Governance of Finance and Integrity in Africa

Professor Chibuike Uche

Stephen Ellis Chair in the Governance of Finance and Integrity in Africa

The main research objective is to enhance our understanding of the (mis)governance issues in Africa especially in relation to finance, businesses, and entrepreneurship. The poor governance of the African economic space is perhaps best highlighted by the current state of the financial flows in the continent.

Although Africa is rightly portrayed as being in need of capital, it has remained a net exporter of capital. In 2015, for instance, African countries received $162bn, mainly in loans and experienced a decrease in international reserve holdings, aid and personal remittances while $203bn was taken from the continent. About a third of this ($68bn) was taken out in capital flight, mostly by multinational companies deliberately misreporting the value of their imports or exports to reduce tax. This is more than the combined amount Africa received as remittances ($31.2) and loans to its various governments ($32.8bn). It was also more than four times the net Foreign Direct Investment Equity that entered the continent in the said year ($15.8bn).

At another level, profits legally repatriated by multinational companies operating in Africa in 2015 ($32.4bn) amounted to more than twice the net FDI equity that came into Africa that year. It was also more than the official aid received from all OECD countries ($19.1bn).

While it is widely known that the economic terrain in Africa is very different from those in other, more developed jurisdictions, the main (although simplistic) explanation for such difference has been the widespread corruption and the absence of institutions in the continent. Unfortunately, the recent proliferation of governance institutions and anti-corruption agencies has done little to positively influence changes in the business terrain in the continent.
This questions the assumption that corruption is a principal-agent problem, which is the basis for the proliferation of all manner of anti-corruption agencies and governance institutions across Africa.

Cultural foundations
My research will therefore explore other factors that have impacted on African business operations and the dynamics of the Africa’s economic space. I believe, for instance, that it is impossible to understand the African business terrain without understanding the cultural foundations of Africa and the impact of external influences on such cultures.

Unfortunately, recreating such cultures will be difficult, not least because such past practices have been eroded and corrupted by poor documentation. Perhaps more important is the fact that such ideas are based on beliefs rather than verifiable facts. Since the context of Africa has changed, in part due to globalization, putting the genie back in the bottle is no longer possible. Our focus will therefore be on identifying and exploring the important variables that can help enhance governance practices in the African economic space. It is in this light that we will explore the role of accounting and record-keeping in making Africans and their economic space governable.

While accounting is important, it must also be contextualised. Another consequence of globalization, for instance, is that African countries are increasingly being requested to adopt complex accounting and regulatory standards that do not always correlate with the size of their local economies. While this has benefits, it raises concerns about the impact of such rules on the competitiveness of African businesses and financial institutions and the prospects for the contextual development of the African economic space.

Read the full text of the research intentions of this Chair.