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Launch of Deloitte Private Africa in Kenya to serve growing market of family businesses

Striking the right balance between short-term initiatives and long-term goals will be the key differentiator for success

Nairobi, KENYA, 15 October 2019 – In response to the specific needs of the private sector, Deloitte East Africa has launched its latest endeavour, Deloitte Private, which delivers audit and assurance, tax, consulting, and risk and financial advisory services tailored exclusively for private companies, including family-owned businesses.

Today, Deloitte East Africa gathered industry experts and leaders to share global insights and local market trends in the private market space which will take private businesses into the future.

According to Deloitte, more than 80 percent of businesses in Kenya are Micro, Small, and Medium Enterprises (MSMEs) mostly comprising of family-owned businesses. “Family businesses tend to lean towards a long-term view rooted in shared values, vision and culture, which can help them, maintain family control over years. However, family ownership, by itself, does not guarantee a business’s longevity. For family businesses, remaining competitive means translating their vision for the future into a solid plan for action—and executing that plan with the vigour and commitment that has always characterized the family business,” says Joe Eshun, Deloitte East Africa CEO.

Deloitte’s Global family business survey 2019: Long-term goals meet short-term drive - which interviewed 791 executives from 58 countries about the challenges and opportunities they are currently facing – found that retaining family ownership is one of the key elements of these executives’ long-term goals, yet only 41 percent felt confident in their plans for succession.
“Despite the focus by most executives on the long-term goals, family-run businesses appear just as prone to pursuing immediate priorities that, necessary as they may seem at the time, can fail to support the company’s ultimate vision and objectives,” says Mabel Ndawula, Deloitte Africa Private Leader, “Such a disconnect between long-term aspirations and short-term priorities can jeopardize the preservation of family tradition and legacy as well as family capital.”

Family legacy

Deloitte’s survey also found that maintaining ownership, ensuring the legacy and preserving family capital are three of the main challenges for every family business, but many have not yet created a formal succession plan. For instance, despite 68 percent of executives saying they intend to keep the business in the family, only 26 percent have a stated plan for the CEO position. And even fewer have one for other C-suite positions.
Moreover, less than one third of respondents believe their families share a common vision for the business’s future development. Furthermore, the same amount of respondents would be willing to trade at least some measure of family control over the business for greater long-term financial success.
What businesses should keep in mind is that selling minority stakes to other family businesses or family offices can be an alternative way to attract capital, while remaining true to their vision as a family-owned company.

Innovation and agility, keys to success

When asked about the drivers for stability and future success of the business, executives tend to point to agility (61 percent) and innovation capabilities (39 percent), even though the possibility of a negative outcome and a reduction on family wealth is what keeps some of them from fully embracing their potential.
While some companies are committed to expanding their business by industry or geography, only 26 percent saw diversification as a way to sustain the business over the next 10 to 20 years.

Zoom out to zoom in

Technological advances and globalisation are creating change at an unprecedented pace, and fundamentally transforming business environments along with the rest of society. Key highlights from Deloitte’s Private company global considerations for 2019 study revealed that the growing connectivity of business interactions today is both a source of disruption, and an opportunity for private companies to do some disrupting of their own.
To help family-run companies connect the present to the future, Deloitte has developed a framework that proposes a “zoom out/zoom in” approach to strategy development, which aligns short-term initiatives with what the leaders envision of the market in 10 to 20 years.
“Synchronicity of vision and values is achievable for virtually any family business, provided they have the right discipline, governance structure and communication practices in place,” adds Ndawula, “Families that can appropriately define both their 10 to 20-year aspirations and their 6 to 12-month initiatives and maintain a clear line of sight from the one to the other—will stand a far greater chance of staying ahead of the game for years to come.”