and innovative initiatives
for reducing poverty.

35. Allocating resources for effective
poverty reduction
Given the limited volumes of development
assistance and the importance of reducing
poverty, it is vital that development
cooperation resources are used as
effectively as possible. Country allocation
criteria need to take into account both the
number and proportion of very poor people
and include an assessment of the scope for
the effectiveness of aid in a given partner
country. Maximizing the impact of
development cooperation on reducing
poverty implies:

36. • Concentration on the poorest countries,
although some targeted funding should
also be provided to other developing
countries with widespread poverty.
• More emphasis on medium and largersized countries, where the vast majority of
the very poor are found, although aid per
capita would remain significantly higher in
smaller countries.

37. The place of corporate governance
Corporate governance has seven pillars
namely, discipline, accountability,
transparency, responsibility, independence,
social responsibility and fairness. It is
concerned with holding the balance between
economic and social goals and between
individual and communal goals to align as
nearly as possible the interests of individuals,
corporations and society.

38. It extols practices which can be put into
practice in promoting the proper
governance, not only of business
enterprises and institutions connected to
them, but also governments. Such
principles include transparency,
accountability and probity.
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39. In applying sound corporate governance
practices, the various stakeholders must first
agree on what constitutes the national
standards of practices which they desire to put
in place. Standard setting is vital and would
entail taking the standards that have already
been agreed on internationally and then
adopting them to the African situation.
Institutional capacity building must then take
place. This would involve activities like putting
in place institutions like centres that promote
Corporate Governance initiatives and other
similar institutions that foster the growth of
corporate governance in the country.

40. This would then be followed by national
capacity building and this entails the training
of directors of various institutions as well as
the training of trainers, to ensure that the
corporate governance practices in place, start
bearing fruit.

41. Good corporate governance prescribes
desirable practices which if implemented
would ensure a marked improvement in
the fortunes of the vast majority of
countries in Africa, and indeed the
developing world as a whole. These
measures include:

42. 1)
Training and Education
Training and education can be used to build
a national capacity to implement and apply
good Corporate Governance practices by
facilitating increased range of training
opportunities for directors and potential
directors, and by exposing and sensitizing
as many people as possible to good
corporate governance principles through;

43. • Development, continuous review,
•
•
•
•
improvement and update of training materials
and case studies.
Training of Trainers courses.
Initial training courses for a critical core of
directors in publicly quoted companies and
major private companies and leading private
and public corporations.
Stakeholders’ workshops to promote
understanding of good corporate citizenship
and social responsibility.
Consultative meetings on promoting
partnerships for sustainable wealth creation
and eradicating corruption and bribery in
business.

44. • Establishment of a national register of
qualified and competent directors suitable for
appointment as non-executive directors, or
similar corporate appointments.
• Consultations with professional and
educational institutions on development of
education curriculum in corporate
governance.
• Development of educational curricula and
materials for postgraduate programmes in
corporate governance.
• Support and collaboration with institutions of
higher learning for the introduction of post
graduate studies in corporate governance.

45. 2)
Research and Development
This would contribute to the continued
improvement and refinement of the
principles of good corporate governance by
studying, documenting and understanding
how current systems operate, the problems
to good corporate governance and the
potential for improvement, including:

46. a) Studies and research on sector specific
governance practices and procedures e.g.
in:
– The not-for-profit sector.
– The cooperative sector.
– Local authorities.
– Banking and finance sector.

47. b) Studies and research on the impact of
governance practices e.g:
• Public governance and its impact on
the business operating environment.
• Knowledge management and its impact
on the creativity, innovativeness and
competitiveness of business
enterprises and the national economy.
• Role of governance in mobilizing
resources for sustainable development.

48. • Impact of globalization and trade
liberalization on corporate performance
and governance.
• Challenges of implementing self-regulatory
governance procedures.
• Impact of corruption and bribery on
corporate performance and governance.

49. c) Formulation and development of
guidelines e.g.:
• Role, duties and obligations of executive
and non-executive directors.
• Good corporate citizenship and corporate
social responsibility.
• Ethics in corporate governance.

50. • Information disclosure, accountability and
transparency.
• Mechanisms for promoting effective
partnerships between the public, privates
and civil sectors for sustainable wealth
creation.
• Sustainable methods for promoting, rating
and policing of good corporate governance.
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51. 3) Advocacy and Communications
Advocacy plays a very critical role in
sensitizing, motivating and influencing
policy-makers, corporate directors and
community leaders to embrace and promote
good corporate governance principles and to
motivate the participation and involvement of
the community in actively demanding good
economic governance for sustainable wealth
creation, increased employment
opportunities, etc through leadership for
efficiency and probity:

52. leadership with responsibility and
leadership that is transparent and
accountable in all fields of human
endeavour and in developing a national
framework of values, ethics and ethos for
good corporate governance and whose
activities are as follows:
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53. a) Advocacy:
– Workshops for policymakers, regulators
and supervisors.
– Seminars on national ethics and values
for good and sustainable economic
governance.

54. – Workshops and seminars on
partnerships for sustainable wealth
creation and employment generation.
– Discussions and debate on governance
practices to enhance democratization of
institutions for sustainable wealth
creation.
– Workshops on good corporate
citizenship and social responsibility.
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55. b)
Information, Documentation and
Communications
This involves:
– Establishment of a resource centre and a
databank on corporate governance.
– Publication and communication of research
results and studies showing the impact that
governance practices and corruption have
on national economic performance, the
quality of life of the community and on
employment opportunities.

56. – Periodic and regular publication of journals
and magazines to facilitate dissemination of
information, exchange of ideas and
experiences and to promote policy dialogue
on good corporate governance.
– Development and maintenance of a
dynamic website on corporate governance.
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57. 4) Monitoring and Evaluation
To monitor and evaluate the extent to which
public institutions and private business
enterprises in a country embrace, apply
and implement good corporate governance
principles and practices and to assess the
impact that this has on improving national
efficiency and competitiveness in enhanced
wealth and employment creation. Activities
involve:

58. • Development of a criterion for the
monitoring, evaluation and certification of
good corporate governance practices.
• Putting in place a mechanism for evaluating
and assessing the extent to which
companies in Kenya embrace good
corporate governance principles.
• Initiate and launch a national recognition
and reward scheme for companies that
excel in good corporate governance
practices.

59. CONCLUSION
Africa is not an island. We are now in a
global market and in order to prosper,
Africa must be competitive. With proper
institutional and policy frameworks in place,
and with strict implementation of those
policies, there is no reason why we cannot
turn a continent which is the most endowed
with natural resources, into the richest
continent.

60. It is instructive therefore that legal and
policy frameworks that promote or provide
a conducive environment for the creation
of wealth are formulated and put in place
to facilitate economic growth.
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61. Vices like corruption and other undesirable
practices like ethnicity which have the
potential of derailing poverty eradication
schemes already in place, must be curbed.
More importantly, the fight against poverty
must be a concerted three-pronged assault
between the public sector, the private sector
and the civil society, if any meaningful gains
are to be realized.

62. In all these ventures, corporate
governance plays an exceedingly
important role in providing the frame work
and guidelines of practices that ensure
success in the running and management
of enterprises at various levels.
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