Good Governance Key to Investment

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By Wezi Tjaronda WINDHOEK Namibia has been tainted by the perception that Africa is characterised by poor governance. Africa, of which Namibia is part, is ignored and does not get much foreign direct investment because it is perceived as being unstable, corrupt, crime ridden and susceptible to despotic rule, the Executive Director of the Institute of Director Southern Africa (IoDSA), Tony Dixon says. And Prime Minister Nahas Angula said although Namibia is a young nation, it has had more than its share of corporate scandals and corrupt officials. In addition, Dixon said if a country does not have a strong reputation for good governance, capital flows elsewhere. Dixon said in his presentation on Corporate Governance yesterday, to board members of the country’s Development Financial Institutes (DFIs), that “people have gotten the message that good governance makes good business sense”. The DFIs in Namibia are the Development Bank of Namibia, National Housing Enterprise and Agribank. For Namibia and Africa as a whole to achieve the levels of economic growth that will enable them to alleviate their social problems, Dixon said, the countries would have to achieve seven percent growth. He noted that Africa is dogged by problems of shortage of housing, health, education and unemployment, but that it did not have what it takes to attract enough FDI. “FDI is pivotal to growth targets,” he said. As far as Namibia is concerned, it experiences the same problems that are experienced at continental level in that it has an unemployment rate of over 30 percent and the national prevalence rate of the HIV/AIDS epidemic is 19.7 percent. Many of its citizens do not have decent housing, while the education sector has been criticised as failing the nation. The workshop, which is being offered by the SADC Development Finance Resource Centre (SADC DFRC) in conjunction with the Io-DSA, is the first in a series in Corporate Governance and Board Effectiveness workshops. Angula said although “corporate governance has become a fashionable phrase, treating it as a buzzword would be short-sighted on our part”. He said public institutions such as the DFIs were agents of transformation, which required them to transform themselves in order to play a more meaningful role. Angula said he hoped the workshop would strategically place them in a position where they are able to use local savings for the country’s development. He expressed concern about millions of dollars that are exported to other countries when Namibia itself goes around to mobilise resources for its development. The workshop targeted DFIs because it has been noted that African DFIs have a history of non-performing assets, erosion of financial discipline and resource misallocation, which rendered most of them insolvent. Chief Executive Officer of SADC DFRC, Dr Rosalind Thomas said while project appraisals of DFIs, their risk management and supervision capabilities proved inadequate, coupled with other problems such as the political interventions that they were subjected to, this resulted in imprudent lending. Many DFIs in Africa either closed down or underwent fundamental restructuring during the 1990s when African countries embraced World Bank driven reforms. Although there has been hostility and cynicism toward national DFIs, Thomas said the idea of the DFIs playing a part on the financial landscape in SADC was increasingly being recognised. “There is a growing recognition that DFIs are indispensable for offering a range of financial and other services to stimulate industrialisation and infrastructure delivery,” said she. Since corporate governance was critical for financial institutions such as the DFIs, to ensure the confidence of the market, as government shareholding and subvention recedes, Thomas said accountability and openness in business dealings in attracting the private sector investors was important. It is envisaged that the future will see more stakeholder activism to hold companies accountable as well as much longer trends of sustainabi-lity.