East Africa faces rise in inequality

By Grace Maina/Report

East Africa is experiencing tremendous economic growth, but also rising inequality says Michael Armstrong from the Institute of Chartered Accountants in England and Wales (ICAEW).

According to the International Monetary Fund, East Africa is the star of sub-Saharan Africa thanks to tourism, manufacturing, services and agriculture. However, the Society for International Development’s State of East Africa Report 2016 suggests that inequality is growing in Kenya, Tanzania and Rwanda.

Michael Armstrong says that integrity is a little-understood feature of organisations and the individuals they employ, yet it is vitally important. The public, customers, and clients all expect businesses, organisations and individuals to act with integrity.

“This is vital for all businesses, regardless of size, sector or where they operate, but it is becoming increasingly topical for Kenyan business. A report by Kenya’s Ethics and Anti-Corruption Commission found that 74% of Kenyans believe corruption is rife,” says Armstrong.

President Kenyatta declared that corruption was  a “national security threat” and vowed to introduce anti-corruption legislation, blacklist official, and strop licenses from banks that violate money laundering laws in November last year. Increasingly the public mood is that a lack of integrity will no longer be tolerated.

Armstrong states that if East Africa is to continue towards prosperity, it is more important than ever to ensure that growth is sustainable, and this will mean embedding good practices and ensuring trust and confidence are built into business at an elemental level. Integrity is a fundamental part of this. In business, as in politics, the tone comes from the top, and failure to meet public expectations can be hugely detrimental.

“ICAEW has integrated ethics into every single section of the ACA qualification, which means that no one can call themselves a Chartered Accountant unless they can demonstrate that they act to the highest ethical standards at all times,” says Armstrong.

The Institute of Public Certified Accountants of Kenya (ICPAK) said it will deregister corrupt accountants who steal public funds or refuse to cooperate with the Auditor General in May 2107. ICPAK is to be applauded for their stance, which is a clear message that strong economies are underpinned by trusted finance professionals.

Armstrong says that’s while all recognised professions, such as the accountancy profession (and its professional bodies and regulators) have an important role in promoting integrity among its membership, organisations and businesses of all types should seek to encourage integrity – and actively monitor it.

Research shows that tone from the top is absolutely critical for organisational integrity. The leaders must set out what is and isn’t acceptable behaviour and lead by example, in both words and actions. However, strong leadership is not necessarily enough in itself.

ICAEW’s 2012 report – in collaboration with Leeds University in the UK – provides advice on which practical techniques have the most positive impact on integrity and also points out some things to avoid. It is not just about what you do but also how you do it.

“Disciplinary procedures which are not open, reward systems which are unfair or partisan, advice that is not really confidential, all have the potential to breed cynicism, resentment and distrust. Conversely, an organisation which takes ethics seriously, admits its mistakes, genuinely values its employees’ contributions, and practices what it preaches, can make its employees feel proud to work for it, and motivate them to go the extra mile,” says Armstrong.

The research underlying the report identified the most critical and effective factors in instilling integrity. Among them are having stated organisational values. If properly embedded, a list of values can offer criteria for decisions which are not purely commercial, and can thereby offer a counter-balance to commercial pressures, which can be a threat to integrity.

Armstrong states that having an open culture where discussions on ethical issues are encouraged and employees feel comfortable in raising issues and concern is also important.

“Support for whistleblowing is yet another area highlighted as quite fundamental to encouraging and instilling organisational integrity. That is because it helps to promote openness in the organisation by allowing people to raise issues in a confidential setting without fear of repercussions. It thus has an effect both on individual integrity – providing a route for people to ‘stand for something’ within the organisation – and also on organisational integrity, because it helps ensure consistent behaviour within the organisation,” he says

“While tone from the top, values, openness and allowing whistleblowing are all seen as being among the most efficient factors, there are many other techniques that can also help encourage employees and organisations to ‘do the right thing’. Training can absolutely be beneficial and bring positive results though the research found that it is critical that the training is well-tailored. Sending staff on a random course on ethics will help relatively little and could, in fact, actually be counter-productive,” adds Armstrong.

Armstrong goes on to say that, rewarding staff for ethical behaviour and disciplining those who don’t meet expectations are other tools available to those seeking to instil integrity. Disciplinary procedures enable organisations to correct unethical behaviour through punishment, or to rid themselves of persistent or serious offenders. It can also act as a deterrent.

“Rewarding behaviour, while seen as efficient by many, is typically a lesser-used technique by organisations. A reason for that may be a feeling that a certain type of behaviour should be a minimum requirement and not something that deserves an extra pat on the back. What is successful in one organisation may not be what works in another so it is important to tailor the techniques and tools used to the organisation in question,” he says.

Acts with integrity reaps many benefits. Investing a bit of time and effort in encouraging it, and monitoring efforts and results, is well worth it.