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Posted Mon, 20 Feb 2006
Increasing fluidity in the global trade environment has burst the seams of the traditional CORPORATE GOVERNANCE model. With this must come a new style of leadership if Africa’s to have its day.
THERE IS a great deal of passion in Stanley Subramoney’s voice when he speaks about the development of the African continent. It’s for this reason that his chosen topic for the African Leadership Conference is “Strategies for Business Growth”. Subramoney, Deputy Chief Executive, PricewaterhouseCoopers, Southern Africa, says there is a critical need for turnaround strategies in a continent in dire straits.
“The tragedy of the African continent is that foreign-derived investments are very low. The continent receives a mere 1 percent of global investments. That is too low to facilitate sustainable development and growth. The result is that there are many countries in Africa that continue to live on hand-outs and foreign aid.”
This economic reality is particularly saddening since Africa is a treasure trove. Some 90 percent of chromium is found in Africa, according to Subramoney. And in excess of 55 percent of gold, but the problem is that Africa exports raw materials and imports the fi nished product. With the result that Africa gets poorer and the nations north of us get richer.
Subramoney says achieving these objectives calls for strategies to speed up development and growth on the continent.
“We need to create an environment that will attract more global investments while also encouraging a shift towards Africans carrying out more trade with fellow Africans. We need to promote intra-African trading so that more of the wealth is trapped in the African continent, thereby improving our balance of payments, improving the currency and strengthening long-term sustainable economic growth.”
He adds that development strategies have to have a specifi c focus on creating jobs and wealth in order to break the cycle of poverty. For that to happen, there has to be economic growth, preferably in excess of 5 percent. But there are several obstacles that stand in the way of foreign investment in continent. The fi rst is afro-pessimism - the belief that the entire continent is corrupt and riddled with ineffi ciencies.
“This is incorrect,” Subramoney says. “There are countries that have maintained an admirable record of good government and good governance. What is really encouraging is the new thinking around governance largely infl uenced by peer review mechanisms engineered by the African Union.”
The key, according to Subramoney, is using continental and regional bodies to create a stable, investor-friendly environment. He says there are many similarities between strategies to run successful businesses and successful countries.
And so strategies to attract investment into a company through good governance and subsequent growth can be applied to the process of building a country geared towards attracting investment. The trouble with delinquent countries, he says, is that, unlike unprofi table businesses, one cannot simply shut them down. Which is why he believes the peer review mechanism can play a major role in regulating country behaviour.
The second factor that can improve Africa’s position in the global arena is economic governance. This includes the independence of the Treasury and the Reserve Bank.
Lastly, Subramoney says the continent’s success will be enhanced through improved corporate governance. “The corporate sector is a critical driver of growth in any country. With the best intentions in the world, government is not a good creator of employment and wealth. When government does create jobs, this is often at great cost to the economy.”
“Those three components of governance set the framework required to attract foreign investment. But if domestic business does not believe in investing in its own country, it becomes diffi cult for foreign investment to fl ow in.”
He points out that most business failures are a result of a limited understanding of the product, the markets and the competition.
Talent and good leadership are increasingly becoming key to sustainable businesses. Whereas in the past, there was huge emphasis on assets, there is an increasing focus on people as the core of every successful organisation.