Corporate governance: Driving growth in Africa
Corporate governance: Driving growth in Africa
Following on from the Côte d’Ivoire Ocorian Forum edition in April, Business Development Director Anjeelee Chinamal, speaks to Abidjan.net about the goal of the Forums and how good corporate governance is key to driving growth on the continent.
What are the objectives of the first Ocorian Forum recently held in Abidjan?
Ocorian Forum is a discussion platform highlighting best practices and sharing of experience among stakeholders of the international business community. The idea is to bring together entrepreneurs, investors and intermediaries as well as representatives of regulators and organisations with a mission to promote investment and business. In this way, we seek to understand the needs of investors and explain the role of International Financial Centres (IFCs) in terms of adding value to investments. We also discuss current investment trends in emerging countries, in particular Private Equity funds.
How does the Ocorian Forum facilitate growth in Africa? What is the result of your activities?
It would be presumptuous to say that Ocorian Forum facilitates growth. As I mentioned previously, it is primarily to share knowledge between the local economic actors and those operating at an international level. By sharing best practices, including the understanding of the importance of corporate governance, investors can get a better idea of what they need to do to increase their Enterprise Value and their Investor Value.
To this day, we have organised several Ocorian Forums, in Mauritius, in Dubai and on the African continent. We hope that we succeeded in raising awareness as to the role played by IFCs and the growing importance of what, at Ocorian, we call the governance capital. An entrepreneur looking for capital to finance his growth will be seeking capital from his shareholders, a bank or financial institution, or from Private Equity investors. It is this governance capital that will give him the required access to the financial capital he needs, also giving him more assurance that he is building his Enterprise Value.
Why do you focus on investment in your Ocorian Forum?
Investment is one of the key drivers of growth and employment. It is largely through investment that Africa's emerging economies will be able to realize their full potential. At this Forum, we talked about the required ecosystem that can be found in a business hub - what Ivory Coast can claim to be today - or in an IFC. Let's take an example, that of an entrepreneur with an innovative idea. He may have protected his intellectual capital with a patent and he may now want to look at the markets in neighbouring countries. He will need capital to fund his cross-border expansion. Without this governance capital, it will be very difficult to give confidence to investors and it very likely that he will not succeed to fill his financial gap. So long as there are investment opportunities, good governance becomes as important a factor as the expected return on investment and market conditions.
Globally, corporate governance issues are becoming increasingly important. What is your view on good governance in Africa? Is the situation improving?
It is true that the question of corporate governance is becoming more and more important across the world. I will illustrate this by the fact that corporate governance is today a major criteria which investors take into account in Private Equity funds, placing it on the same footing as the environmental and social impact criteria. Investors sensitive to good corporate governance are both private investors and institutional investors such as development finance institutions. The reason for this emphasis on corporate governance is easy to understand. Good governance in a company suggests a framework more likely to unleash operational effectiveness. It will also attract investors that will find in it a reason to feel more secure, in addition to the security of the macroeconomic landscape in which the company operates.
Good corporate governance is generally on the rise everywhere in Africa where it becomes vital to attract foreign investment to make up for the lack of domestic investment, whether public or private. The number of countries in Africa having adopted a Code of Corporate Governance is increasing. This phenomenon is distinct from governance measures brought in by the public sector. But the two together, private sector governance and public sector governance, act in the same direction and eventually result in an improvement of the business environment measured by an index such as the World Bank Doing Business survey. I note with satisfaction that Côte d'Ivoire this year features amongst the 5 countries in Africa having the most progressed on the Doing Business survey ranking, alongside Djibouti, Kenya, Rwanda, and Togo.
What impact do initiatives such as the Mo Ibrahim Awards for Leadership have on governance in Africa?
These rankings are important and reflect a dynamic evolution. However, I'm talking here about the governance of companies. These indices are very macro-driven even if they can inspire measures that will encourage good governance at a micro level, i.e. that of companies. It is through the adoption on a daily basis of best-in-class governance practices that we will see a positive effect on the way companies are run, on their ability to give confidence to investors and generate more value. At Ocorian, our role is to assist companies in building up their governance capital, which is the most effective way to add value in a sustainable manner for the company and its shareholders.
What is your view on the business environment in Côte d'Ivoire? Looking at the countries that are most successful at attracting investments, what is that they are doing well? What can Côte d’Ivoire learn from them?
We believe in the growth and investment potential of Côte d'Ivoire. For long, this country has been an engine of growth for the region. It is also in recognition of this potential that Ocorian, which is already present in several hubs and financial centres worldwide, chose to open an office in Abidjan. That said, if Abidjan is to develop from the business hub it is today into a regional financial centre, there must be a plan of action supported by unfailing political will. The business environment will need to improve, with less cumbersome procedures for the setting up of companies. There must also be investments in human capital, macroeconomic stability must prevail and corporate governance must be an accelerator of growth and a lever for creating value. In this process, which could lead Côte d’Ivoire to move from the level of a hub to that of a regional financial centre, working with an international financial centre such as Mauritius could help. In that context, we could for instance work on a collaboration between the ‘Bourse Régionale des Valeurs Mobilières’ – our Regional Stock Exchange – and the Stock Exchange of Mauritius for dual listings. In the financial sector, many such collaborations may be considered. Coming to the question of which countries are best at attracting investments, I would say there are common characteristics one can observe: an investor-friendly business environment that gives security and adds value to investors; an operational framework that makes it easy to do business; and mechanisms that make investment exits through repatriation of capital and dividends fiscally attractive.
Given this favourable context, will the Abidjan office continue its development?
Because of the importance of Côte d’Ivoire as a regional business centre, our role is to support investors wishing to invest out of Côte d’Ivoire or directly into Côte d’Ivoire or from Côte d’Ivoire into the region. Over the years, dating back to the times we were known as ABAX, we have developed specialist expertise in cross-border investment and trade structuring. Our aim is to make this expertise available to business operators involved in cross-border transactions. Our support also comes in the form of 'business matching', i.e. finding a provider of financial capital that can help finance the project of an entrepreneur. In terms of corporate financial advisory, we are also able to offer various services, such as business valuations, for instance when there are mergers and acquisitions. Finally, I will also add our capabilities in terms of setting up structures such as trusts and foundations that are solutions for asset preservation and transmission. We see many opportunities for us here.
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You can read the full interview in french here.