Family businesses keen to improve corporate structures

What you need to know:

A report by consultancy PwC on family enterprises says 40 per cent of global businesses surveyed accepted the need to have proper structures in the modern tough market.
PwC, however, says family business still benefit from fast decision making and a greater appetite to take on risk.

Kenyan family business concerns, like their global peers, recognise the need to improve the way they are run to survive an increasingly competitive market.

A report by consultancy PwC on family enterprises says 40 per cent of global businesses surveyed accepted the need to have proper structures in the modern tough market.

PwC survey titled “Up Close and Professional: The Family Factor Global Family Business Survey” says fierce competition and pressure on prices are the factors informing a tough business environment for all businesses.

A Kenyan top executive quoted in the report says the enterprises will need to put in place good corporate governance structures similar to global companies if they are to increase profitability.

“It can be incredibly difficult to make any changes within the company or control expenditure. With multi-national corporations they have a set approach which we need to adopt – our profits will increase with better governance,” said the report.

The survey interviewed top executives in 2,848 companies globally and was conducted between April and August this year. Companies sampled had an annual turnover of between Sh444.7 million and Sh88.9 billion.

READ: Family firms in slow quest for listing on NSE

PwC, however, says family business still benefit from fast decision making and a greater appetite to take on risk.

“Growth is strong and prospects are bright for family businesses and private companies in Kenya. Their leaders believe that companies like theirs benefit from agile decision-making and an entrepreneurial mind-set, particularly when they focus on strategies to support long-term sustainability, professional management, skills development and innovation,” says Michael Mugasa, a partner at PwC Kenya.

Other financial consultants have said proper corporate governance and other systems are a challenge for Kenyan SMEs.

“We have been told of people who are not preparing financial statements, who do not have proper corporate governance structures,” said KPMG chief executive Josphat Mwaura at a briefing on this year’s Top 100 survey.

Family and small business also stand to access more affordable credit if they put in place stronger corporate governance structures.

Diamond Trust Bank chief executive Nasim Devji said there was enough money available for businesses but lenders are uncomfortable with SMEs that do not have proper structures.

PwC said it expected to launch the Kenyan-specific report on Wednesday. Most family businesses operate in an informal manner but a number have transformed going as far as listing at the NSE. They include ARM Cement owned by the Paunrana family and NIC owned by the Ndegwas.