NAIROBI, KENYA, DECEMBER 14 — Seventy two per cent (72%) of Kenyan businesses, mainly family owned, fear corruption as the key challenge to their businesses, a survey has revealed.
According to the Global Family Business Survey 2018 by audit firm PricewaterhouseCoopers(PwC), access to skills, prices of energy, raw materials and international competition are other factors that concern the businesses. More than a half of the family businesses fear these factors could disrupt their investments.
This comes as 35 per cent of businesses feel vulnerable to digital disruption and more than half (59 per cent) feel vulnerable to a cyber-attack with both measures being higher than the global average.
Kenyan family businesses have seen a 74 per cent growth compared to the global average of 89 per cent. Of the 46 Kenyan family businesses surveyed 83 per cent expect to grow over the next two years, which is similar to the global average of 84 per cent.
Businesses in Kenya are more likely to say growth will be quick and aggressive (30 percent compared to 16 per cent globally). International sales currently account for 26 per cent of Kenyan family business turnover and is predicted to account for 30 per cent in the next five years.
In terms of important personal and business goals, the maintenance of the best talent (via recruitment and retention) for the business is crucial (93 per cent cite this). Innovation and profit ability are also key.
The 2018 Kenya survey results show alignment with global results and reinforce the results of the 2016 survey finding a ‘missing middle’ with regard to strategy at family businesses over the medium term.
A strong values-led culture at family businesses in Kenya can help to bridge that gap, as the 2018 survey clearly shows.
Michael Mugasa, PwC Kenya Leader for Private Company and Family Business Services says:”Our research globally and in Kenya highlights the benefits of a values-led approach that can focus a family business on the continuity planning they need to do,and how that approach can help attract and equip the next generation with the skills needed to thrive in a digital age.”
“A values-led approach is also part of the professionalization journey for many family businesses and private companies in Kenya,” Mugasa added.
Most strikingly, the 2018 edition of the survey demonstrates a link between putting values at the heart of strategic planning and strong growth prospects. While 75 per cent of family businesses believe their stronger culture and values gives them an advantage over non-family businesses,less than half (49 percent ) of respondents have those values articulated in written form.
Among those family businesses reporting double-digit annual growth, 53 per cent were able to point towards a codified set of values. This reflects the increasing emphasis needed on integrating business ownership strategies and family business growth strategies.
Despite family businesses’ confidence and growth potential, the report cautions that the growth expectation is not always achieved.
Peter Ngahu, Country Senior Partner PwC Kenya comments:“While the aspiration is strong, focusing on strategic planning remains a blind spot for too many businesses.48 per cent say they have a formal mid-term strategic plan in place. 11 per cent have no plan (lower than the global average of 21 per cent). 22 per cent of Kenyan family businesses expect to change their business model over the next two years (verses 20 per cent globally) and 61 per cent say they will bring in professional expertise from outside the family.”
This year’s global survey saw family business leaders globally reporting robust health,with levels of growth at their highest level since 2007.
Revenues are expected to continue growing for the vast majority of businesses (84 percent ), with 16 per cent saying it will be “quick” and “aggressive”.
Regionally businesses in the Middle East and Africa were the most optimistic, with 28 percent expecting aggressive growth. They are followed by those in Asia Pacific (24 per cent ), Eastern Europe (17 per cent),North America (16 per cent ), Central and South America (12 per cent ) while Western Europe is 11 per cent.
Peter Englisch, Global Leader for Family Business at PwC and report co-author says:“The message is clear: adopting an active stance towards company values generates practices that pay off in real terms. A commitment to a clearly defined set of values can act as an ‘inner compass’ for a family business as it navigates the challenges of technological and competitive disruption.”
“What this survey clearly indicates, however, is that family business values are not simply the same as family values,” Englisch says. “Business values should be clearly defined and articulated, but also strongly embedded in the business culture and the day-to-day decision- making regularly reviewed.”
The PwC Family Business Survey also contains insights into how the pace of technology change and generational differences are informing family businesses’approach to legacy and succession planning.
Two-thirds(67 per cent ) of Kenyan family businesses feel they will have made significant steps in terms of digital capabilities in the next two years (slightly higher than the 57 per cent who say this globally).