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Governance Challenges in Africa

High-profile corporate scandals globally have generated increased interest in corporate governance.

High-profile corporate scandals globally have generated increased interest in corporate governance. As companies in Africa are becoming international players in both operations and sourcing of capital, the need to meet listing requirements of foreign exchanges and appeal to international investors has elevated the importance of corporate governance in Africa. Generally, favourable economic growth expectations and lack of legacy issues mean that Africa has some advantage in having new governance frameworks fit for the 21st century.

However, corporate governance failures persist in many African countries, and there are still many challenges and opportunities in developing and implementing corporate governance.

In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards talks with Tinuade Awe, Chief Executive Officer of NGX Regulation Limited – an independent regulatory subsidiary of the Nigerian Exchange Group Plc. The Group was formerly known as The Nigerian Stock Exchange (NSE) and is licensed by the Securities and Exchange Commission (SEC) to provide regulatory services within the Nigerian Capital Market.

Some of the key takeaways of the conversation include:

“Different differences have an impact”

Doyin opens by explaining that inclusion is about the degree to which difference is recognised and valued, regardless of the type of difference. She highlights that in some geographical locations and cultures, certain differences matter more than in others, and some differences are visible and some not so visible, such as neurodiversity or religion. She believes there is a need to think intentionally about different identity dimensions and how they matter differently. Doyin feels that boards have a role as role models because of the work that boards and their members can do as a powerful social system. But that system has structural inequities. To build organisations that are gender, race, disability, or neurodivergent inclusive, we have to understand how structures may be exclusive based on certain groups. But structure alone is not sufficient. She believes individual action is very important, and the key question that everyone in the boardroom should ask is: ‘What is your own compelling driving force for equality in the business?’

“Entities don’t go into business because they want to be regulated”

Tinuade starts by outlining the difficulties of multiple layers of regulation, sometimes with different regulators, each wanting to impose certain obligations, each acting within its mandate by the legislative enactment. She believes that while regulators are already collaborating, there should be more of this.

She describes how sociocultural issues are important because the underpinnings of good governance are transparency and disclosure, but the African approach to disclosure differs. African countries have extremely multi-ethnic cultures, leading to a sense of ‘keeping what’s yours to yourself.’ She believes this leads to people simply ‘not wanting to see what is happening,’ not because of any wrongdoing, fraud, or cover-up, but because culturally, many people don’t believe that type of disclosure is necessary.

Also, not every African regulator is keen on that type of disclosure because some regulators want to do their work and may not want the entire world to know what is happening.

“We tend to look at what works in other places and then domesticate for our market”

Tinuade believes that Africa is more similar than different to other countries in regulation. However, when thinking globally and acting locally, there are exceptions, and she gives the example of the demutualisation of the Nigerian Stock Exchange. It was decided to have a separate company with a separate board because they wanted the stamp of independence, so everybody would know that this was independent regulation. There was no idea that its decisions could be subsumed under business considerations. Tinuade gives this example of Africa going in a different direction from the rest of the world. Although there are other companies like this in Singapore, Japan, and Brazil, they are few and far between.

She explains that there were certain things about the economy in Africa that require a growth board for growing companies, and they are also in the process of creating a technology board. There is a lot of investment by PE and VC firms in technology companies that have come out of Nigeria, Egypt, and Kenya, for example, and there are already unicorns from Nigeria.

Nigeria seems to attract technology, even though it is a developing country and some of the conditions may be challenging, so they are creating a board for technology. However, she accepts that they tend to look at what works elsewhere and then domesticate for the African market.

“Regulator, don’t you really think that you should be looking at this group of us and trying to come up with something?”

Tinuade reports that the very youthful population in Africa are digital natives and thus require access to digital sources of information and want disclosure. They want well-run companies because they can see how governance is helping to improve other economies and giving opportunities. She feels the combination of youth and the democratic creation of technology is undoubtedly vital for the furtherance of corporate governance. Also, governments themselves have a role in trying to attract funding, and one of the ways to do this is to have certain levels of governance. More and more African countries have principles-based codes, for example, Nigeria, Kenya, South Africa, Egypt – also Mauritius.

Tinuade thinks the private sector does not necessarily lead many of these initiatives, so governments step in. Some African companies are finding particular demands are being made of them, especially when seeking foreign capital. If compliance is required, and it becomes more expensive to do business than for a fellow company that doesn’t have to comply, they are turning to the regulators. It helps to market to foreign investment to be able to say you are regulated. Regulation can be for a selfish motive in the sense that now the cost of business is higher, regulators or the government are being to raise the standard, so everyone has that additional burden. Finally, financial institutions like the IFC, and FSD, have an African focus. They are trying to encourage companies to do better governance and to be better run because of their belief that when you have better-run companies, it benefits the economy.

“The move from rule-based to principles-based helps moderate the box-ticking”

Tinuade acknowledges that, unfortunately, sometimes corporate governance becomes a box-ticking exercise, and there is not as much time spent on whether the board or the governance processes are effective. But if you have a completely Greenfield country, where there is no corporate governance, she feels people need help to get accustomed to what governance means. At the start, you may want to give a tick-box list of things to do. Then at some point, the move can be made to be more principles-based. Tinuade advocates principles-based corporate governance because it gives scalability and flexibility, which help to moderate the frustrations that a company may feel. It gives them some level of ownership and control as to how they will meet the principal’s requirements. Then buy-in is more likely, and companies are more willing to comply.

Tinuade believes that regulators have a lot of tools, ranging from a civil money penalty to a warning, to naming and shaming, to meeting with the board. She explains that when a company does not comply, the first thought is not that the company doesn’t want to comply, but it is to engage with the company as to why there is no compliance. Instead of a penalty, sometimes this leads to mandatory compliance training. This helps the company to understand better, leading to less box-ticking.


The three top takeaways from our conversation are:

  • Corporate governance is global. There is no African or Western corporate governance. Certain immutable principles apply everywhere.
  • Many companies are not taking issues around ESG as seriously as they should, and there are many developments in the world right now that will require mandatory obligations on companies.
  • The regulator is your friend. People should engage more with regulators and find a way of engaging with regulations and forcing a relationship that should be a two-way street.

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