PwC Kenya’s latest report “The values effect: PwC 2018 Family Business Survey” shows that family businesses in Kenya have plans to grow over the next 5 years with 83% of survey respondents remaining confident of their businesses growth potential.
The survey was conducted in late 2018 and involved key decision makers in family businesses in 53 countries including 46 business leaders from Kenya. The report highlights specific trends, challenges and opportunities for family businesses.
Family business owners identified corruption, access to the right skills and capabilities, high prices of energy and raw materials, international competition, innovation and the economic environment as the challenges.
“This publication, based on conversations with family business owners, is an effort to share insight about some of the trends affecting family businesses in Kenya. Family businesses and private companies contribute exceptional value to the economy in Kenya and the East Africa region and our publication focuses on their purpose and values as well as their challenges and opportunities going forward,” said Peter Ngahu, Regional and Country Senior Partner, PwC, East Africa Region.
Despite these challenges, family businesses have a competitive advantage in disruptive times.
“In a fast-changing and challenging business environment, family businesses in Kenya need to be able to think beyond the immediate demands of the day-to-day business and develop an informed view of the future. Digital technology is disrupting business; sustainability is becoming key to the conduct of business; winning trust is more important than it has ever been and millennials present an enduring demographic change,” said Michael Mugasa, Partner PwC Kenya and the firm’s Private Company Services Leader.
According to the survey, family business leaders are aware of the power of digital disruption. The need to continually innovate to keep ahead is important to 50% of Kenya family business owners, compared to 66% globally.
35% of Kenya respondents said that they feel vulnerable to digital disruption, compared to 30% globally. The specific technological advances cited as challenges by Kenya survey respondents include cybersecurity (39%) and digitisation (30%) and 67% of Kenya respondents are aiming to take significant steps in terms of digital capabilities in the next two years, compared to 57% of global respondents.
“Our survey shows that Kenya’s family businesses may feel more vulnerable, overall than their global counterparts but they are investing in digital capabilities – perhaps helping them to feel more confident about the changes ahead,” said Mr. Mugasa.
The survey also shows that 87% of Kenya respondents felt that they had a clear sense of values and purpose as a company, compared to 79% globally. 73% felt strongly that having a clear sense of agreed-upon values increased revenues and profitability (compared to 70% globally). 73% felt that having a clear sense of values gave them a competitive advantage (compared to 75% globally), and 68% said that strong values helped to attract potential joiners (compared to 79% globally).
“Family businesses focus on values and purpose as a driver of their success. It has long been recognised that a family firm – ranging from a global enterprise to a business in a small community – is more likely than other companies to treat each day’s activity as an investment in the long-term, prioritising broad stakeholder interests” said Mr. Mugasa.
Only 17% of Kenya family business owners report having a robust, documented and communicated succession plan in place, compared to 15% globally. Succession planning is vital not only to safeguard business continuity but also to ensure the goals of the owners, the family and the objectives of the business are properly aligned over the medium to long term.
“Developing, implementing and communicating a robust succession plan as early as possible before the actual handover will ensure a seamless transition from one generation to the next. A well-managed succession process can be a rallying point for the family firm, allowing it to reinvent itself in response to changing circumstances and find new energy for growth, diversification and professionalization,” concluded Mr. Mugasa.