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BusinessDay 11 Apr 2018

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Wednesday 11 April 2018 10 BUSINESS DAY C002D5556 COMMENT SMALL BUSINESS HANDBOOK comment is free Send 800word comments to comment@businessdayonline.com Corporate governance and the promise of SME EMEKA OSUJI Dr Emeka Osuji School of Management and Social Sciences Pan Atlantic University Lagos. eosuji@pau.edu.ng @Emyosuji Small and Medium Enterprises (SMEs) are very simple organizations. Their operating systems and management processes are not as complicated as those of big corporates. Sometimes, this simple nature of the management and systems of SMEs makes some think that corporate governance is something for every other entity but the SMEs. It is sometimes also felt that the costs and time required to do the right things in corporate governance are too high for SMEs. And the biggest culprits in this line of thinking are actually the SMEs themselves. They often wonder what corporate governance has to do with a small, especially family business in which, quite often, the difference between the owner and the business is highly blurred. That feeling is not hard to appreciate if we recognize that over 99 per cent of the 37 million SMEs in the country in 2013, was of the microenterprise category – mostly unregistered sole traders. The truth however is that good corporate governance is as important to an SME as it is to the mega corporation, scale differences notwithstanding. The only difference is that big corporates may require to go the full scale small enterprises find the critical minimum that is good for their survival. Corporate governance has to do with the system of management and control established in a company. These relate to the proper management of the enterprise including the relationship among members, the board and stakeholders as well as the company and its publics, including creditors and customers. It is also concerned with internal control processes. Effective corporate governance framework will promote internal discipline, accountability and transparency. No matter how small a company may be, corporate governance should be taken seriously. The lack of it is one of the reasons funding often eludes SMEs. Lenders are not just looking for companies with strong cash flows, they are also interested in the structure of a company. This includes how company leadership relates to the board, observes laid down procedures and promotes accountability. These elements are more likely to found where good corporate governance is a priority. Therefore, proper corporate governance is essential in resolving the funding challenges faced by SMEs. This has implications for the growth of these small businesses and their ability to contribute their quota to We do not in any way suggest that SMEs should implement the full range of corporate governance regulations applicable to big corporates. However, we insist that they adopt and implement basic governance rules that are not just appropriate but also take account of their size, level and stage of growth and sophistication the development of the country. Good corporate governance is the first sign of a well-managed enterprise because it presupposes the existence of proper systems and controls that ensure accountability and transparency. Companies may grow without structures but growth may be unsustainable without structures. It is the structures in an organization that support attempts to scale up operations in response to growth. Part of effective corporate governance is the proper delineation of duties, which is very important not just to directors, managers and shareholders but also to funding sources, such as banks and other categories of fund providers. A clear understanding of roles is important for all classes of SMEs, including owner-managed institutions. By reducing the potential for conflict, it improves trust and loyalty, helping management to focus on its corporate objectives. These elements are important ingredients for the attainment of the goals of SMEs as the engine of economic growth, agents of high employment and politicalsocial stability in a country. Strategic planning and such forward-looking plans benefit immensely form good corporate governance. When boards meet regularly and interact intensely with management, they are able to marshal out proper direction for an entity. This is even more so effective when boards contain independent directors who can tell it as it is. Unfortunately, independent directorship has not gained the relevance it deserves as a check on board-capture of companies in Nigeria. However, properly selected independent directors bring extremely high value to organization though their dispassionate and honest contributions to board decisions not tainted with vested interest. They provide the SME with additional skills, more balanced and objective views on all issues, thereby bringing improved transparency and objectivity in management decisions. We do not in any way suggest that SMEs should implement the full range of corporate governance regulations applicable to big corporates. However, we insist that they adopt and implement basic governance rules that are not just appropriate but also take account of their size, level and stage of growth and sophistication. An effective governance strategy does certain basic things for an entity: it helps to identify and manage risk; promotes innovative thinking and new product development and enhances organizational reputation. No company is too small to implement some modicum of corporate governance best practice, because all organizations need leadership harmony, which begins with clear and publicised roles for the board, and channels of delegated authority, including delegated authority to commit the company in expenditure. Wellgoverned enterprises have properly held and managed board meetings where such critical issues as the budget and financing are discussed, documented and strategies for effective monitoring are elaborated. Companies, big and small are in business to create value for the shareholders. This happens through effective market development, risk recognition and management, including effective disaster recovery and continuity plans that ultimately positively impact growth. Appropriate levels of good corporate governance suited to a company’s stage of growth enhances corporate reputation and patronage. Here lies the colour of the bottom-line at the end of the day. Send reactions to: comment@businessdayonline.com NONSO OBIKILI Dr Nonso Obikili earned his Ph.D. in economics from Binghamton University in 2013. He is also a research associate at Economic Research Southern Africa and Stellenbosch University. He blogs at nonsoobikili.wordpress.com and tweets at @nonso2. Air travel in Africa can be notoriously difficult relative to most other parts of the world. Tickets are significantly more costly for similar flight times and distances. The historical reasons for this air travel difficulty in Africa are numerous. From governments which restricted market access for private participation while trying to protect inefficient state-run airlines, to the requirement for difficult and costly agreements to expand to new destinations. The difficulty in air travel also has other unforeseen costs most notably in reduced links between countries, lost trade and investment, reduced tourism, and the associated jobs that are not created. Notwithstanding these challenges, the continent is witnessing a steady growth in its air traffic. According to the 2017 passenger traffic results released by International Air Transport Association (IATA) in February, African traffic rose by 7.5 percent compared to 2016. Given the rise in air passenger traffic, it will be short-sighted for airports to rely solely on income from airport charges. Lower airfare can be achieved if they paid more attention to what in aviation economics is Thinking about aviation infrastructure in Africa known as non-aeronautical assets i.e. income from retail, car parks, hotels etc. Sectors such as tourism and hospitality would also benefit. A 2012 report about South African airports gives real life meaning to this submission. The report reveals that in 2010/11, non-aeronautical revenue grew by 22 percent to $185 billion, close to half of total revenue generated by the country’s aviation industry. The challenges of interconnecting flights and opportunities in nonaeronautical revenue, are not news to many governments. Over the last few years there have been renewed efforts to change the fortunes in Africa’s airports through concessions and public-private partnerships. These efforts would be a win-win situation at best. If the passenger numbers rise, necessary investments will need to be made to expand and improve Africa’s air transport infrastructure. This will require investments not just from governments but from the private sector as well. It is in this context that the Airports Council International (ACI) Africa hosts its annual conference. This year’s conference is appropriately themed “Business Transformation and Sustainable Development of African Airports” and amongst other things hopes to tackle key questions with regards to investment, safety, and environmental concerns around air infrastructure. Mind you, one key factor behind the higher costs of tickets in Africa is the relatively small number of passengers, the costs of airport infrastructure, and the difficulty in attracting long term private sector investment. Indeed, if a few passengers have to indirectly pay for infrastructure built using short term financing then the burden can get quite large given that more of the costs will need to be included up front in ticket prices. For instance, a $250m airport terminal which handles one million passengers a year and is financed with a tenyear facility that charges eight percent per year will result in an added cost of about $36 per ticket for the financing repayments alone. Increasing the facility to twenty years reduces the impact per ticket to about $25 per passenger even at the same interest rates. This will of course reduce ticket prices which should positively influence passenger numbers, triggering a virtuous cycle. The key strategy for private sector investment therefore, involves lengthening the financing terms for airport infrastructure. Longer term financing implies lower ticket costs as infrastructure costs are more spread out. Accessing long-term financing will however require institutional arrangements to deal with the risks involved. Extra financing options outside of ticket prices also play a vital role in airport infrastructure financing. That is why issues on business partnerships aimed at improving extant services or creating new revenue facilities and resources would take the centre stage at the ACI 2018 conference. It is hoped that experts and investors meeting at the event would also look critically at the different roles that partners can play in the transformation and development of the industry through business innovation in airport retail and other such avenues. Of course, earlier versions of such meetings have yielded desired fruits, producing some of the current growth experienced in the industry, while creating enabling environments for consolidation. Before the issues of investments, safety standards and environmental concerns had been focus of deliberations, especially as they interface with infrastructure. As a direct gain from previous ACI conferences, Africa has made significant strides in improving its safety record with regards to aviation. For instance, in 2016 there were no fatal accidents in sub-Saharan Africa according to the International Civil Aviation Organization (ICAO), the region’s best performance in a decade. Certainly, there is still room for improvement. As passenger numbers increase, continued special attention will have to be paid to maintaining and improving the safety records in African aviation. I will be watching out for the panel discussion on tax-free shopping which is the first source of non-aeronautical revenue in most airports around the world. It is a problematic issue as its future is uncertain in many airports given the new national and regional regulations such as the ban on the sale of cigarettes, and alcohol or the limitation of transport of purchases by air carriers. I’ll very much like to see how the panellists - Keith Spinks, Secretary General, The European Travel Retail Confederation and Mr SherifToulan, Chief Executive Officer, International Duty-Free Trading & Agencies - would approach the topic in the light of the present situation and the future outlook of airport tax free shopping which continues to be one of the best supports for airports sustainability. The conference will hold in Lagos from the 14th to the 20th of April at the Lagos Oriental Hotel and will hopefully result in ideas and solutions for providing aviation infrastructure for an expanding African aviation sector. Send reactions to: comment@businessdayonline.com

Wednesday 11 April 2018 COMMENT C002D5556 BUSINESS DAY 11 comment is free Send 800word comments to comment@businessdayonline.com Forensic accounting practice in Nigeria: Beyond mediocrity OMAGBITSE BARROW FCA Francis Kehinde Emeni (PhD) Emeni is associate professor, Department of Accounting, University of Benin & research fellow, Institute of Chartered Accountants of Nigeria (ICAN). Given the prevalence of corruption in Nigeria, there is the need to thoroughly understand forensic accounting in our national life. “Forensic” is the application of scientific methods and techniques to the investigation of crime, and provision of evidence for use in a court of law. Therefore, forensic accounting can be said to be a specialty practice area of accounting that describes engagements that result from actual or anticipated disputes or litigation. You cannot fight crime successfully without the help of forensic accountants. In the United States of America, the term “forensic accountants” is generally used for Certified Public Accountants (CPA). For you to be a forensic accountant, you must be a member of the only chartered accounting body in the USA known as Certified Public Accountants. Just as you can’t just graduate from the medical school and claim to be a surgeon but must first undergo professional training in the area of interest, likewise you can’t just jump from being a graduate of accounting to being a forensic accountant – otherwise it will only breed mediocrity. Forensic accounting is a specialty area in accounting. All big 4 accounting firms (PricewaterhouseCoopers, Ernst & Young, Deloitte, KPMG) have departments for forensic accounting and investigations. Those who join these departments come from Chartered Institute of Accountants created by their respective countries and recognized by the International Federation of Accountants (IFAC). Aligning my thought with that of Bozkurt (2000), in Nigeria, the main important law enforcement agencies involved directly in combating white-collar crimes are the Police Special Fraud Unit, EFCC and ICPC. I am not sure these law enforcement agencies do train their investigators in the specialized usage of forensic accounting. On the other The point I am making is that if we allow mediocrity in the accounting profession, in this case forensic accounting, and make it just a means of earning money and social prominence, we will slowly destroy what ICAN was meant to do hand, if we look at the western countries, particularly the USA, the law enforcement agencies like FBI and CIA have properly marshalled their pool of special agents with forensic accounting backgrounds, who are the backbone of their financial crimes squad. They investigate with professional acumen complex financial crimes like money laundering, cyber crimes, financial institution fraud and other economic crimes. In our own little way, Nigeria has enacted an Act of parliament setting up the Institute of Chartered Accountants of Nigeria (ICAN) which is producing highlytrained forensic accountants just as we have in Canada (Institute of Chartered Accountants) and UK (ACCA, ICAEW). The point I am making is that if we allow mediocrity in the accounting profession, in this case forensic accounting, and make it just a means of earning money and social prominence, we will slowly destroy what ICAN was meant to do. Idealism and patriotism have now become suspect words and the fault lies somewhere in the cynical attitude non-chartered accountants now seem to encourage in the accounting profession. So, here is raising my cup against any before the National Assembly seeking to proliferate the accounting profession in the country. May mediocrity not be enshrined in the constitution of Nigeria via Bills sponsored in the National Assembly promoting proliferation of the accounting profession in the country. Unfortunately, a look at proliferation of the accounting profession creates tasteless and voyeuristic glee with which unpatriotic Nigerians and their accomplices are feasting on the accounting profession. The Institute of Chartered Accountants of Nigeria, established by an Act of Parliament in 1965, as expected, has forensic, audit and investigating faculty. ICAN registers, trains and issues certificates to qualified members. Forensic accountants trained by the Institute are awarded Certified Forensic Accountants of Nigeria (CFAN) certificates. It should be noted that only chartered accountants are qualified to be forensic and investigative auditors. The reason a forensic accountant must first be a chartered account- ant is simply that, as earlier stated, forensic accounting is a specialized area in accounting. The forensic accounting investigation poses substantial risk. For example, a forensic accountant that lacks the rudiments of accounting and professional experience that can be obtained from the Institute of Chartered Accountants can destroy an organization and even compound the social and economic problems in a country. Given the prevalence of corrupt practices in mostly developing economies, having forensic accountants is highly desirable, but this should not be seen as an opportunity to be fishing on Nigerians under the guise of promoting Bills to duplicate forensic accounting practice. There is no need to duplicate efforts mostly on the altar of mediocrity. Nigeria must always come first before selfish interests. The genuine professionalism of ICAN, the Association of National Accountants of Nigeria, the big 4 audit firms and the International Federation of Accountants must be sustained. Nigeria must remain great without dilution of excellence in our professional life. Send reactions to: comment@businessdayonline.com IZUKA NKEONYE Dr Nkeonye is a wellness physician @ Dennis Ashley Wellness Clinic. In these days of economic hardship and turmoil, turning things around is more likely to happen with a healthy population. Wellness according to the World Health Organization “…. is a state of complete physical, mental, and social wellbeing, and not merely the absence of disease or infirmity.” Another definition which we can relate to in the Nigerian sense, put forward by Alex Jadad, is the ability to adapt and selfmanage when individual communities face physical, mental or social challenges. Wellness in its true sense is an on-going process, a way of life. The question is: how do Nigerians stay well? For all classes of Nigerians, it Wellness in a nutshell pays to eat balanced meals, each day. A balanced diet is one that cuts across all food classes. The less processed it is, the better. It should have a complex carbohydrate like yam or brown rice, some protein like beans, fats like red oil, in small quantity. One can now have some oranges or any other fruit after that meal, which adds to fibre content the body would need. Making healthy food choices is important because it can lower one’s risk of heart disease, some types of cancer, and it will contribute to maintaining a healthy weight. The next step in keeping well is drinking lots of water. The body is 70% water and needs water for its processes. Water in prepared food, vegetables and fruits count as well. The third step is exercising. This helps in maintaining fitness, weight control and boosting wellness including boosting the individual’s mood. If there’s a challenge with going to the gym, one can turn his/her daily activities into exercises. For instance, executives can ditch the lift and take the stairs, they could take brisk walks in their neighbourhood, and they could get involved in a substantial amount of house chores. The fourth step is having adequate sleep. The average sleep duration for adults aged 18 to 64 should be 7 to 9 hours per night. Due to the huge role sleep has on regulating a lot of the body’s processes, chronic sleep insufficiency leads to weight gain or loss, reduced immunity and increased risk for hypertension and cancer. The fifth step is keeping a positive mental health. The benefits of this ensures one realizes his/her full potential, copes well with life stresses, increases work productivity and contributes meaningfully to society. Some of the steps already mentioned above are essential in achieving this goal. Others are connecting with others, staying positive, helping others and developing coping skills. Please seek help from your doctor or psyche specialist if you suffer from or experience any of the following: substance or alcohol abuse, having low or no energy, withdrawing from people and usual activities, experiencing severe mood swings that cause problems in your relationships, thinking of harming yourself or others, inability to perform daily tasks like taking care of your kids or getting to work or school amongst others. The last but not the least is having regular health checks. Usually these checks are based on complaints the individual may have in addition to evaluating risks for certain diseases. This evaluation is based on the individual’s age, lifestyle and family history. Every Nigerian is encouraged to adopt these practices gradually, until it becomes a lifestyle. This is wellness in a nutshell. Send reactions to: comment@businessdayonline.com

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