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Parliamentary Committee

Parliamentary Committee. Institute of Directors in  Southern Africa. Corporate Governance. Why Corporate Governance is vital to South Africa. Corporate Governance. Alleviate key problems of housing, health, education and unemployment Need growth rate of 6% per annum.

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Parliamentary Committee

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  1. Parliamentary Committee Institute of Directors in  Southern Africa

  2. Corporate Governance Why Corporate Governance is vital to South Africa

  3. Corporate Governance • Alleviate key problems of housing, health, education and unemployment Need growth rate of 6% per annum

  4. Foreign Direct Investment • FDI - Pivotal to SA Growth Targets • “Every Government in Africa that betrays the principles of Good Governance betrays Africa” - Tony Blair – G8 – July 2005

  5. Foreign Direct Investment • FDI – 2004 • Global US$ 65O Billion • Africa US$ 18 Billion – 3% • South Africa US$ <1 Billion - 0.1% (Under 1 Billion for last 8 yrs)

  6. Foreign Direct Investment • 7 million - homeless • 5.6 million - HIV/AIDS • 12 million - school pupils • 580 000 - University / Technikon • 14 million - economically active • 30% - of population unemployed • 45 million - total population

  7. Head Start • Powerhouse of Africa GDP • Africa - US$ 700 (420) billion • South Africa - US$ 234 (113) billion • Nigeria - US$ 50 (62) billion • Zimbabwe - US$ 8 (9) billion • Australia - US$ 518 (368) billion

  8. Africa - Perception • Unstable • Corrupt • Crime ridden • Susceptible to despotic rule • South Africa contaminated by this perception of poor Governance

  9. South Africa Reality • Stable economy • Sound macro economic policy • Outstanding constitution • World class infrastructure • Banking system top 10 in the world • Cellular networks ? • Sasol oil from coal • Excellent Corporate Governance

  10. Corporate Governance • Good governance • Good business sense • McKinseys & Deutsche Bank

  11. Good Governance makes Good Business sense • Surveys showed: • Governance at the heart of investment decisions • Put on a par with financial indicators when evaluating an investment decision • An overwhelming majority of investors are prepared to pay a premium for companies exercising high governance standards • Companies with good governance produce more sustainable and better long term results than those that don’t

  12. The premium investors would pay for a well-governed company varies by country and region Average premiums of those investors willing to pay premium New in 2002 Decrease 2002 Increase 2002 Country Region 30 Premium in 2002 22 22 22 21 16 14 14 13 12 11 MOR RSA JPN ITL USA UK CAN L AM ASIA WEUR NAM EE/AFR

  13. Foreign Direct Investment “If a country does not have a reputation for strong governance, capital flows elsewhere” “If investors are not confident with the level of disclosure, money will flow elsewhere” “If a country opts for lax accounting and reporting standards, capital will flow elsewhere” Arthur Levitt

  14. Foreign Direct Investment “If a country is over regulated making it difficult rather than simple for enterprise to flourish, capital will flow elsewhere” “If a country’s rates of tax are too high, capital will flow elsewhere” “If crime and corruption are at unacceptable levels, capital will flow elsewhere” Tony Dixon

  15. Solutions • Proudly South African • King II – This is how we do business • Zero tolerance – non compliance • Let entrepreneurs do what they do best

  16. Last Six Months Successes • G8 - US$ -50 Billion • Gauteng Rail - 148 000 jobs • Barclays Bank – R30 Billion - FDI • Bond Investments – Jan to June R12.5 Billion • Junk Bonds – Cell C – Foodcorp - R 6.5 Billion • JSE Index over 16 000 Ist time ever (12 657 Jan 2005) -23% growth in 8 months – FTSE 9% • Soccer World Cup • Mini Budget – Oct 2005 – extra R78 Billion Infrastructure

  17. Other Issues That Need Addressing • Non Exec Directors Vital to Economy • In National Interest • Legislation chasing them away (Companies Act amendment bill) • Becoming selective – avoiding risk – Co’s that need their support are unable to obtain it • Eg PFMA/ MFMA - Gauteng Municipality • Limitation of Liability to multiple of fees earned

  18. Other Issues That Need Addressing • More Competent Directors • Don’t let unlicensed drivers drive on roads – yet people driving our economy not properly trained. • IoD’s main aim and objective to raise the bar of director performance – skills , expertise, knowledge and professionalism. • In UK and other countries every time new director registers with CIPRO equivalent is recommended that join a body such as the IoD or equivalent where they can receive suitable training. • Every newly appointed director should attend at least an induction programme eg AltX. • UK Chartered Director – Iod South Africa wants to do something similar

  19. Institute of Directors in  Southern Africa

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