In Fidelio’s day-to-day discussions about Board composition the subject of Africa comes up with increasingly regularity. Certainly the economic outlook for Africa is promising, with projected growth rates second only to Asia. Also Private Equity is returning to Africa in strength, with some estimated US $8.1 billion of deals taking place in Africa last year, the highest level since 2007 (US $8.3 billion). As such, it is arguably talent not capital that is a bottleneck in this growth trajectory. We were therefore prompted to host a Fidelio Board breakfast last month with keynote speaker Tara O’Connor of Africa Risk Consulting (ARC), a risk expert who specialises in Africa. Her subject was “Leadership and Africa”.
Our guests at the Board breakfast were senior executives and Non-Executives, including attendees from FTSE 20 companies. We were quick to acknowledge – quite rightly – the arrogance and naivety of talking in generic terms about Africa. Nonetheless, with the help of Tara and her experience we bravely addressed three major questions:
Question 1. Africa has suffered from the perception of poor governance and leadership. Is this fair and to what extent has the picture changed?
Question 2. How should European business leaders be thinking about risk and opportunity in Africa?
Question 3. Political and strategic risk consulting has traditionally been a male dominated sector. How easy has it been as a woman building and leading a highly regarded, heavyweight Pan-African consultancy in this sector?
Leadership and Africa. A recently published report by ARC provides considerable evidence across the African continent of a clear shift away from the narrative of dictators and military coups. There are expected to be 15 democratic elections in Africa this year, and 15 more in 2016.
This level of democratic activity is remarkably under-reported. Indeed the recent handover of power in Nigeria, Africa’s largest economy, received relatively little coverage in the Western media.
As democracy spreads there is also increasing evidence of neighbouring African countries choosing not to come to the aid of dictators looking to secure precarious, unstable regimes.
Moreover, Africa boasts some fine new constitutions, for example that of the Republic of Kenya. Clearly a constitution alone is just a first step, and until the constitution demonstrably protects the weak against the powerful it is effectively just the paper it is written on. Nonetheless, this shift towards enhanced constitutional government underpins a trend away from the dominance of a narrow elite towards the establishment of a broader middle class.
These shifting demographics create both political and business opportunity. The enhanced use of mobile technology across Africa clearly drives economic empowerment. The creation of a mobile payments infrastructure has obvious implications for individuals and businesses. Social media also creates a critical popular voice which is capable of holding both politicians and companies to account.
African businesses that are looking to grow, often on a Pan-African basis, look to access international capital markets and are determined to demonstrate high standards of corporate governance.
The biggest gaps are in funding for [small and medium sized businesses] especially in East and West Africa. The challenge is getting the talent to oversee the investments, sit on the Boards and coach the management. Capital is often the least of your problems.
– Conor Kehoe, Director, McKinsey (FT, 15th March 2015)
The juxtaposition of good governance and the stereotype of corruption in Africa prompted a heated debate among our guests. There remained a sense that corruption was endemic and that Western companies were frequently at a competitive disadvantage by refusing to take part.
Against this other guests emphasised the importance of the draconian UK Bribery Act, which came into effect in 2011 and which ensures UK executives remain very vigilant; we also heard of those who had operated successfully in Africa for years and who had always stoutly refused to succumb to corrupt practices.
The theme of challenging stereotypes led us to our next question: how should Western businesses think about the risks and opportunities of investing and expanding in Africa?
There was strong push back from those most familiar with Africa, arguing that even some of Europe’s largest companies which have been conducting business in Africa for decades are still prone to seeing Africa through a particular risk framework, including at Board level.
This is where unconscious bias can too easily creep in. Boards can unwittingly apply tougher or inappropriate criteria to African investment decisions, in comparison with perhaps more superficially attractive markets.
It is very clear that there is no blanket risk premium for Africa. Very different factors are at play region by region and country by country.
Also the increase in democracy is pushing decision-making to more local levels, for example the county. This means that businesses need to engage not just with the political ‘centre’ but also to understand, and indeed to connect with, local politicians and communities.
And the question ‘who do we need on our Board to navigate a specific market?’ becomes much more nuanced. In this context we can expect to see greater interest in the very sizeable African diaspora that often combines an understanding of Western culture and commerce with strong networks and insights into key African markets, both from a regional and demographic perspective.
Finally we addressed the role of women in Africa. Tara, for example, is a woman operating in a man’s world, and she clearly relishes her role and is very comfortable with the risks she is assuming.
There are indeed a number of senior business women in Africa, the South African Irene Charnley (former Executive Director of MTN Group) and the Nigerian Hajia Bola Shagaya (Managing Director of Practoil Ltd.) to name just two.
Critically there are also a number of senior female government ministers and political leaders across the continent, including Saara Kuugongelwa, Prime Minister of Namibia; Nkosazana Dlamini-Zuma, Chair of the African Union Commission; and Baleka Mbete, Chair of the African National Congress (ANC) in South Africa.
Equally, a number of African countries have included admirable gender diversity clauses in their constitutions, including Kenya and South Africa. In the Kenyan constitution, for example, there is a requirement that 30% of all political roles are filled by women, taking the 30% Club one step further.
In South Africa the equivalent requirement is 50% at local level – a figure repeated by the ANC political party at a national level. However, it was also noted during our discussion that the South African constitution truly proves its worth when a South African woman in KwaZulu-Natal goes to court to protect her land rights.
One of our guests chairs a major UK charity that is active across Africa. She drew our attention to the importance of attracting more women into education and how basic investment in sanitation, for example, can be a critical component in ensuring more women receive a decent secondary education.
And thus in the course of one short breakfast we touched upon some of the great economic, political and social themes relevant for any Board, entrepreneur or investor contemplating business expansion in Africa.
In Africa today we recognise that trade and investment, and not aid, are pillars of development.
– Paul Kagame, President of Rwanda
We did not ignore the tragic and much-publicised acts of terrorism that we have seen in Nigeria and Kenya recently, to name but two examples. However, while it is easy to be lulled into a narrative of concerted Islamic fundamentalism, Tara argued that local feuds and disenfranchisement were also major contributors to violent, regional unrest.
We also touched upon sovereign investment in commodities and land in Africa, especially the phenomenon of massive Chinese investment in the continent (estimated at US $200 billion).
It is frequently argued that many of these transactions are opaque and have an ‘East India Company’ quality to them. Nonetheless, there is evidence of improved local infrastructure, a certain level of trickle-down wealth to local communities, and the increased movement of people and goods essential to economic growth.
And so back to our original question. Given the plethora of issues facing Africa, combined with the very strong regional and national distinctions, what are the skill-sets and experience that a Board needs to begin asking the critical questions? As this Overture suggests, there is no one size fits all profile. But the ability to challenge the unconscious bias that often creeps in when European companies think about Africa is not a bad starting point for a Board Director.
Fidelio High Notes – April 2015
- Fidelio conducts Board Searches drawing on our ability to source well-qualified candidates from diverse backgrounds.
- Fidelio supports Chairmen and CEOs with regard to Board composition. Fidelio brings a deep understanding of stakeholder and shareholder expectations for the Board.
- Fidelio is currently conducting Executive Searches on a Pan-European basis with a focus on senior Communications, Finance and IR roles, including Advisory.
- Fidelio is working with a range of organisations including quoted and unquoted corporates, global consultancies, international professional bodies and academic institutions. Sector expertise extends across Financial and Professional Services, Automotive and Technology.
- Fidelio hosted a Board breakfast with Tara O’Connor, founder of Africa Risk Consulting, entitled “Africa and Leadership”.
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