Can Africa overcome its developmental challenges in the 21st century? This is a question every African businessperson who is enlightened enough to understand our shared humanity should be concerned about. Yet it is a question that few business leaders and even fewer political leaders ask.
According to Shanta Devarajan, Chief Economist at the World Bank, Africa is the region with the highest poverty rate, and its rate of poverty decline is too slow. The twin forces of ignorance and a lack of integrity in leadership continue to limit the human potential of the continent. The dream of a renaissance in Africa begins with ensuring that a sufficient critical mass of the continent’s population develops the strength of character needed to lead with integrity. It is my opinion that such leadership can influence the political class in the long run. The private sector and organised business can lead the way in engendering a culture of transparent honesty, which is the cornerstone of corporate governance.
The private sector and organised business can lead the way in engendering a culture of transparent honesty
Cultural concerns
There are few countries with a robust system of social security in Africa. African entrepreneurs, in particular those that are successful, are often required to support a large number of extended family members. A financially comfortable (and kind) relative is the only security the typical African has against hunger in the event of any personal incapacitation. The other security for the unemployed is the handout that may be made by politicians scurrying for votes. In Nigeria, this has reached frightening proportions, with politicians even coining the phrase ‘stomach infrastructure’ in discussing it. Systemic failures in governance by the political class have led to the emergence of an entitlement mentality in much of Nigeria’s uneducated youth. It is now normal for relatives of landowners to demand perpetual rent from investors even when a piece of real estate was disposed of by outright sale. It is for this and several similar reasons that discerning companies engage a specialist community liaison officer to deal with the communities in which they operate.
The lesson coming out of Africa is that a responsible business should exist to solve society’s problems in a sustainable manner. True profit is not measured in monetary units. It is reflected in the human development indices of the society that supports the business. Unfortunately, it is still difficult to find good examples of companies leading the way in terms of CSR in Africa. The profit motive alone continues to propel most African businesses.
Character roles
Dr Stanley Milgram, a psychologist at Yale University, conducted his famous experiments on obedience to authority in 1961. The lessons of that experiment are especially relevant for Africa today. The results indicated that the average person, irrespective of his or her level of education, would comply blindly with orders to commit sadistic acts and even murder if he or she was acting under the instructions of an authority figure, who was willing to accept all responsibility. It appears that, beyond all reasonable doubt, character is the single biggest factor needed for leadership.
When people of strong character lead a corporate board, decisions and governance are made on the basis of balance. Risk is minimised and the personal integrity of each individual board member hinges on the actions of the leaders. Africa needs particularly strong, honest individuals to lead the boards of its corporations so that they can stand up to the corrupt regulators that foster many of the systemic failures in governance. These requirements have no gender bias. If boards were constituted more on the basis of strength of character than on technical competence or gender, then we would see more companies resist the corrupting influences of their operational environment.
In the course of my consulting work for small business owners, I am surprised by how limited their future outlook is. Japan has a plethora of corporations that have existed for several centuries. Such large, well-governed corporations have contributed in no small measure to the country’s resilience. Perhaps if business founders and those charged with business governance understood that a well-managed business could exist more or less perpetually, we’d see a shift in attitudes.
The need for transparency
What do I want to hide? Why do I want to hide it? When the facts are finally revealed, how will it impact my reputation? These questions are too often in the minds of many current business leaders. We humans, as a social species, will often judge ourselves on the basis of how we are perceived by others. Perceptions are fuelled by reputation. It takes a certain strength of character to rise above these instinctive worries. Similarly, where the regulatory environment is weak, either as a result of wilful corruption or an honest lack of capacity, a business leader will need to establish a strong code of personal accountability and responsibility. Honest communication is the tool that fosters accountability and responsibility, even at an individual level.
In my experience, there appears to be an intentional refusal by corporations to communicate transparently with their stakeholders. On a consulting project for one of the largest national oil companies in Africa, I was prevented from accessing the historical financial statements which were needed to deliver on the terms of my engagement. I was forced to advise on the basis of hypothetical scenarios rather than actual results. This is akin to a patient concealing vital information from a doctor. In that particular corporation, the financial statements were regarded as so sensitive that even senior managers were not allowed a complete view of the documents.
To analyse and understand risk in Africa, particular attention should be placed on the word itself, the acronym RISK: resources, information, systems and knowledge need to be tailored to operate smoothly in the terrain. Unfortunately, this basic approach is too often ignored in favour of a broad fear of revealing information. The end result is that information is not shared and significant opportunities are lost.
Open and honest communication is, today, a buzz phrase. In practice, many companies are anything but open and honest in their quest to maintain secrecy. The fear of competition is one factor companies commonly cite as a hindrance. In reality, those companies that survive in the long run do not spend time meditating on their competition, but on creating and innovating.
Information about executive remuneration and board compensation is masked and rarely disclosed. Some companies in Africa refuse to respond to compensation surveys on the basis that personal harm could come to their employees if the information was leaked. This concern is not unfounded in the face of rampant criminality and kidnappings. However, a company that is committed to dealing honestly will find a way around excuses in order to do the right thing.
Africa needs a renaissance. This will begin with having more people of strong character and integrity leading boards.