|
Protecting Investors
Good company law and good corporate governance are critical for a developing country like Tanzania. They protect investors – and encourage new investment – by providing clear rules for a company’s internal management and by providing enforceable standards to protect shareholder rights and access to information. They can also establish the country’s reputation as investor-friendly. As expressed in the introduction to South Africa’s corporate governance code, “If there is a lack of good corporate governance in a market, capital will leave that market with the click of a mouse.”
At this time, notwithstanding a series of initiatives to improve responsiveness to the needs of investors, Tanzania’s company law lacks best-practice standards and is often unclear and cumbersome to use. It suffers from having been drafted without extensive local consultation or comment. There is a great need to add provisions that will increase investor protection, to adapt the law to current international and Tanzanian business practice, and to add flexibility for SMEs.
On the other hand, the Government of Tanzania recognizes the need for good corporate governance, and in 2002 it issued a corporate governance code setting forth many international best practices. The code applies directly to stock exchange-listed companies only, but other companies in Tanzania observe it and it is currently under reviewed for possible expansion in content, in the number of companies covered, and in methods for implementation and enforcement. The actual state of corporate governance “on the ground” is hard to measure. but clearly can be enhanced by a strengthened company law and corporate governance code.
Another essential part of investor protection is foreign investor protection. Tanzania generally exhibits a welcoming attitude to foreign investment, and the Government has taken many strides to implement this. However, a major problem is that information on companies is harder to come by in Tanzania than in comparable countries. This dissuades potential investment.
|
