LONDON (Reuters) - A $5 million prize for former African leaders who set examples of honest, democratic government will not be awarded for a second year running, the sponsor said on Sunday.

Mo Ibrahim, a Sudanese-born telecommunications entrepreneur, founded the world's largest individual award as a way to encourage good governance in a continent blighted by corruption and a frequently loose adherence to democratic principles.

A seven-member prize committee, chaired by former United Nations' Secretary-General Kofi Annan, met on Saturday but did not select a winner, the Mo Ibrahim Foundation said.

The committee did not choose a winner last year either. It told the foundation there had been no new candidates and so no winner had been selected.

Democratically elected former leaders of sub-Saharan African countries who left office in the past three years are eligible for the award.

"The standards set for the prize winner are high and the number of potential candidates each year is small. So it is likely that there will be years when no prize is awarded," Ibrahim said in a statement.

Following last year's decision not to award the prize, Ibrahim denied it was a snub to leaders such as former South African President Thabo Mbeki or former Nigerian President Olusegun Obasanjo, who would have been eligible.

The two winners of the prize so far are former Botswana President Festus Mogae and Mozambique's former President Joaquim Chissano. Former South African President Nelson Mandela was made an honorary laureate in 2007.

The winner receives $5 million over 10 years and then $200,000 a year for life, with another possible $200,000 a year for 10 years for "good causes" that the former leader supports.

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