Leave it to the Ladies: Addressing Corruption Head-on to Attract Foreign Investment in Africa

Photo Credit: U.S. Department of State

Despite the thick Lagos air and long journey 60 women entered the The Moorhouse hotel on a recent Saturday morning, exchanging excited greetings and fresh ideas. Women business leaders adorned in brightly colored fabric and empowered with strong ambitions went around the room introducing themselves and their businesses. It was the inaugural meeting of the Lagos chapter of the African Women’s Entrepreneurship Program (AWEP), launched by the U.S. Department of State in July 2010 to assist women entrepreneurs across sub-Saharan Africa. The program supports African women entrepreneurs to promote business growth, increase trade both regionally and to U.S. markets, create better business environments, and empower African women entrepreneurs to become voices of change in their communities. Although AWEP in Nigeria initially started as a group of women’s businesses in agriculture, the members now represent a variety of sectors including fashion, textiles, professional services, cosmetics, and home decor.  Since AWEP’s inception, chapters such as the Lagos chapter have started all over Africa bringing together 1,600 women entrepreneurs and 33 business associations across the continent creating over 17,000 jobs.

I was fortunate enough to be in Lagos for this inaugural meeting and listen as members discussed common issues among women entrepreneurs in Nigeria including gaining access to finance, balancing work and family responsibilities, and addressing corruption issues. Yemisi Ironanloye, a former AWEP regional president, shared her story of growing her cassava farm from a small local business to the main starch supplier for Heineken in Nigeria, producing 9,000 tons of cassava starch per year from over 2,000 farmers. She stressed to the group how important transparency and ethical practices have been in attracting international investment. Ironanloye explained that she never worried about investors coming to her factory because she was proud to show her business.  It is common practice for potential investors to visit businesses on the lookout for poor working conditions, governance structures, or accounting practices that may represent a risk to their investment.  Ironanloye was visited by companies such as Heineken to inspect her facilities and they liked what they saw. Taking the time to establish strong management systems paid-off for Ironanloye by instilling confidence in local and foreign investors.

Such concerns, of course, are not confined to Nigeria. In fact, corruption was recently identified as the greatest concern for companies doing business in emerging markets according to Agility Emerging Markets Logistics Index’s survey on logistics service providers. Sixteen percent of global respondents expressed concern that corruption would threaten their operations. The report explains, “The effects of corruption on business operations are clear. Whether it manifests at the highest levels, affecting contract awards or investment decisions, or lurks in day-to-day operations with payments required to process loads through ports or checkpoints, corruption fundamentally reduces the capacity of logistics service providers to operate efficient and profitable businesses.” The report continues to explain that “survey respondents place increasing value on fair, open and transparent legal and regulatory institutions which can protect investments, enforce contracts and offer robust commercial markets.” Businesses operating in countries with high levels of corruption bear the burden of proving that they are able to operate ethically in these environments.

Zainab Jaji, current President of the AWEP Nigeria Chapter, explained that AWEP leaders have met with a variety of international donors and investment funders who have made it clear that addressing corruption is essential to attract foreign investment. Jaji explained, “Having an anti-corruption policy for businesses that work in international supply chains we believe enhances the level of integrity of the business. Partners and investors will take you more seriously and [it] dispels the prevailing perception that [Nigerian] businesses are all corrupt one way or the other.” Angela Ajala, Vice President of the AWEP Nigeria chapter, elaborated that it is not sufficient to claim “ethics” as your business value without having specific operational codes to back this claim.  You must demonstrated that you are committed to acting ethically by spelling out specifics in your policy against common business practices.  Ajala explains, “If you want to go into that international market place you must have a clear policy in place…People must know that they are protected from any type of shady practices while dealing with [your business].”

Laura Alakija, Lead Counsel at the Sterling Partnership law practice in Nigeria added, “It helps to have a gift and hospitality policy in house. You have a policy in place that says your staff cannot take gifts… You have to be specific about the type of people you give gifts to. You cannot give gifts to government officials or people that have a stake [in the business]…If you have a gifts and hospitality policy in place and you practice it that takes care of [many of the concerns].”

Understanding that corruption concerns are keeping investors out of Nigeria and working collectively to address these concerns both individually and collectively is important for AWEP. Jaji explains that every member of AWEP is being encouraged to put in place specific policies addressing corruption. Jaji explained, “It also means that all our members will have good business ethics going forward and will also mean that gradually our members will be seen as the go-to women in business that do things properly.”

Laura Van Voorhees is a Program Officer for Global Programs at CIPE.