Africapitalism rests on the notion that the cure for developing countries’ problems especially Africa, rests with private sector investment situated in responsible orientation. According to its promoters, “impact investors” and private equity firms with specific focus on projects that will positively impact upon Africa are the champions of sustainable development in whom Africans will place their hopes. They argue that it is not about transposing the western capitalism on Africa, but rather, requires navigating a blurring line of doing well financially and doing good socially at the same time. In this lies responsible investing.
The first insight from the above is that Africapitalism calls for investors with a different mindset and motive. Generally, there are diverse and different types of investors to whom I employ the term, ‘providers of capital’. But broadly there are individual investors and institutional investors. Whether individual or institutional investors, they may be classified as short term or long term investors. Africapitalism calls for long term investors given its leaning towards responsible investing. Also, given the limited capacity of individual investors, institutional investors and government agencies may be more suitable for this type of investment because of long term gestation period.
This brings us to the type of capital called forth by Africapitalism. What type of investor’s capital is called for under Africapitalism? Should it be conceptualised to extend beyond just financial capital or should it just be financial capital? In accounting, the concept of capital now extends beyond financial capital. Extending the conceptualisation of capital beyond financial capital gives rise to examining the nature of return on capital invested by providers of capital.
Investors invest to make return, which accounting refers to as profit. In their conceptualising of Africapitalism, proponents have argued that the role of African governments should be restricted to “capacitising the private sector” and “creating the right environment for a new crop of entrepreneurs to emerge. The primary aim is to make profit, with the idea that as you make profit you are also touching society.” In its true sense, this is responsible profit as its impact is felt in the society. The question is what this profit means and how is it to be measured. This brings into focus, the link between Africapitalism and accounting.
It is accounting that makes it possible for the entrepreneur in Africapitalism to define profit, measure and ascertain it, whether qualitatively or quantitatively. However, at present profit is measured quantitatively. Accounting therefore facilitates the knowing of what this profit is, whether it has been made or not and how it impacts the society. Inherent in this is accountability owed to the providers of the capital invested to actualise Africapitalism. This draws attention to the concept and form of accountability within Africapitalism. It is a well- known fact drawing from experience of modern corporations that where there is separation between ownership and management of capital, accountability is owed to the owner of capital. This is taken as stewardship obligation that must be rendered to providers of capital.
The role of accounting in stewardship when there is separation between ownership and management of capital is part of the wider corporate governance. Other writers are engaged with the link between Africapitalism and corporate governance which is beyond the present discussion. The wider consideration is limited to accountability.
Accountability in its conceptualisation and definition is highly contested and is bound to be problematic when applied to Africapitalism. Rather than interrogating Africapitalism and accountability, perhaps we should direct attention to how accountability ought to be applied in Africapitalism. Before then, it is necessary to understand the concept of accountability. In its broad sense, Robert and Scapens define accountability as the “giving and demanding of reasons for conduct”. Others see it as a requirement to give an account of oneself and of one’s activities. To this end it is generally agreed that accountability refers to the responsibility expected from a person, an entity or institution, to give an account of their conduct or activities. Applying this to our discussion, accountability is the responsibility of managers entrusted with capital by investors (entrepreneurs) to render account of how these capitals have been managed over the agreed time period, usually one year in the business world. As earlier stated, these capitals need not be only financial capital. How is this account to be given?
Although accountability emphasises demanding and giving account of conduct, it is within the context of information, rights and responsibilities that it is made manifest. Ignoring rights and responsibilities to focus on information, accountability is rendered through accounting information by modern corporation. This explains why accounting is seen as the language of business and investment. Accounting information for accountability purposes evidences itself through regulated financial reporting whose output is defined by accounting regulation through international financial reporting standards (IFRS) or generally accepted accounting principles (GAAP). Whereas over 100 countries adopt IFRS in their financial reporting, the US adopts US GAAP.
There are those who are of the view that financial reporting is doing a good job when it comes to rendering accountability to providers of financial capital. Yet others have criticised it for being inadequate for this purpose. However, the general view is that financial reporting suits western capitalism and may have been designed specifically to serve this purpose. If Africapitalism is not about transposing western capitalism on Africa, is a different accounting required to render account under Africapitalism. This brings us to interrogating Africapitalism, accounting and accountability? The interrogation calls for attention to focus on the nature of accountability and the role of accounting information in Africapitalism.
It is not my intention to go into the issues raised by this interrogation in this paper. I intend to take them one by one in future series. I also invite others to engage in it. However, suffice it to say that issues emanating from this interrogation are not limited to such questions as:
What is the meaning of accountability in Africapitalism?
To whom is this accountability owed to?
What is the nature of accounting and accounting information required to render this accountability?
What capital is to be accounted for?
How is profit to be determined, given invested capital?
How do we assess the idea that as you make profit you are also touching society?
To conclude, Africapitalism as a concept that has been put forward to help address African problems, by relying on responsible investment of private sector, is a novel idea. Being in its embryonic stage of conceptualisation calls for certain foundational interrogation to expose its propositions. This paper engages in such by raising issues that may arise interrogating Africapitalism, accounting and accountability.