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