Skip to Content

We provide succinct insight on industry news and regulatory developments

Status of sustainability reporting in sub-Saharan Africa

4 September 2012

Safaricom’s Sustainability Report 2012, which is due to be released on 5 September, will make a small but important contribution to the momentum behind sustainable investment in Africa. By disclosing its performance on environmental, social and governance (ESG) issues, Safaricom will enable responsible investors to improve the integration of the analysis of these issues into their valuations.

Why report on sustainability factors?

Investor interest in the impact of ESG factors in Africa is growing. According to a recent IFC-backed report, the size of the sustainable investment market, defined broadly as the integration of ESG factors in investment policy, in sub-Saharan Africa including South Africa is 20% of assets under management. This growing interest is partly due to regulatory changes, such as the revision to Regulation 28 of South Africa’s Pension Funds Act, which requires pension funds to “give appropriate consideration to any factors which may materially affect the sustainable long-term performances of a fund’s assets, including factors of an environmental, social and governance character”, which is driving demand from institutional investors. It also reflects the increasing understanding that sustainability factors can have significant implications for investors. The recent tragic shootings at Lonmin’s Marikana mine in South Africa underlines this. However, sustainability reporting is not only about assessing ESG weaknesses and their potential impact on company performance but can also be used, as Safaricom has tried to do, to indentify strategic opportunities for sustainable growth and innovation.

Progress in financial reporting…

The disclosure of non-financial information by companies listed on African stock exchanges tends to be extremely weak outside of South Africa. Many companies have embraced technology, particularly websites, to engage with investors and other stakeholders and provide relevant financial information including financial statements and annual reports. Of the top 100 listed companies (by market capitalisation) in sub-Saharan Africa outside of South Africa, 79 provide a 2011 or 2012 annual report on their website. Some of the others have outdated or minimal information, while 8 companies still do not have a website at all.

…but need to go beyond CSR

However, only 11 of the top 100 companies have published a separate sustainability report and the majority of these are from before 2011. Some companies (17) provide some relevant non-financial information as a chapter in their annual reports, but very few of these go much beyond listing the various corporate social responsibility (CSR) projects that they have contributed to. Meanwhile, five companies have taken the step to publish integrated reports, which are now mandatory in South Africa but not in other countries.

Status of sustainability reporting in sub-Saharan Africa

Weak disclosure hampers investment analysis

Given the scarcity of sustainability reporting, it is no surprise that, as can be seen in these slides from a recent presentation given by Kigoda Consulting at the 2nd Annual Africa ESG Investment Forum, corporate disclosure is extremely weak on environmental issues such as energy consumption or greenhouse gas emissions, and social issues such as human rights and labour standards policies. The best disclosure is in corporate governance, which is often a listing requirement.

Leadership required

Safaricom’s 2012 sustainability report will see it join the growing number of companies across Africa that are demonstrating that they are serious about the impact they have on communities and the environment. Hopefully this step will encourage other companies to follow its path and demonstrate how they contribute to sustainable development. However, as was noted by several attendees at the Africa ESG Investment Forum, it is also essential that investors start questioning companies about their ESG performance if they are serious about supporting the principles of responsible investment. It will be interesting to follow both these trends.


Sign up to receive occasional updates on industry news and regulatory developments.