In Africa as in other frontier markets, it’s not very useful to prepare for (or react to) corruption in isolation. Corruption typically coincides with other governance issues, such as overwhelming bureaucracy, a shortage of labor or skills, or even both.

In this regard, businesses can learn from sociology. It’s better to think about how a company achieves good governance rather than learn how to avoid corruption, which is just a symptom of poor governance.

This chapter offers some insights into developing an environment conducive to good governance in Africa, specifically focusing on how to build a constructive relationship with the government.

Governments in Africa play a more significant role in the lives of most businesses than elsewhere. According to Pricewaterhouse Coopers, 21% of African CEOs say they derive a third or more of their revenue from the state. This is the case for 15% of CEOs worldwide. And 67% of African CEOs believe that governments in emerging markets drive growth for their company, compared to 52% globally.

Businesses have suffered greatly from government failures, which is not surprising. James Mworia views government failure as a toxin that has poisoned the ground where a generation of brilliant entrepreneurs could have thrived. “Steve Jobs isn’t Kenyan. Why?” he asks. “Because the Steve Jobs here couldn’t navigate through corruption. If you look at macroeconomic stability, you see it’s dependent on political stability. There may have been hundreds of entrepreneurs of that caliber with brilliant ideas that couldn’t flourish for this reason.” This is the cost of poor governance in Africa.

This cost would be decreasing, according to the World Bank’s Doing Business report, which assesses the business climate in 183 countries. The 2012 report particularly highlighted progress in sub-Saharan Africa. In this area, 36 out of 48 countries implemented business-friendly reforms in 2010-2011, the highest proportion in the world. This change is not limited to sub-Saharan Africa. Morocco made the most progress, rising to the 94th place. Four other African countries (Sao Tome and Principe, Cape Verde, Sierra Leone, and Burundi) were among the eleven economies where business was most facilitated by various regulations.

Nevertheless, Africa still has a long way to go.

Mauritius, South Africa, and Tunisia are the only African countries to rank in the top 50 globally. In contrast, thirteen of the bottom countries are African. Sub-Saharan African countries are still considered to have weak and complicated judicial institutions with costly regulatory processes. North Africa fares slightly better on both fronts but still lags behind other developing regions, and the momentum of reforms has been slowed by the Arab Spring.

Despite its low scores, Africa is progressing and continues to narrow the gap with developed economies in terms of ease of doing business. This is demonstrated in figure 6.1:

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This text is an excerpt from the book “These Businesses That Succesd In Africa“, written by Jonathan Berman.

We invite you to read the following article “THE GOVERNANCE REVOLUTION“.