Why trust is key to family businesses in East Africa

More than three-quarters of East African family-owned companies are kept afloat through trust from employees and families, a new survey by audit firm PwC has revealed.

It, however, says these companies need to build on the trust by adopting new priorities to secure their legacy.

“Trust has been and remains a vital competitive advantage that sets family businesses apart from other businesses….they are (however) not prioritising what is most important to their stakeholders today, Michael Mugasa, a PwC Partner said.

“That is why they need to adopt a new formula for building trust to secure their legacy,” he added.
Mugasa said although an integral part of the economy and society, family business inherit an identity associated with features including non-professionalism, conservatism and poor governance, factors that have now been altered by the fast-paced changes in the business environment.

He said the notion of what builds trust is expanding and businesses need to be cognisant of new groups of stakeholders who consume information in different ways and have different expectations of businesses.

According to Mugasa, issues like Environmental Social Governance and Diversity, Equity and Inclusion are becoming increasingly common as a barometer for measuring business.
Key stakeholders

“Family businesses will need to do a better job of communicating and increasing the visibility of their efforts around these new measures of trust. Transparency and accountability is key to winning the trust of these key stakeholders,” he said.

The research findings show that 56 per cent and 47 per cent of the family businesses believe they are fully trusted by their customers and employees respectively.

However, being trusted by suppliers is seen as more essential than being trusted by family members, while 77 per cent are fully trusted by family members.

Further, the study reveals that 77 per cent of these businesses measure or monitor progress against goals and handle conflict within the family unit rather than resorting to third parties or resolution mechanisms.

The study drew responses from over 2,000 participants in 82 territories, 95 of whom were from East Africa.

The interview involved family business with a turnover of $9 billion (Sh143 billion by current exchange rate), with 37 per cent being second generation businesses. This year’s survey focused on Trust, which PwC described as a fundamental ingredient for sustainability.

Other insights from the survey show that growth aims for family businesses in East Africa are ambitious over the next two years, with 75 per cent expecting to see growth compared to 77 per cent globally.

Their key priorities over the next two years are expanding into new markets and increasing customer loyalty, the study indicates.