When in business, there are processes, structures, principles and mechanisms that must be in place to ensure that the rights of shareholders and other stakeholders are not infringed. In general terms, corporate governance is more of a road map which outlines the path that a corporation has to follow when making decisions and dealing with various situations. It can be likened to an in house police department that keeps the directors and those in charge of the day to day running of the business in check. The importance of corporate governance grew during 2001–2002 and also after the 2008 financial crisis as a number of large corporations collapsed as a result of fraud.
Good governance can improve corporations as it aims to improve accountability and transparency. Investors nowadays use corporate governance as an investment screening tool as this will determine the safety of their investment. In Zimbabwe, the Public Entities Corporate Governance Act [Chapter 10:31], and related SEC rules are the pieces of law that are referred to when checking if companies are operating in the right lane. Having witnessed the crisis that hit the banking sector in 2004, where various bankers were involved in unethical behaviour that left depositors and shareholders at risk, the RBZ rolled out tight corporate governance directives in a bid to bring order to the banking sector. Failure to adhere to corporate governance issues as an organisation is detrimental and comes with a lot of penalties including having to do jail time.
Corporations that do not uphold good corporate governance practices run the risk of making poor decisions which benefit only a few and may be suicidal to shareholder’s interests. Such decisions usually come with high exposure to regulatory and reputation risk. This eventual results in financial loss and in the worst case scenario may see the company facing closure. As a country that is trying to build its economy, we cannot afford to be seen slagging behind in issues of global interest especially with issues to do with corporate governance.
It is shocking to note that in some of the large organisations in the country, poor corporate governance is the order of the day. The Herald of the 9th of November 2018 carries a very disturbing article. An audit the was carried on state entities revealed that the Zimbabwe National Road Administration (Zinara) and National Oil Infrastructure Company of Zimbabwe (NOIC) were shockingly using personal bank accounts for employees outside Harare to administer cash transactions for their entities. The same audit report further revealed that there were 21 State entities that were failing to uphold good corporate governance.
One then discovers the reason why year after year, budget after budget, the government has to continuously pour funds into these state entities that are always recording losses. And the innocent citizens that are then made to pay for such poor corporate government practices through the payment of taxes. Poor internal controls over cash and banking expose an organisation to a lot of risks ranging from theft to embezzlement and fraud. Such big organisations cannot afford to operate with clearly set out procedures on how company funds are handled. Such loopholes are prone to manipulation and in most cases, the perpetrators walk away scot free as there is not rope with which to tie them down.
No matter the amount of money involved or how small it may be, good corporate governance practice should not be compromised. It should be followed to the end to ensure that there is a clear trace and accountability. State owned entities like Zesa Holdings, the Grain Marketing Board, National Railways of Zimbabwe, Air Zimbabwe, Allied Timbers, Zimparks, Civil Aviation Authority of Zimbabwe among others continue to lose millions of dollars due to poor practices that could be avoided if only corporate government mechanism were in place and followed religiously. Surely there is someone sleeping on duty if such abnormalities are only discovered after a full year when an audit is done. As a country we continue to lose a lot of resources to people that have seen the loopholes of the weak systems in these state owned corporations. They have become cash cows for individuals that are brave enough to walk through their doors. This must stop as it is killing our country.
The importance of risk management and corporate governance cannot be over emphasized. Government entities need to pull up their socks. Infact, heads should roll so that a clear message is sent out to the next pack of wolves that may be thinking of getting a ticket to paradise through defrauding the state. The good gospel of corporate governance should be preached at all levels in an organizations so that the problem is plugged at the very root. Monitoring committees should be set up to always keep a watchful eye on state own entities and periodically conduct audits to help continuously improve operations in these corporations. Entities like the NRZ and ZINARA are very vital to our journey of economic recovery and it becomes a national issue if such cases of poor corporate governance are reported. It is time to pull up our socks and work together to creating the Zimbabwe we all want.
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