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Good corporate governance crucial for attracting more foreign investments

Good corporate governance crucial for attracting more foreign investments

By Josef Kefas Sheehama.

The effectiveness of a political party in power in most cases determines whether good governance exists in a country. Good governance begins with the political will to govern well.

The global economic environment is changing and investors are hard pressed to find profitable and stable investment harbours for their funds. Improving government efficiency, accountability, and responsiveness controlling corruption and establishing ethical norms, making public administration more responsive, strengthening judicial institutions and decentralizing government need to be implemented. All these measures have to be taken by the government as a step to promoting good governance and ease of doing business which strengthens corporate governance.

The reason why I am stressing corporate governance because from what we have seen, there is still a need to improve the corporate governance audit and the role of various organizations to bring in more transparency, accountability and efficiency in the system. Strengthening corporate governance policies and frameworks will help both existing and new companies access the capital they need. Good corporate governance and well-functioning capital markets play a crucial role in supporting the recovery of our economy coming out of the COVID-19 crisis.

Deloitte’s 2022 Africa Investment Attractiveness Index which is based on the responses of almost 200 CEOs from both French and English-speaking African countries, indicated that Namibia failed to be listed amongst the top 10. It’s not the end of the world. The world as we know it has changed. And it might never be the same again. That’s a scary thought, but we will bounce back from these unprecedented and challenging times and come out on top.

Therefore, good corporate governance principles provide a system of checks and balances that helps to balance the power and ensure that there are benefits for everyone involved. Good corporate governance is a crucial benchmark for sound leadership, sustainability, as well as economic growth and development in Namibia. Good corporate governance can create a balance between economic and social goals while encouraging efficient use of resources, accountability in the use of power and aligning the interest of individuals, corporations and society.

Good corporate governance is important to investors, and shareholders have rights and expectations under good corporate governance principles and practices. Their stake in corporate ownership makes their investments less susceptible to system risks. Corruption control is the foremost imperative of economic development and it can impact the economic growth more than any other development determinants. To create development more comprehensive and less unequal, racial and gender separation must be killed, and approaches ought to be implemented to guarantee that there’s a more pleasant conveyance of income, resources and openings. Both the state and market need to function effectively to achieve inclusive growth, and as such the kind of corruption that has begun to take root in Namibia’s state and private sector must be dealt with decisively before it becomes entrenched as a permanent impediment to inclusive growth.

Moreover, my assumption is that what we are currently witnessing in geopolitical and international economic relations is a backlash, not a total collapse of that framework. Good ethical practices and corporate governance norms can boost gross domestic product. If implementing ethical guidelines it will always have an element of integrity at the core, which to my mind, is esssential for growth in the GDP. It is certainly not impossible, very much achievable and possibly one could do even better than that.

The prevailing interest among policymakers for corporate governance reform as well as the related interest in reducing corruption and cronyism in business affairs, is primarily grounded in economics and a belief in the allocative efficiency of free markets. With globalization and the removal of barriers to the free flow of capital, policymakers have come to recognize the importance of corporate governance in attracting capital flows. Systems with weak corporate governance together with corruption and cronyism, distort the efficient allocation of resources thereby undermining the level playing field and ultimately hindering investment and economic development.

Effective corporate governance also helps to lower the cost of capital by improving the confidence of both foreign and domestic investors that their investments will be used for the agreed purposes.

Furthermore, for long-term success, investors must comply with the laws, regulations and expectations of the societies where they operate. Many corporations take their role as corporate citizens seriously thus contributing to civil society. Regrettably however, some corporations are opportunistic and seek to profit without regard for the environment or the communities. The latter are not merely failures of corporate governance but are symptomatic of the larger failures of government to provide the framework needed to hold corporations responsible for issues that are also important for society at large.

To this end, there is a heightened awareness worldwide that effective corporate governance as manifested by transparency, accountability as well as the just and equitable treatment of shareholders, is now a prerequisite to promote sustainable development. Namibia needs public and private sector partnerships to raise the awareness of the importance of corporate governance and to assist in implementing corporate governance reforms.

Therefore at this point in time, corporate governance in Namibia is still in its infancy but many laws and amendments are being made to improve the effectiveness of corporate governance. There is no doubt that corporate governance if implemented properly, has ample benefits for stakeholders, shareholders, management, employees, customers and the community at large.

Hence, the Government and regulators should work to enhancd transparency and increase accountability to promote innovation and competitiveness nationally, thereby making Namibia the most preferred investment destination globally.


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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.