PAN AFRICAN CONSULTATIVE FORUM ON CORPORATE GOVERNANCE THIRD MEETING DAKAR SENEGAL 8TH – 10TH NOVEMBER 2005 THE CHALLENGE FOR AFRICAN COUNTRIES TO SET STANDARDS AND PROMOTE GOOD CORPORATE GOVERNANCE IN STATE OWNED ENTERPRISES Presentation by:- Col Joseph L. Simbakalia Managing Director and CEO National Development Corporation, The United Republic of Tanzania

Slide 2 ORDER OF PRESENTATION 1.Introduction and Overview: Setting the Premises 2.Global Overview of Corporate Governance 3.The Corporate Governance Debate 4.Corporate Governance Challenges and Opportunities for African Countries 5.Conclusion

Slide 3 INTRODUCTION AND OVERVIEW: SETTING THE PREMISES State Owned Enterprises (SOEs) in Africa continue dominate the key sectors of infrastructure provision, utility services and development, even with on-going public sector reforms. The Non-performance and failure of SOEs in Africa, largely ascribed to corrupt or ineffective, and merely substandard corporate governance The behaviour/operations of SOEs affect stakeholders (General Public, Governments, Investors, Financial Markets) The Ultimate goal of more robust corporate governance and higher standards of integrity, fairness and accountability offers wide ranging benefits to stakeholders.

Slide 4 GLOBAL SCENARIO OF CORPORATE GOVERNANCE In 1990’s attention on corporate governance focused on emerging markets following the financial crises of Asia and Russia. The list of corporate casualties has grown in all markets, including prominent companies domiciled in countries with developed legal systems, sophisticated accounting standards, and mature financial markets, e.g. the spectacular collapse of ENRON. Corporate Governance has emerged as an explicit or stand-alone risk factor.

Slide 5 THE CORPORATE GOVERNANCE DEBATE Both Global setting and the Africa scenario do not provide a standardised or universal approach to corporate governance because of pluralistic market environments, legal systems, ownership structures and culture. Conclusions from research based on broad measures of governance in the global markets:- a)Corporate governance does matter ( in relation to performance) b)Corporate governance risk premium is suggested as a concept to reward good governance performance (arising from the concept of governance as a stand-alone risk issue) c)Corporate Governance is not a “One Size Fits All Concept. Local institution comes into play.

Slide 6 CORPORATE GOVERNANCE CHALLENGES AND OPPORTUNITIES FOR AFRICAN COUNTRIES NEPAD FRAMEWORK Corporate Governance is linked to State Governance In terms of State Governance, African countries have adopted the APRM under NEPAD Hence APRM provides the most coherent opportunity to link with, and mainstream corporate governance advocacy, promotion and entrenchment underpinned by political will and support REFORM OF SOEs Opportunities exist link the promotion of corporate governance with the reform of SOEs.

Slide 7 CORPORATE GOVERNANCE CHALLENGES.. Cont. Key legislative and regulatory interventions to support the SOEs reform agenda and address the issues of public finance management and accountability:- a)Revision of the Establishment Acts of SOEs to be aligned with best practices for corporate governance, including recruitment, composition and selection of Boards and Management b)Use of public listed companies as a benchmark for the institutional development of SOEs (e.g. Singapore)

Slide 8 CORPORATE GOVERNANCE CHALLENGES.. Cont. c)Establishment and role of independent industry regulators d)Establishment of efficient commercial courts to enforce commercial legal requirements/compliance e)Bankers/Financial Institutions to adopt the concept of governance premium as a stand alone risk issue, and hence create an incentive system to promote good corporate governance. f)Institutional capacity building in the organisations over time, including education to create public awareness and training of Directors of SOEs.

Slide 9 CONCLUSIONS A standard approach cannot be prescribed to promote corporate governance in Africa for SOEs. Unlike private companies, most SOEs are not transnational or multinational There are 3 critical common factors for Africa, which are paramount in the challenge to set standards and promote good corporate governance:- a)INSTITUTIONS: the rules of the game and the operating culture obtaining within the organisation and in the operating environment b)GOVERNANCE ARCHITECTURE: the leadership and functional structures of the organisation, as well as reporting relationships and accountability c)PERSONAL ETHICS AND INTEGRITY – Governance ultimately is less a question of architecture and more a question of the people governing from within this architecture

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