Mo Ibrahim, a Sudanese mobile phone tycoon, has established a foundation in his name as an African-based project to recognise good leaders among 48 sub-Saharan African countries - and to "name and shame" underperforming regimes.
The Mo Ibrahim Prize for Achievement in African Leadership will each year land a former head of state or government with the sum over 10 years, with a $200,000 annual life pension to follow.
The award, which will be first granted in 2007, far exceeds the $1.3 million given to recipients of the Nobel Peace Prize.
Meanwhile, the annual Ibrahim Index for African Governance will rank the countries according to governance quality, with the idea of showing African citizens how their rulers match up.
The foundation is backed by several former world leaders. including Nelson Mandela, the former South African president, Kofi Annan, the Ghanaian United Nations secretary-general and Paul Wolfowitz, president of the World Bank.
"Nothing, simply nothing is more important to African development than good governance," Ibrahim said.
"I'm ashamed that we always have to look to the rest of the world for assistance - it impacts on our dignity and our self-respect"
Mo Ibrahim, founder
"I'm ashamed that we always have to look to the rest of the world for assistance. It impacts on our dignity and our self-respect.
"We want to celebrate the guy who managed to take his people out of poverty. That deserves the largest prize in the world."
The winner will be chosen by a team of 18 academics in conjunction with the UN and other bodies such as the World Bank.
They will be informed by the Ibrahim Index, which assesses national progress on sustainable economic development, health and education programmes, transparency and empowerment of civil society, democracy and human rights, security and the rule of law.
The index has been drawn up by experts at the Kennedy School of Government at Harvard University in the United States.
"There are no excuses for anyone to criticise. This is not mixing business with politics: I am a concerned African citizen and this is my private money," Ibrahim said.
"For once, we want Africa to do something for itself. I have no better way of spending my money."
And he warned rulers in Africa who may be corrupt: "Watch out - we are coming after you."
Foundation board member Mary Robinson, the former president of Ireland and UN high commissioner for human rights, said the award would have all the more impact because it was an African initiative rather than a Western handout.
"It's greatly significant that this is an African businessman who has invested in 14 countries, made big profits and done it cleanly and has now decided to put it back in to his own people," she said.