5 Questions To Ask Before Joining A Company Board In Africa

board room

A strong track record and reputation will likely land you a board seat in due time. As an investor, that opportunity comes quicker than you expect if you plan to protect your investment. There is usually much anxiousness and excitement.

But an opportunity that arrives because of reputation can easily damage it in a moment’s notice. A company’s challenges and failures is not simply a reflection of the management team, but also of those individuals that allow management to underperform, particularly in the small business communities in many African cities. An old Korean proverb says “To be prepared is to have no anxiety.”

Here are 5 questions that potential directors can ask BEFORE joining a Company Board in Africa:


#1. WHO ARE THE OTHER DIRECTORS?

Running a company is a team effort. Like a basketball player in free agency choosing a new team, knowing your potential teammates names is simply not enough. You want to know their backgrounds, skill sets, personalities and reputations. If possible, chat over a meal. Or, in context of multinational companies in Africa, Skype and talk life then business. Board diversity in skills can matter as each member should bring a value-add, not simply show up and be present. A friend of the CEO club (i.e. all members are former connections of the CEO) is usually not the best idea. Whether the director role is for one year or multiple years, you must know all the other directors to be open, trustworthy and communicative (especially about past experiences). One ‘bad’ member can ruin the Board’s work…or, as an old African proverb goes, “one fly causes the whole carcass of a cow to rot.”

#2. HOW DOES THE COMPANY OPERATE?

Knowing a company ‘inside and out’ is always best. Public reports are available in more sophisticated markets, such as South Africa and Kenya. But, in general, the general lack of public information characterizes the African business environment and can make the task of research quite daunting. How does cash come in, move through, and exit the company? What does the company produce – good and/or service – and how is the product produced? What are the costs in the process of production? Too many directors take company answers for granted without asking further due diligence questions. Businesses across Africa, similar to other emerging market companies, adopt to local markets in crafty, however not always sustainable, ways. The informality and cash nature of many African markets can only further complicate your understanding of the company business model.

#3. WHAT IS THE FINANCIAL STATUS OF THE COMPANY?

I was once advised to ask for the last 5 years of financials. Great advice! But, if you have done a deal in Africa, you know that many companies do not necessarily have audited (or unaudited) financials that meet, for lack of better words, Western standard. For example, several countries have not adopted a specific accounting system (i.e. GAAP or IFRS). Accordingly, finding a company that only has a balance sheet and income statement can happen. In many cases, you may be appointed to the Board to help rectify the matter. Either way, you want to know as much as possible before assuming your role.

#4. WHAT IS THE LOCAL CONTEXT?

Who are the shareholders? Is it a local family? In what countries does the company operate? Cross-border operators always face different challenges in different markets and accordingly adopt their business model to overcome those challenges. For example, Nakumatt in Nairobi definitely does not reflect Nakumatt in Kigali. It is the nature of the business. Either adapt or do not survive. The local context was too much for Woolworths in Nigeria. It would best serve you as a director to have local knowledge when trying to advise on strategy and management. Fifty-four countries with different business environments and cultures is an understatement in this situation.

#5. WHAT ARE DIRECTOR AND OFFICER (D&O) LIABILITY INSURANCE COVERAGE?

Rules for directors and officers differ across the continent. Accordingly, director liabilities and coverage differ across markets. Knowing the differences in rules for the countries in which the company operates, the company’s ability to protect you against liabilities, and the company’s overall past performance in complying with the law, are paramount to your survival. Local penalties can be drastic, especially if the issue becomes political, and you do not want to come into a situation that could forever tarnish your reputation, end your career, or leave you empty pocketed (with you knowing very little on how it happened). Africa, in general is not a corrupt continent. But, again the informality of markets and the underdeveloped legal frameworks, can leave you vulnerable to one or two persons’ mistake(s).


ALSO…never forget to ask if this is the right opportunity for you at this time. This is a personal question. But many potential directors fail to ask themselves this question.

Kurt Davis Jr
Kurt Davis Jr. is an investor, advisor and consultant with experience in Africa, Asia, Europe and the United States. He is an avid traveler who has been to 70+ countries throughout the world in search of new investment opportunities, new people, and better understanding of the world. His international professional career includes positions with Schulze Global Investments, Kukula Capital, and African Development Bank, with experience covering the agribusiness, energy, fast-consumer moving goods (FMCG), infrastructure, manufacturing, natural resources, and real estate sectors.