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Political reform – a business case for resilience

Political reform – a business case for resilience

A change in government administration is one of the most potent sources of volatility in African markets. It usually represents a critical test of business resilience to sudden shifts in government policy. This is amplified at a time when anti-bribery and -corruption (ABC) enforcement continues to spread around the world and many African governments find themselves under pressure to join this trend.

We continue to see a general move away from dictatorships, towards democratic forms of governance. Although this varies across the continent, there is some evidence that electoral processes are becoming more robust and democratic institutions are being strengthened. This has produced more vibrant electorates who are demanding higher levels of accountability through the ballot. The status quo is gradually being challenged and we are witnessing a quasi-revolution that seems here to stay. Recent events in Nigeria, for instance, highlight the need for companies to factor this popular drive for “change” into their business resilience plans.

On March 31, the retired general Muhammadu Buhari received a phone call from Nigerian president Goodluck Jonathan, congratulating him on his victory in the presidential elections held a few days earlier. The phone call marked the first time in Nigeria’s democratic history that an incumbent willingly conceded to an opponent. It also signalled the end of the ruling Peoples’ Democratic Party’s 16-year hold on power ‒ a seismic event that heralds a new political era and a potential shift in attitudes towards addressing some of the country’s most intractable problems. Many observers will closely watch the incoming administration’s handling of key issues, such as terrorism, political corruption and the enforcement of anti-corruption laws.

The Buhari-led administration, which takes office on 29 May, will be mindful that expectations are sky high. Buhari has projected himself as an upright, no-nonsense disciplinarian and his party, the All Progressives Congress (APC), has vigorously pushed the anti-corruption message. Political observers, when asked whether this image will translate into meaningful and sustained action, quickly pointed to Buhari’s running mate, professor Yemi Osinbajo, a highly respected lawyer and anti-corruption campaigner. Those who know Osinbajo have vouched for his reformist credentials. Reliable sources who know Osinbajo have vouched for his reformist credentials, and say he has privately lamented the technical deficiencies of Nigeria’s anti-corruption institutions, most notably the Economic and Financial Crimes Commission (EFCC). Strengthening the ability of anti-corruption institutions to credibly investigate and prosecute cases of high-level corruption will likely form a key element of reforms under Buhari.

The speed and scope of any such reforms will become clearer as the new government establishes itself. Without a doubt, there will be challenges to overcome, not least the fact that, as some observers assert, the APC is itself not immune to the influence of powerful and allegedly corrupt party members. A one-sided or politicised approach to tackling corruption will quickly erode the new government’s credibility. This was the case in Zambia, when the Patriotic Front party swept into power in September 2011 on an anti-corruption platform. The new government later faced accusations of double standards, having shielded its own party members from prosecution. The APC will be eager to demonstrate that it is making good on its campaign promises.

No longer business as usual

In theory, a renewed political will to tackle corruption under the new government can reduce companies’ exposure to corruption. In practice, however, it also heightens the risk of becoming ensnared in anti-corruption investigations of agreements signed by new and former government officials. Businesses that routinely flout local ABC laws will face higher risks of fines, reputational damage and potential jail terms for staff. Therefore, companies operating in countries like Nigeria need to take critical steps to review their business operations:

  • First, companies should revisit their business strategy, goals and objectives to ensure they would be compatible with a more “compliant” environment and, therefore, have a sustainable business in the new evolving context. This exercise may well raise various questions about the business. For instance, are staff incentives that promote business development sufficiently balanced with incentives that promote compliant behaviour? Are ABC policies on paper actually practiced in the field? Is there sufficient leader involvement and accountability for anti-corruption? A company’s reputation is a strategic issue that needs to be managed from the very top. The tone from the top will naturally affect behaviour in the rest of the organisation.
  • Such a review can be enhanced with an anti-corruption assessment of the business environment. It is important that companies understand the real risks they are likely to face and place these within the specific context of their operations. This should form the basis for developing or enhancing ABC policies and procedures.
  • Companies should also make renewed efforts to ensure that individuals across the organisation fully understand ABC legislation, the potential business effects of non-adherence and the implications for their day-to-day activities. ABC training programmes are an effective method for getting the message across. The same applies to third-party contractors; many high-profile ABC enforcement actions in Africa have involved companies whose third-party contractors have paid bribes to secure business on their behalf. Ignorance is usually not a credible defence.
  • Above all, there should be an emphasis on obtaining quality intelligence about activities within and outside the business. It is not uncommon for organisations with sound ABC programmes to find themselves caught out by the unethical actions of negligent staff or partners. This emphasises the need for effective communication lines within the business, as well as quality integrity due diligence programmes covering third parties.

The emergence of genuine local efforts to combat corruption is ultimately a positive story, especially when combined with the existing international enforcement actions of countries like the US and the UK. Removing the “corruption barrier” to business could go a long way towards further unlocking the continent’s vast economic potential. Africa’s leaders still have a lot to prove in this area but it is clear that their followers are running out of patience with “business-as-usual” practices. Companies should, therefore, take note of this impending change of direction and ensure they are properly aligned to capture the opportunities while managing the associated integrity risks.

by Gbenga Abosede, Practice Leader Compliance, Intelligence, Investigations and Technology, West Africa

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Written by African Business Magazine

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