Strengthening Domestic Corporate Activity in Global Capital Markets: A Canadian Perspective on South Africa\u27s Corporate Governance

As a Canadian corporate law scholar who recently had the opportunity to visit South Africa, I was humbled by both the profound challenges and the immutable positive spirit of the South African people when it comes to thinking about their economic and social future. Hence while this paper is a reflective discussion on the kinds of challenges that exist and the strategies that could be deployed to enhance corporate governance in South Africa, it must be emphasized at the outset that it is for Sub-Saharan African nations to develop their own governance models. They are best positioned to adopt strategies that align with their social, economic and political goals, and it is not for the West to impose Anglo-American conceptions of corporate and securities laws on developing nations. While there are lessons, both positive and negative, from the North American governance experience, self-determination of optimal governance strategies for emerging economies will allow them to take account of both domestic needs and global capital markets. This paper is divided into four parts. The first part sets a context for the discussion, including an overview of the corporate law regime in South Africa and more generally, the challenges faced by Sub-Saharan Africa in terms of economic development. Corporate governance cannot be discussed without at least some appreciation of the challenges posed by foreign direct investment, the level of debt of these nations and broader development concerns. Much of the wealth of Sub-Saharan Africa has been mortgaged previously, creating enormous barriers to becoming independent in their economic policy choices. Part II then sets out a framework for thinking about corporate governance in Sub-Saharan Africa, briefly analyzing both shareholder wealth maximization and stakeholder models of governance. Part III shifts into a more specific discussion of corporate governance developments in South Africa. In this respect, South Africa shares much in common with Canada in terms of its capital structure, corporate law and challenges of being a host nation for many multinational enterprises (MNEs) headquartered elsewhere. The King II Report on corporate governance is examined in terms of its influence on shaping corporate governance policy in South Africa. A more fulsome conception of corporate governance for South Africa includes empowerment, equity and the inclusion of African value systems. Finally, Part IV looks forward, examining the possible benefits and limits of socially responsible investing through the new Johannesburg Stock Exchange SRI Index. It also briefly discusses areas of further research that may provide assistance in enhancing domestic corporate activity in South Africa