Sustainability in African companies | From Compliance to Value
In my last Reflection, I gave examples of African companies that have stepped up to provide essential items for their countries and neighbouring countries during the Covid-19 pandemic. To maintain this momentum, both during and after this crisis, African companies will need to invest in scaling up and improving their standards of operations. This would mean, in addition to the usual technical, commercial and financial requirements for any successful business, making Sustainability an integral part of their decision-making and operations. I use the term Sustainability broadly to mean a company’s commitment to responsible environmental, social and governance (ESG) standards, systems and processes.
For many African companies, their Sustainability story so far has largely been one of compliance or philanthropy. They have reacted to ESG standards imposed on them by investors and lenders, or by international companies who demand certain requirements from suppliers. At the very minimum, this compliance factor will become more prominent in a post-pandemic world. The outperformance of ESG funds during the pandemic and the alliance of politicians, business leaders and society calling for a green recovery will likely push the investment community even more towards companies that adhere to ESG standards. For African companies, a large proportion of these investors will be Development Finance Institutions. Therefore, if companies want access to capital, now and in the future, they will have to be attentive to the larger Sustainability agenda.
Within this landscape, Sustainability has largely been used as a tool by investors and lenders to mitigate risks. For example, environmental risks such as inefficient water usage and the pollution of local water supplies; or social risks in the form of human and labour rights violations; or governance risks such as fraud and corruption. These risks, both collectively and individually, result in the loss of reputation, customers and market share.
In my experience, however, the benefits of Sustainability go far beyond risk mitigation. Sustainability is an effective tool for creating value. Sustainability initiatives can help drive profits through cost-savings, identifying innovation opportunities, improving productivity, access to new markets and customers, and improving a company’s reputation and brand value.
One way of achieving such value creation is by improving operational efficiency and resource management. The actions taken do not have to be big or expensive to have an impact and can still lower operating expenses and offer direct cost savings. A 2019 study conducted by the International Finance Corporation on South Africa’s agri-processing sector found low-cost water efficiency methods offered considerable cost-saving benefits. For example, a soft drink manufacturer invested ZAR140,000 (approx.USD 7,948) in a system to recover and reuse rinse water from the bottling plant and initiated a staff awareness campaign. They reduced their water consumption by 27% and reduced their wastewater production by 61%. The payback period on this intervention was less than three years. Therefore, in addition to improving their bottom line, the soft drink manufacturer is also contributing to preserving water supplies in a country that has notoriously strained water resources – it is a win-win situation.
Over and above the business-specific benefits, African companies have a key role to play in contributing to the development and long-term prosperity of the continent. The UN estimates that by the end of 2020, the Covid-19 pandemic will likely push an additional 19.3 million people into poverty in Africa. African companies can play a significant role to avoid or manage such an outcome – by creating jobs; providing essential goods and services; and, when they turn a profit, paying taxes which support the provision of public goods and services such as healthcare, infrastructure and education.
To play this key role, however, African companies will need to step up, scale up and, possibly, scale out beyond their borders. In doing so, they will also need to meet the Sustainability demands and expectations of a wide range of stakeholders – investors, customers, employees, governments, and civil society. These stakeholders are increasingly becoming more powerful and influential on how businesses run their operations and deliver their projects.
Achieving profits and integrating Sustainability principles and practices are not mutually exclusive – they can in fact be mutually reinforcing. Sustainability is not just the right thing to do, it is also the smart thing to do. In the Reflections that follow, I will delve deeper into how Sustainability will create value for African companies. I will also invite guests to share their views on how African companies can step up, scale up and scale out – sustainably.
What we are up to & News
Joël Rault joins Kina’s Advisory Board
We are thrilled to have Joël Rault, Chairman and Founder of Hermès Advisory, join our Advisory Board. Joël has previously served as an Ambassador Extraordinary and Plenipotentiary for the Government of France and has extensive experience in administration and the management of private companies. He is also an emerging leader of the Harvard Kennedy School. We are looking forward to having his advice and guidance as we forge ahead with advising companies operating in Africa on Sustainability. For our full press release, ‘click here’
Invest Africa Ltd’s Webinar On Renewable Energy Solutions in Africa
Join our Managing Director, Rosalind Kainyah MBE, as she moderates Invest Africa’s webinar on Renewable Energy Solutions in Africa – Covid19, Sustainability & the future of the continent with Jennifer Boca of Lekela Power, Mansoor Hamayun of BBOXX and Scott Mackin of Denham Capital. They will be looking at whether investment bodies will have to pivot away from renewable energy assets in light of COVID-19; how renewable energy operations have been affected by the virus; the multilateral funds such as AfDB’s SEFA play in renewable energy developments across Africa; and the importance funds should place on ESG standards in the investment decision?
Date: Wednesday 6 May 2020. Time: 12:00-13:00 BST
Kina Advisory is proud to be an event partner of DLA Piper – Africa Week 2019
On the 28th November, Kina Advisory is proud to be an event partner of DLA Piper – Africa Week 2019. The theme for the day is“Africa: the future of trade and investment” and will be facilitated by Lanre A. editor of Nurmara and former editor of This Is Africa at the Financial Times and African Business. Our MD Rosalind Kainyah MBE will be moderating a session in the afternoon on: “Developing sustainable energy and natural resource projects: Implementing ESG in practice” | The panel will be made up of Jack Cunningham – Sustainability, Policy & Risk Director, Gemfields, Rhys Davies – Partner, DLA Piper, Chris Goodwin-Hudson – Founder, Watchman & Carla McRoberts – Managing Director, Veracity Worldwide | For a full breakdown of the day click here:
Rosalind Kainyah MBE will be chairing the 5th Africa Oil Governance Summit
Rosalind Kainyah MBE will be chairing the 5th Africa Oil Governance Summit on the 22nd & 23rd October 2019 & facilitating the 1st panel on “Value addition to petroleum resources extraction through industrialization: The possibilities and the challenges”. For a full break down of speaker & agenda, click here.
Africa | Attracting a New Wave of Investors
Rosalind Kainyah our Managing Director will be moderating a panel discussion for Invest Africa & DLA Piper on Wednesday 25th Sept 2019. The Topic: Attracting a New Wave of Investors: Corporate Governance and Meeting International Standards | For the full details of who’s on the panel and focus points, click here.