Good governance is key to mobilizing cheaper debt
African countries continue to struggle with the ever growing deficit in providing decent and affordable housing to their citizens.
With the current cumulative housing deficit reaching over 50 million housing units and growing, there is a need for sustained encouragement and collaboration among key partners and stakeholders in the housing sector to close the gap.
As a pan-African supranational institution created to help member countries address this challenge, Shelter Afrique believes that with the right funding structure, effective collaboration and smart partnerships between states, private sector actors and multilateral agencies financing development, the goal can be achieved. gradually.
The key, however, lies in mobilizing an appropriate and quality financing structure, and in effectively and honestly deploying the borrowed funds into the respective targeted housing programs.
An appropriate and quality financing structure would involve key parameters such as longer term financing, low interest rates, adequate grace periods, sufficient amount, and readily available and easily accessible financing.
Over years of providing such financing to a diverse set of property developers and public agencies in the African countries where we operate, Shelter Afrique has observed that to ensure efficient and honest deployment of borrowed funds into affordable housing programs targeted; host institutions (whether promoters or public agencies) should embody good corporate governance practices.
Simply put, institutions must be seen and perceived to be governed properly, with values and standards that embrace good governance structures and practices.
So what is good governance in the context of mobilizing adequate and quality debt capital?
The answer lies in three key fundamental factors which include: having the right governance structures; the right governance processes, systems and tools; and sustained good practice that describes good governance.
Having the right governance structures involves designing and institutionalizing structures that include, but are not limited to, a board of directors, board sub-committees, an executive committee and sub-committees, functions sales and an internal audit.
These structures matter – and they bring a business to life. They are the engines that drive the business and therefore need to be structured in accordance with the best practice standards that underpin the industry.
Global corporate governance standards such as the OECD Principles of Corporate Governance as well as the King IV Corporate Governance Code, among others, are essential in shaping the design and framework of these structures and institutions should look beyond their industry and regulatory requirements.
As a lender, and the same goes for other potential lenders in the debt and capital markets, Shelter Afrique always strives to partner with companies that show the appetite and sustained commitment to strengthen their corporate governance structures by strictly adhering to established statutory laws governing their establishment, day-to-day operations, and the constitution and functioning of the boards of directors of such organizations.
Putting the right governance processes, systems and tools in place involves designing and developing an appropriate business strategy, incorporating a best-fit organizational structure that helps drive the strategy, and putting in place a robust and appropriate business performance management system that tracks performance against set strategic objectives.
Adopting and conducting regular board assessment exercises, designing and documenting corporate processes and procedures, implementing appropriate business continuity and resilience management systems , as well as a code of ethics and conduct are also essential to establish good governance.
Once an organization has instituted a good governance structure, the sustained implementation of good governance practices is essential.
This can be achieved by increasing staff awareness of the company’s corporate governance structures, processes, systems and tools; impose the right culture of corporate governance in the company as a way of life; hold the board of directors, senior management and staff accountable for the performance of the company and their actions; and conducting regular audits, reviews and reports of the company’s corporate governance practices.
Any institution that sustainably institutionalizes these factors and gradually strengthens their effectiveness will fundamentally be an attraction for donors (lenders) including Shelter Afrique.
These characteristics speak to a key concept in credit management called “character”. A borrower’s character is fundamental in determining a customer’s creditworthiness as it discerns the borrower’s willingness to repay the credit once advanced.
Therefore, the above features provide immense opportunities for private sector actors (developers) in the affordable housing space to realign their governance systems and practices to attract quality and affordable credit.
Mr. Oketch is the Head of Enterprise Risk Management at Shelter Afrique.