For Family-Owned Businesses, Trust Becomes a Strategic Advantage

PwC on 25th May launched the Family Business Survey at a time when family businesses in East African have recorded mixed performance over the last financial year (pre-Covid-19), with 46% experiencing growth and 31% seeing a sales reduction. Some 53% of East African family businesses (FBs) report that COVID-19 led to a reduction in sales, slightly higher than global FBs at 46%.

East Africa family businesses are more optimistic in 2021, with 60% of them expecting to see growth, and very positive from 2022, as 91% expect` growth. The key priorities facing East African family businesses over the next two years are expanding into new markets & client segments, increased use of new technologies, introducing new products & services and rethinking their business models.

The survey results show levels of trust, transparency and communication are quite high in family businesses in East Africa. Just under three quarters of East African family businesses feel they have a clear sense of company and/or family values which have helped during the COVID-19 pandemic even though only 39% have these values and company mission documented.

“The strong fundamentals that are the hallmark of family businesses – commitment to values, long-term thinking, sensible leverage – put them in a strong position for faster recovery from the pandemic disruptions,” says Michael Mugasaa, Partner and Entrepreneurial & Private Business Leader at PwC. “More so, because family businesses tend to be trusted businesses and, in most sectors, they are very resilient.”

East Africa family businesses are slightly more likely to have at least one issue related to sustainability or the local community as a key priority, compared to global respondents. 83% of East African family businesses engage in some form of social responsibility activities. This tends to involve contribution to the local community or traditional forms of philanthropy.

Only a quarter (25%) of these businesses have a developed and communicated sustainability strategy. 

Growth and legacy

Family businesses in East Africa are rising to the challenge at a time when financial uncertainty has already impacted many of their forecasts. While 60% anticipate growth in 2021, a much higher percentage – 91% – expect that their businesses will grow in 2022, an impressive level of optimism.

See Also >> Kenyan Family-Owned Businesses Optimistic About The Future

Cedric Mpobusingye, Partner at PwC Uganda says, “the key indicators for a business’s agility and responsiveness include the ability to forecast and model different potential outcomes, depending on an investment strategy or a product launch’s reception or possible disruptions to the supply chain. Modelling exercises and scenario planning can help identify weak links, such as a lack of internal capabilities or appropriate systems, or certain risks to the brand and/ or reputation in the market.”

Translating ambition into action

Family businesses tend to be trusted businesses. Many of them contribute directly to local economies through employment and tax revenue, their brands are seen as ‘home-grown’ and their owners and founders are highly credible and well known.

Getting ahead of the digital curve

Several of family business owners’ key priorities over the next two years are associated with the digitization. Over half of East Africa respondents indicate that they plan to increase use of new technologies and improve digital capabilities.

Family dynamics: holding up a mirror

According to the East Africa Family Business Survey, 44% of respondents indicate that not all family members share similar views about the company’s direction even though 72% agree that family members communicate regularly about the business.

Strong family and business values form the foundation of an effective decision-making and prioritisation process. Nearly three-quarters of our East Africa respondents indicate that the family owning the business has a clear set of family values, and 70% report that at a company level, there is also a clear sense of values and purpose.

Next >> When a Business Should Liquidate

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