Bad corporate governance affecting investment

FAILURE by local companies to adhere to good corporate governance practices has stifled efforts to attract capital for retooling among other things, a financial expert has said.

BY MTHANDAZO NYONI

Institute of Chartered Secretaries and Administrators in Zimbabwe chief executive officer, Farai Musamba, told NewsDay on the sidelines of the institution’s 2018 winter school held in Bulawayo last week that Zimbabwe was not doing well on corporate governance practices.

“We are certainly not doing well; there is a lot we could do from a number of angles because from the man in the street, corporate and government, each one of us probably is not playing the part that we should play to ensure that there are good corporate governance practices in the country,” Musamba said.

“What we tend to find is there is a lot of talk about the corporate governance but the implementation is what is missing, so that is where our challenges are. People know about it, it appears but they seem not to implement it. That’s where the issue is,” he said.

President Emmerson Mnangagwa is yet to sign into law the Public Entities Corporate Governance Bill meant to improve corporate governance practices in the country.
According to statistics from the Office of the President and Cabinet, 38 of the 93 State-owned enterprises audited in 2016 incurred a combined $270 million loss as a result of weak corporate governance and ineffective control mechanisms.

“What needs to be done is that we need to have people who are committed to the cause and these people must include those in leadership positions. Theses leadership positions must come right from the political spectrum right down to the company or organisational leadership and right down to the person on the street.
“…so that the people who are leading they are seen to be practicing corporate governance. They set the right tone for those who are following to be able to follow,” he said.

Musamba said if the people at the top of the political system and corporates were not leading by example, it was unlikely that those who are working below them will be able to be ethical.

“If we don’t practice good governance, we obviously will suffer in terms of things not being done well, the economy not being run well, the organisations not being run well…,” he said.

“Sometimes we will not be able to attract good capital because good capital comes when there are good corporate governance practices. So if we don’t have good corporate governance practices, both the nation and companies will not be able to attract good capital because capital is shy,” Musamba said.

“It will come where there is good governance. Yes you will still be able to get capital but you will get it at a premium because there is a risky premium that they will add, and then because of that gain, it will cascade down to the consumer because our productive processes become heavy due to costly capital.”


“If we are producing at a high cost because of a number of things such as poor ethics, poor governance practices, high capital cost and so on, it means the consumer suffers and we will not be able to export. So we will not be able to earn the foreign currency that we are looking for,” he said.

Leave a Reply

Your email address will not be published.