“It is in the interest of our continent that African countries start implementing Integrated Reporting (IR) as it is the future of reporting and of the accountancy profession. Besides enabling Organizations to provide a fuller and better picture of their ability to create value over the long term, it will result in auditors not only auditing 20% of Organizations’ value (financial), but also playing a role in the assurance of the other 80% (intangibles).” So, urged Prof Mervyn King, during the inaugural meeting of the Africa Integrated Reporting Committee (AIRC), which he chairs.
The Committee was established by the Pan African Federation of Accountants (PAFA) and the World Bank Group (WBG) to provide strategic thinking, and promote and support the adoption of integrated thinking and IR in Africa. The initial target is for four African countries to adopt IR by 2020. The Committee will be supporting implementation of the International Integrated Reporting <IR> framework.
The Committee was established as a partnership between the accountancy profession and stock exchanges in Africa. The initial membership comprises eight countries with two senior officials per country: from the Professional Accountancy Organizations (PAO) and the Stock Exchange. The eight initial member countries – Botswana, Kenya, Namibia, Mauritius, Morocco, Nigeria, South Africa and Zimbabwe - were selected based on their likelihood to implement the reform in the short to medium term informed by the maturity of the accountancy profession, financial reporting and capital market structures in those jurisdictions.
The Committee will benefit from participation and contribution of observers from institutions involved in IR at global and regional levels, specifically the International Integrated Reporting Council (IIRC), the International Federation of Accountants (IFAC), the African Union Commission (OHADA) and the African Development Bank.
“The Committee will assist Africa to accelerate implementation of integrated thinking and IR, which will enable us to determine how organizations in Africa are utilizing the endowment of resources in Africa to improve the wellbeing of citizens,” said Vickson Ncube, CEO of PAFA. Integrated thinking will be a driver of change in organizations and will be manifested through integrated reports. Integrated thinking will enable organizations to increasingly adopt an integrated approach to management and focus on how all the capitals are used to generate value that benefit all stakeholders.
Several African countries are making progress towards adopting non-financial reporting reforms, including integrated reporting. South Africa adopted IR from 1 March 2010. The Botswana Stock Exchange is currently revising its listing requirements and plans to require all listed companies to prepare an IR. In Kenya, the Capital Market Authority (CMA), recently adopted a new Code of Corporate Governance and some companies have adopted IR, though it is not a mandatory requirement.
Paul Muthaura, CEO of CMA acknowledges that focus on the long-term health of the company makes integrated reporting key for investors.
The Mauritius Stock Exchange has established a Sustainable Index (SI) that incorporates integrated thinking and plans to adopt IR in future once the culture of SI is well inculcated in the listed companies. Nigeria’s Institute of Chartered Accountants has embraced IR and has included the subject in the accountancy qualification syllabus. Nigeria Stock Exchange and Securities Exchange Commission of Zimbabwe (SECZ) are considering introducing IR for listed companies. IR is being taught in some Zimbabwe Universities.
To achieve its objective, the Committee, during its inaugural meeting in August 2017, agreed on four thematic strategic activities that it will implement over the next three years to promote integrated thinking and IR in both private and public sectors in Africa.
Firstly, each member country agreed to establish a national IR committee comprising of many national multi-stakeholders to promote, influence and support implementation of integrated thinking and IR in the country. The national committees will provide regular feedback to AIRC and seek necessary support.
Secondly, the Committee will host many advocacy campaigns with policy makers, especially Heads of States at the Africa Union Commission and regional economic blocks, as well as at national level, facilitated by representatives of IIRC and AIRC. To facilitate the advocacy, the Committee will prepare a policy paper on IR – a layman paper stating why IR, what is IR, the policy and institutional requirements to implement IR, etc – to be used by the countries for advocacy and policy decisions to adopt IR.
Thirdly, prepare a report on the status of non-financial reporting including IR implementation/activities in each of the AIRC member countries.
Fourthly, provide support by developing a roadmap (template) for implementing IR; preparing a synthesis study on IR implementation in Africa – experiences of how companies have implemented IR (preferably by 2020); establishing and facilitating an African Community of Practice on IR; and a knowledge repository to share IR information through a PAFA newsletter and website.
PAFA is actively leading the initiative as it believes that the accountancy profession should play an instrumental and influential role of supporting implementation of the reform. As a minimum,
- The profession should serve as ambassadors of IR especially by hosting advocacy campaigns with policy makers, civil society organizations, media, organizations and so on;
- The PAOs should include IR in the accountancy qualification frameworks to empower future accountants; and in the continuous professional development programme.
- PAOs should develop IR implementation material and provide appropriate implementation support to organizations; and
- PAOs should lead by example by preparing annual integrated reports.
“Adopting integrated thinking and IR will contribute to improving decision making, transparency and accountability especially as to how organizations in the public and private sector are creating value and contributing towards improving lives of citizens – ending poverty and boosting shared prosperity,” said Patrick Kabuya, Senior Financial Management Specialist, WBG, who is assisting in coordinating the initiative.
“We are honoured to be part of this initiative, which we believe will result in significant benefits for citizens in the African region. It provides us an opportunity to share knowledge and experiences that we have generated over the years when supporting strengthening the role of IR in public sector governance.”
By Patrick Kabuya, Senior Specialist, World Bank Group