IFC unveils strategy to boost EAC businesses

Central Bank of Kenya Chairman Mohammed Nyaoga

World Bank’s investment arm, International Finance Corporation (IFC), has teamed up with a Swiss State corporation to launch a programme that would see corporations in East Africa boost their businesses.

The East Africa chapter of the Africa Governance Programme was launched on Tuesday by the IFC and Switzerland’s State Secretariat for Economic Affairs (SECO) to improve the performance of businesses in Kenya, Uganda, Rwanda and Tanzania by helping them adopt good corporate governance practices in line with regional priorities.

“IFC is supporting businesses in critical sectors for African development, including power, agribusiness and financial services. By further supporting good corporate practices within African companies, we expect them to carry lower financial and non-financial risk, and generate higher returns for shareholders.

“IFC and SECO’s corporate governance programme will equip businesses in East Africa with the tools they need to attract and retain investment, and operate more efficiently, which in turn will boost economic growth in the region,” explained Cheikh Oumar Seydi, IFC’s director for Eastern and Southern Africa.

Central Bank of Kenya Chairman Mohammed Nyaoga urged East African businesses, most of which rely on exports, to embrace corporate governance’s best practices if they wanted to improve on their competitiveness. Mr Nyaoga defined Corporate Governance as practices, procedures, structures by which corporations manage their businesses towards meeting their strategic objectives.

“The objective of corporate governance is to promote competitiveness and performance excellence,” he said.

Some of the best practices of corporate governance include a strong board of directors with a clear definition of roles and responsibilities, focus on integrity and ethical dealing and performance evaluation for both the board and executive directors.

According to Mr Nyaoga, a number of businesses in East Africa are owned and managed by families. This means that succession planning is a key best practice to them.

“Succession planning is a best practice. For example, in some of these family businesses, after the dominant partner disappears, the business collapses,” he said.

One-size-fits-all

Swiss ambassador to Kenya Ralf Heckner noted that corporate governance facilitates foreign direct investments, stabilises the financial sector, and supports economic sustainability and transparency.

“A company that is not well governed tends to perform poorly in its social and environmental footprint. Such a company is more likely to engage in corrupt or illegal practices,” he said.

But SECO and IFC were also cautioned against employing the one-size-fits-all approach in the implementation of the corporate programme to the East African corporations.

According to Nyaoga, while it is true that corporate governance best practices are universal, they don’t need similar implementation among East Africa’s corporations.

Nyaoga said most corporations in East Africa are small, micro or medium businesses, some of them not incorporated or licensed.

“If you have an unincorporated, unlicensed and unregistered business, the focus would be promoting a competitive and performance excellence,” he said.