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Governance failures – eroding stakeholders’ trust in governance bodies that must protect their interests. Think SME Bank

Governance failures – eroding stakeholders’ trust in governance bodies that must protect their interests. Think SME Bank

By Parmi Natesan, a chartered accountant by profession and the Executive Director at the Institute of Directors in Southern Africa.

Thanks to the litany of recent governance failures, and the high-profile scandals in the private and public sectors, governance has shot up the public agenda. One of the common conclusions to be drawn is the truth of the old adage that “the fish rots from the head”. For those in leadership positions, and particularly those on governing bodies, the pressure is mounting as the court of public opinion, as well as the courts themselves, should increasingly hold them accountable for the shortcomings of the organisations they lead.

The question this raises, of course, is what issues should governing bodies be considering to ensure that they are on the right side of history?

A paper by the Corporate Governance Network, a special interest group of the Institute of Directors in Southern Africa (IODSA) sponsored by PWC, argues that these issues can be grouped into three broad themes: introspection about the governing body itself, understanding the context in which the organisation operates, and realising their organisation’s place within (rather than without) society.

The first theme, Looking within, acknowledges that the governing body will not fulfil its corporate governance mandate, or indeed its other roles if it does not have the proper skills and experience to draw on.

The central issue here is the quality and composition of the governing body. Because of its key roles in setting strategy and ensuring governance, the governing body is often seen as one of an organisation’s “most critical strategic assets”, according to Vanguard CEO, William McNabb (Vanguard is a major US investment fund). It’s thus vital that it has the right mix of skills and experience in the light of its current and future needs. Succession planning and the management of talent and skills are vital components of this.

Director independence is clearly a critical enabler of an effective governing body. Governing body members have to be able to exercise judgement effectively—and be seen to be able to do so.

A final issue within this theme is the need for the governing body to pay more attention to how it oversees corporate culture. It is clear that corporate culture both on the governing body and the organisation as a whole provides the growth medium for certain kinds of behaviour—good and bad.

Steering through choppy waters

The second theme that should concern governing bodies relates to the business and socio-political environment in which the organisation operates. As a general observation, it is clear that organisations have to deal with unprecedentedly swift change. Innovation and its flipside, disruption, have become the defining characteristics of the 21st Century. The acronym VUCA—volatile, uncertain, complex and ambiguous—is often used to characterise the modern business environment and its risks.

This change frequently comes on the back of technological advances which often have unintended and unanticipated consequences. At present, cybersecurity and privacy threats are among the most serious, but governing bodies must ensure that they are equipped to govern all risk in this shifting context.

A related issue is how to define and ensure long-term value creation and sustainability. Risk is one factor, but others include investment in R&D, corporate culture, incentives and skill retention. At the same time, environmental, social and governance factors are becoming more important to stakeholders, among them institutional investors.

The final theme relates to the rebuilding of trust within the broader context. Governance failures and irresponsible business practices have eroded the trust that stakeholders have in organisations—corporate governance has a critical role to play in rebuilding that trust. Issues that need attention in this context include the governance of ethics, stakeholder communications and crisis management, remuneration, and fostering trust between the governing body and management.

While this set of issues is by no means intended to be exhaustive, grouping them into themes will prompt governing bodies in creating their own long-term agendas.

Whatever the specific issues that are identified by individual governing bodies, they are bound to present a daunting prospect. A second Corporate Governance Network paper on the importance of mentorship for governing bodies, and how to make it happen, offers part of the solution. By learning to leverage the experience of others, whether governing body colleagues or not, governing bodies can avoid making the same mistakes and benefit from others’ successes.


 

About The Author

Guest Contributor

A Guest Contributor is any of a number of experts who contribute articles and columns under their own respective names. They are regarded as authorities in their disciplines, and their work is usually published with limited editing only. They may also contribute to other publications. - Ed.

Following reverse listing, public can now acquire shareholding in Paratus Namibia

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20 February 2020, Windhoek, Namibia: Paratus Namibia Holdings (PNH) was founded as Nimbus Infrastructure Limited (“Nimbus”), Namibia’s first Capital Pool Company listed on the Namibian Stock Exchange (“NSX”).

Although targeting an initial capital raising of N$300 million, Nimbus nonetheless managed to secure funding to the value of N$98 million through its CPC listing. With a mandate to invest in ICT infrastructure in sub-Sahara Africa, it concluded management agreements with financial partner Cirrus and technology partner, Paratus Telecommunications (Pty) Ltd (“Paratus Namibia”).

Paratus Namibia Managing Director, Andrew Hall

Its first investment was placed in Paratus Namibia, a fully licensed communications operator in Namibia under regulation of the Communications Regulatory Authority of Namibia (CRAN). Nimbus has since been able to increase its capital asset base to close to N$500 million over the past two years.

In order to streamline further investment and to avoid duplicating potential ICT projects in the market between Nimbus and Paratus Namibia, it was decided to consolidate the operations.

Publishing various circulars to shareholders, Nimbus took up a 100% shareholding stake in Paratus Namibia in 2019 and proceeded to apply to have its name changed to Paratus Namibia Holdings with a consolidated board structure to ensure streamlined operations between the capital holdings and the operational arm of the business.

This transaction was approved by the Competitions Commission as well as CRAN, following all the relevant regulatory approvals as well as the necessary requirements in terms of corporate governance structures.

Paratus Namibia has evolved as a fully comprehensive communications operator in Namibia and operates as the head office of the Paratus Group in Africa. Paratus has established a pan-African footprint with operations in six African countries, being: Angola, Botswana, Mozambique, Namibia, South Africa and Zambia.

The group has achieved many successes over the years of which more recently includes the building of the Trans-Kalahari Fibre (TKF) project, which connects from the West Africa Cable System (WACS) eastward through Namibia to Botswana and onward to Johannesburg. The TKF also extends northward through Zambia to connect to Dar es Salaam in Tanzania, which made Paratus the first operator to connect the west and east coast of Africa under one Autonomous System Number (ASN).

This means that Paratus is now “exporting” internet capacity to landlocked countries such as Zambia, Botswana, the DRC with more countries to be targeted, and through its extensive African network, Paratus is well-positioned to expand the network even further into emerging ICT territories.

PNH as a fully-listed entity on the NSX, is therefore now the 100% shareholder of Paratus Namibia thereby becoming a public company. PNH is ready to invest in the future of the ICT environment in Namibia. The public is therefore invited and welcome to acquire shares in Paratus Namibia Holdings by speaking to a local stockbroker registered with the NSX. The future is bright, and the opportunities are endless.