On 23 September 2009, I held a workshop on online IR management in Accra, Ghana. My co-presenters were Winston Nelson, the CEO of African Alliance Securities Ghana, a pan-African stockbroking firm, and Farayi Mangwende, the corporate communications manager for African Sun, one of our clients.

At the moment, Ghana’s online investor relations practices can be described as practically non-existent. This is not unusual. We have pointed out that it has only been in the last three to five years that technologies have developed to the point where the majority of the pain associated with online communication can be eliminated and some of the commercial pleasure enjoyed.

Winston Nelson, the CEO of African Alliance Securities Ghana, analysed the online IR practices of Ghana’s listed companies in his presentation at our workshop.

The following key statistics were presented:-

• Only 17% of listed companies in Ghana have IR websites
• Only 2% have the contact details of an IR officer online
• Company apathy toward meeting investors has increased after the worldwide economic meltdown (when it should be the other way) as only 6 out of 34 listed companies utilised the GSE’s meet investor initiatives (one third of the activity of 2008)
• The practice of posting annual reports online is not prevalent

But Ghana, like many other countries, is reaching that tipping point where internet and mobile access rates show the rapidly growing potential for digital investor communications. Some statistics on the market:

• Number of listed companies on the Ghana Stock Exchange: 34
• Total market capitalization: USD10bn
• Number of Internet users : 1,000,000
• Number of shareholders: 250,000
• Number of shareholders in CSD: 25,000
• Mobile penetration rate: 60%

In my experience, in many countries with smaller, illiquid stock markets, securities markets professionals seem staid in their attitudes to the market. Things don’t change much from day to day, so the introduction of something new like online shareholder communication takes some time to digest. I have often noted that African capital market regulators are some of the most widely travelled executives, yet have not pushed the technology agenda to ensure that stock market information is immediately available online, and that shareholder communications from listed companies use online platforms.

What Does the Audience Think?

We asked participants to fill in a brief questionnaire to hear whether and how they prioritise online IR management. Here are some of the highlights:

Participants almost unanimously agreed that those companies starting their online IR activities early would benefit the most in the long run. This is consistent with the experience of US companies after electronic communications were permitted in 2005. Those that embraced the technology changes learnt how to benefit from them early.

The majority of respondents may agree that the internet was the way forward for shareholder communications and the environment was right in Ghana for online IR, but approximately 1/3 of respondents indicated that the timing and the environment were only somewhat relevant, so there are clearly some doubts. Executives, investors and market participants are not looking forward, they are looking backward. That said, the Ghanaian executives I met have been most responsive to the principles we shed light on.

The other common retort across all markets I have visited (including, incidentally, in the US where 90% of the investing population has access to the internet) is why should online investor relations practices be introduced when rural people have no access to computers? Ghana has approximately 1 million Internet users, compared to only 250,000 shareholders. Surely it is a safe assumption that the majority of shareholders should have access to the internet. It access to email that is the key criterion, but lets stick with the Internet at the moment. It just takes one investor to change the fortunes of a company and directors have an obligation to ensure that broad arrays of tools are available for investors to access information. I am unaware of any regulators in any markets in Africa that are carrying out surveys of the profiles of investors, retail or otherwise, their habits, their needs, access to phones, internet average wealth etc. These have been common in the US and are used to drive the SEC’s strategy for overall market development. The various African Governments that were proponents of privatisation campaigns and that carried them out successfully should now ensure that the mass of shareholders that they created can make meaningful use of their share in the economy. Listed companies generally ignore retail shareholders.

In explaining why companies had not previously had an online IR presence, respondents most commonly attributed this to a lack of policy (probably at board level) within their company. Lack of awareness was also mentioned. This was substantiated by similar findings elsewhere that also noted the absence of policies to deal with online communications. Dealing with the hassle of IT and the cost of IT were the next most common reasons, which I assume have their origins in the absence of tools and technology (and skills) readily available to listed companies.

Most respondents were somewhat (not strongly) happy with their corporate websites – to me, this is further evidence of limited awareness of recent trends and online communications practices.

In considering the relevance of an online IR programme, increasing communications efficiency was seen as the overriding relevant factor in justifying an online IR programme. Saving management time was the next most prominent justification, followed equally by ensuring competitiveness to peers, reducing costs and promoting investor and customer loyalty.

Rob Stangroom

CEO

African Is Cool

Continue Reading

South Africa has been through three King processes supported by the private sector and the South African Institute of Directors (IOD SA). King III was implemented effectively because of critical mass, a familiarity of all parties and a compelling national need to ensure that a South African solution on governance was provided for South Africa.

Zimbabwe is currently in a similar position, given the dire need for investment. But can the Zimbabwean Institute of Directors (IOD Z) pull off such an immense task with limited resources, within the targeted eight months and within the current political environment? Probably not, in my view. Here is why:

Briefly, the institutional framework needed for effective corporate governance are:

• An independent, well functioning judicial system
• Anti-corruption strategies
• Reform of government agencies
• Investigative and informed media
• Active business community with integrity

Zimbabwe scores very low on all of the indicators above, possibly with the exception of the last one. Looking at the limited resources of Zimbabwe’s IOD, financial and otherwise, I find it difficult to see how this process can be carried out within the stipulated time frame. Cynical? Maybe.

Main Bottlenecks

But the last launch of a similar code (in the same room at Crowne Plaza Hotel over 10 years ago) also failed through the lack of buy-in and follow through. Nyasha Zhou wondered whether the re-launch at exactly the same place was not a bad omen for the second governance code.

Two additional things weigh on my mind, having been a participant at the IOD and Zimbabwe Leadership Forum launch: Firstly, that without resolution of the current governance issues surrounding the GNU in Zimbabwe, launching a new corporate governance code will be meaningless to investors for obvious reasons. How can government buy-in be secured for corporate governance matters when the government cannot even implement basic governance issues itself? Will it be taken seriously? I think not. And secondly, can a governance code be completed without the current initiatives to replace the Companies Act and Securities Act being complete or at least being addressed at the same time?

Nevertheless, prima facie the initiative is a welcome one and is based on the assumption that the current GNU impasse will be resolved – an assumption adopted by anyone investing money in Zimbabwe at the moment.

Corporate Governance and Investor Relations

African Is Cool is an online shareholder communications consultancy. Our specialty is using online communications software to enable listed companies communicate with investment communities so it is natural that we will take a interest in this process.

Of particular interest to us is whether any new code embraces technology and promotes technology in communication. If it does, the law and the governance code must speak the same language. I also feel that the ‘comply or explain’ obligation should be legislated, as suggested by Professor Mervyn King SC. Our efforts to introduce progressive investor relations practices and to ensure wide availability of annual reports have revealed just how poor the basic IR practices of listed companies in Africa are. What is the catalyst for change? I can’t see it. It has to be a national legislated commitment to improved corporate governance, but not to the extent of the Sarbanes Oxley Act. For our clients, commercial benefits arose from progressive communications. This is not a catalyst, however – this is a result following the implementation of good governance.

The awareness surrounding what, how and when to communicate within governance principles is very low amongst ALL players. The communications aspects of governance were not mentioned in the summit and we did not expect so at this point. But they should and will need to be included in the future because the internet-enabled access to vast audiences of potential investors is just what Zimbabwe is looking for.

At the appropriate time, we expect to provide some guidance to the main steering committee on how the internet is changing governance, providing the opportunity to communicate with much larger audiences, saving cost through the distribution of communications electronically and increasing transparency and sustainability – all the good things that are discussed in governance fora.

Recommendations

My suggestions for a successful process to develop the new governance code:

• Government should come to the table immediately with financial support as tangible evidence of its support of the private sector. The funds should be managed by the IOD in putting together the processes needed to get broad control.
• The IOD in South Africa and UK should consider supporting their Zimbabwean counterpart with financial and human resource, which would help to apply the skills and experiences gained in the launch of King III in Zimbabwe. This, I believe, is happening.
• It is important to obtain buy-in and commitment from key private sector participants, and to publicly hold them to their promises.
• Key milestones in the process from now until May 2009 should be widely published – this will keep everyone focused.

One positive aspect of this initiative is Zimbabwe’s access to a number of grey-haired executives. The IOD, the ZSE and key participants of this process are well respected and experienced individuals who have profound insights into what is required to put together a meaningful code in Zimbabwe’s difficult environment. This gives me confidence.

We have been telling our clients that the absence of good corporate governance, particularly in communications, is a huge opportunity to improve corporate reputation and engage the local, diaspora and international investment community directly. Now this is the time for Zimbabwean executives to come to the table and actively participate in the development of a new code for the national good and to ensure that their interests are adequately represented.

But do they have enough time? In short, I do not anticipate that that the timetable for the implementation of the new code will be kept. But on our part, we hope to assist the process with an interactive website to enable immediate dissemination of information in the process as well as to facilitate managed feedback from all quarters.

Rob Stangroom

CEO

African Is Cool

Continue Reading

The Corporate Governance Summit Zimbabwe began on Monday, 28 September 2009, at the Crowne Plaza Monomatapa and was well attended by all representative sectors of Zimbabwe’s economy.

Zimbabwe has started the process to create a new corporate governance code at what clearly seems to be an opportune time: The main motivator is that Zimbabwe needs capital – and corporate governance is a pre-requisite attracting funding.

The speakers at the one-day summit were:

• Mr Canaan Dube, Chairman, Zimbabwe Leadership Forum (ZimLef)
• Honourable Mrs Thokozana Khupe, Deputy Prime Minister of Zimbabwe
• Professor Mervyn King SC, Chairman of the King Committee on Corporate Governance in South Africa, and Vice President of the South African Institute of Directors
• Mr Nqaba Mkwananzi, Partner Business Risk Services, Ernst and Young Zimbabwe
• Mr Shepherd Shonhiwa, past Chairman, Institute of Directors of Southern Africa
• Mr David Mutambara, President, Institute of Directors (IOD) of Zimbabwe
• Mr Eliah Mutowo, Permanent Secretary, Ministry of State Enterprises and Parastatals
• Mr Nyasha Zhou, Chairman, CZI Committee on Business Ethics
• Mr Tinashe Rwodzi, Territory Senior Partner Zimbabwe and Malawi PricewaterhouseCoopers

Organisational Issues

The development of the code is inclusive and will solicit feedback from all stakeholder registered, i.e. multi nationals, local companies, parastatals and state-owned enterprises, SMEs and the informal sector.

The steering committee to drive the process is currently being constituted: The IOD will look at the key issues at hand and then decide what structure would best respond to those issues. The intention is to have a small, but effective board with access to a full supporting cast of sub-committees. It is anticipated to have completed the new Code on Corporate Governance Zimbabwe by 30 May 2010)

The private sector is expected to be the main driver of the formulation process, and key corporate private sector sponsors to this initiative are Delta Corporation, First Banking Corporation and TA Holdings. The Institute of Directors Zimbabwe and the Zimbabwe Leadership Forum will provide additional support.

Additional buy-in is expected from other corporate entities in Zimbabwe. Addressing the challenge of how to garner high level support from key decision makers in the process, the past chairman of the Southern African Institute of Directors, Mr Shoniwa, said the South African process targeted high powered individuals and invited them to become conveners and advisors. In addition, prominent organisations were invited to participate directly in the process and obtain buy-in. Lastly, a consistent publicity policy was pursued.

The funding of this new initiative is intended to come from the private sector, mostly in kind: members of the steering committees will be offering their time and effort for free. The experience of the IOD of South Africa is going to be tapped once the steering committee has been appointed.

Conceptual Inputs

Is there a difference between African and European corporate governance? How would an African solution differ a European one? David Mutambara responded by suggesting that there was no contradiction in the objectives of both. If anything, the West, through international governance codes, was actually teaching Africans the concept of “ubuntu” of traditional African governance philosophies.

David Mutambara’s presentation provided a very level headed insight into the practicalities of developing a governance code and the tendency of key participating executives to put their individual company objectives ahead of national interest. This conflict creates dissonance, especially when a new governance code is being developed, so he suggested it was important to ensure that the concept of “national interest” was well defined. Mr Mutambara also pointed out that a replication of process that governs the development of a national constitution is not going to be in the interests of the code development process: The intense time pressure requires a balance between broad consultation and expediency.

Recommendations by Professor Mervyn King SC

The Zimbabwe Leadership Forum and the IOD Zimbabwe secured the participation of Professor Mervyn King SC who flew from Europe to Zimbabwe (and straight back to Europe) to provide guidance to everyone following the launch of King III earlier this month. He is an excellent speaker and his speeches have begun to address environmental issues more prominently as time goes on. Not surprising given that has spent some time with Al Gore recently.

Shedding light on the process of developing King III in South Africa, Prof. King had a few tips for the IOD and ZimLef in Zimbabwe:

• King III can be used as a guideline by the Zimbabwe initiative, but should not be merely copied: It is essential that parties participating in the Zimbabwe process first lists the special circumstances surrounding governance in Zimbabwe and then determine how these are to be integrated into any governance code.
• It is crucial that the main steering committee carries out its work through sub-committees (King III had eleven sub committees, manned by 90 people in total, representing various stakeholders)
• Prof King advises to obtain wide buy in from all sectors of the economy: unions, societies, stock exchanges and others. Failure to do so had been the reason for the ineffectiveness of the previous code on corporate governance.
• Concentrate on the ensuring that the individual is the focus of corporate governance.

Professor King emphasized that Zimbabwe would not be able to legislate “competency and honesty” and that the “comply or explain” philosophy underlying codes in many other countries should be adopted in legislation, not as a code.

Continue Reading