The "G" Foundation: You can't handle year-ten complexity with year-one governance.

I met a friend over the weekend for what was meant to be a catch-up over coffee. We ended up in a three-hour conversation about life, family and the opportunities and challenges of doing business in Africa.

He has been investing on the continent for about 25 years and has lived through currency crashes, policy U‑turns, electricity shortages and security scares.

I was struck when he said that, looking back over the investments that struggled the most, the underlying problem in the great majority wasn’t about markets or politics, but about governance.

Not wrongdoing. Just the absence of the right structures and systems as the businesses grew: how decisions were made, and who was actually keeping an eye on the numbers and the risks. That was his experience, but it captured a recurring problem.

It is one that I recognise. I have been a senior executive in founder-led companies and have sat on their boards, where deliberate governance allowed the founder to continue driving the business while keeping it bigger than any one individual. 

I have also sat on boards where the structures existed on paper, but were not always strong enough to provide an effective challenge to a powerful founder.

What works for a three‑person operation in one office can quietly become dangerous when a business employs 30 or 50 people across several locations.

On day one, the founder knows every customer, every supplier, every invoice. That intensity is often what keeps the business alive. But as the company grows, dependence on one person, no matter how brilliant, begins to limit the business and may eventually threaten its survival.

The business is handling year-ten complexity with year-one governance.

Staff make promises or enter into deals that the founder hears about only when there is a dispute. Money moves through accounts that are only examined properly at year‑end audit. Regulators introduce new requirements and the business becomes aware of them only when someone from the inspectorate is at the door.

A bank declines a loan application because the financial records are unreliable. A customer walks away because the business cannot provide the required information or assurances. Good employees leave because responsibilities and lines of authority are unclear. A promising company collapses when the founder falls ill.

As the founder or CEO, you may believe you are still in control, but the truth is that no one has been for a while.

What is “Governance”?

“Governance” might sound too complex or formal for an African SME. A concept that belongs to the world of listed companies with boards, lengthy corporate policies and reports. But governance is simply about how a business is directed and run.

In Simplifying Sustainability: A Handbook for African SME Leaders, we look at governance through two lenses.

First, ethics and compliance. This goes beyond compliance with laws, it also covers the values and behaviours that guide decisions even when the law does not provide clear direction: acting with integrity, fairness and respect in all business dealings.

The second is the structures and systems through which a company makes decisions, allocates responsibility, monitors performance, manages risks and ensures accountability. It answers the question, “Are we set up in the right way to make good decisions and run this company well?”

This article focuses on the second - the “how” of running your business:

• how decisions are made and challenged,

• how responsibilities are allocated,

• how money and performance are monitored, and

• how risks are identified and managed.

But if we stop there, governance can still sound like something imported from elsewhere, designed for large companies rather than African founder-led businesses.

That is why the conversation needs to be reframed.

What does good governance look like in practice for an African SME?

The underlying principle is not foreign to many African contexts. Councils of elders, advisory groups, family forums and community processes have long provided ways to test decisions, draw on collective judgement, and challenge and hold leaders accountable.

The language may be different, but the central premise is familiar: leaders matter, but important decisions should benefit from collective wisdom; authority should come with responsibility to others; and leaders should not govern alone.

Most African SMEs do not have the resources, time or need for a complex governance architecture. They need something appropriate to their context, stage of growth, level of risk, and resources. In many cases, it begins with a few sensible disciplines that reduce dependence on one person and make the business easier to run.

Here are four practical starting points.

1. Create a trusted sounding board

One of the quiet dangers in founder- or strong CEO-led businesses is that people stop questioning decisions, either out of respect, fear or habit. Over time, this creates blind spots.

Giving others permission to ask questions, raise concerns and make suggestions does not weaken the leader’s authority. It strengthens the business by ensuring that difficult issues come to light early and that important decisions are not made in isolation.

A practical first step is to create a small circle of trusted advisers. This does not need to be a formal corporate board. It may simply be three or four people who meet periodically to bring complementary judgement to the founder; challenge assumptions; review strategy, major decisions and risks; and ask difficult questions before problems grow.

That group could include a professional adviser, a sector expert or a respected business leader with sound judgement. It doesn't really matter what title the group has. What is important is having people who can speak honestly and be heard. The advisers should understand the founder’s emotional investment in the business, but their value lies in being willing to challenge assumptions and say what others may be reluctant to say.

2. Clarify roles and decision rights

A second practical step is to make roles clearer. In many founder-led businesses, the "boss" acts as chief executive, sales director, head of finance, head of risk and head of HR. That is understandable in the early stages, but as the business grows, it becomes risky.

Responsibilities should be divided more deliberately. This does not mean a large management team. It is about being clear about who is responsible for what; who has authority to make particular decisions; and when an issue must be referred to a more senior person.

The business should be able to answer questions such as:

• Who can commit the business to a contract?

• Who can approve expenditure?

• Who is responsible for collecting money from customers?

• Who monitors compliance with legal and regulatory requirements?

• Who acts when the founder or CEO is not available?

You don't need to hire five different people to cover these responsibilities. In a small business, one person may reasonably hold more than one. What matters is that whoever holds the responsibility understands its remit and has the know-how to carry it out.

However, the same person should not initiate, approve and record the task, transaction or decision. Applying a simple "maker and checker" principle to payments, contracts and other significant commitments helps to identify errors, reduces the risk of fraud and stops too much control sitting with one individual. 

The founder can continue to lead key relationships and major decisions while operational and financial responsibilities are assigned to people with the expertise and time to manage them more effectively.

Clarity about roles and responsibilities helps decisions move faster, improves accountability and reduces risk.

3. Keep reliable records

A third step is to strengthen record-keeping and financial discipline. Many businesses start by running largely on trust, memory and verbal instruction. Again, that may be enough at the beginning, but once a company is growing, borrowing, entering new markets or dealing with more demanding customers, poor record-keeping quickly becomes a serious weakness.

Reliable records help a business explain itself to a bank, respond to questions from an investor or customer, defend itself in a dispute, and understand why a poor decision was made and how to avoid repeating it.

A simple decision register, a clearer approval process, better records and more disciplined financial oversight can make a substantial difference. It can be as basic as a notebook or spreadsheet recording:

• the major decisions taken,

• who was consulted,

• what information was taken into account,

• what risks were identified, and

• why a particular route was chosen.

The business should also have records of contracts, expenditure approvals, tax and regulatory obligations, ownership arrangements and money owed by and to the company.

4. Establish a regular review process

Even a small business should have a regular rhythm for reviewing cash flow, performance, major commitments and risks. It might be a weekly or fortnightly management meeting and a quarterly meeting with the trusted advisers. What is important is a system that ensures that information is available, the right people examine it and agreed actions are implemented.

During regular reviews, the following questions can be asked and answered:

• Are customers paying on time?

• Can the business meet its obligations over the next three or six months?

• Are costs rising faster than revenues?

• Have any new contracts, regulations or commitments created risks that the business has not considered?

• Are important decisions being implemented?

• Are there problems that staff are reluctant to raise?

Governance as a survival strategy, not a luxury

In many SMEs, governance is seen as something to think about later, after the business has become bigger, more profitable or more stable. But in practice, governance matters long before that stage. In fact, for many African businesses, it is one of the things that determines whether they ever reach that stage at all.

Governance is part of a business’s survival strategy. It does not prevent currency shocks, supply disruptions, regulatory change or market downturns. But it helps a business see problems earlier, make better decisions under pressure and demonstrate to others that it can manage its obligations responsibly.

It also matters because the environment around African SMEs is changing. Corporate customers are asking more questions. Banks are paying closer attention to risk. Investors and development finance institutions want evidence that a business can manage money, people, supply chains and compliance responsibly. Export markets increasingly expect traceability, documentation and transparency. In that context, governance is not separate from growth. It is one of the things that makes growth possible.

Africa’s SMEs financing gap is estimated at hundreds of billions of dollars, and surveys in markets like Ghana show that nearly half of SMEs see access to finance as a major constraint. Governance is not the only explanation for the financing gap, but weak governance, poor records, and informal controls are some of the reasons why otherwise viable businesses struggle to bridge that gap. Stronger governance can help a business present a more credible case and make better use of the finance it obtains.

The Mamili Foods example in the Handbook illustrates this well. As Mamili grew and sought access to new markets and funding, stronger governance, better systems, and greater transparency became necessary to support expansion, manage risk and build credibility with lenders, investors, and customers.

A five minute exercise to get started

Think back over the last month and write down three decisions you, as a business leader, made alone. For each one, ask:

• Who else could or should I have consulted?

• Did I need to carry the weight of that decision on my own?

• Did I have all the information I needed to make the decision?

• Was the decision recorded?

• Could I explain the reason and evidence supporting it to a bank, an investor or a major customer?

That short exercise could tell you which of the four steps you should tackle first.

Start where you are. Right-sized governance is about putting in place structures that match the stage, scale and risk of the business.

For one company, that may mean a quarterly advisory meeting with trusted advisers and tighter financial controls. For another, it may mean clearer family and management roles, simple policies and a succession plan.

The form may vary, but the test is whether the way the business is governed has kept pace with the business itself.

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If you found this article useful and would like to know more about practical approaches to governance and ESG in your business, do get in touch. I would love to hear your thoughts and learn from your experiences.