Africa’s family businesses need to transform to secure their legacy, and building trust is key to this.
Approximately half of Africa’s family-owned businesses believe their customers do not trust them. This key finding from PwC Africa’s Family Business Survey 2023 should be viewed as a notable concern for the continent’s family businesses, many of which have spent decades crafting their legacy.
‘Trust is a vital competitive advantage that sets family businesses apart from other companies,’ says Duncan Adriaans, PwC Africa Private Business Leader. ‘The optimism of a post-COVID world has been tested by the geopolitical turmoil following the war in Ukraine and its effect on economies around the world. We live in a world of uncertainty, and that’s why we chose to focus this year’s survey on trust.’
PwC surveyed 172 family business owners in 12 African territories to assess whether family businesses are doing the right things in today’s world to build trust. Their report delves into issues of transparency, which is essential to build trust within and around business families, and how family businesses can strengthen their trust. The report also highlights where and how family businesses will need to transform to ensure their legacy.
The Edelman Trust Barometer confirms that family businesses are trusted more than other businesses: their trust score is six percentage points higher than that of businesses in general. They have, however, been losing this advantage over the past decade. Only 56% of family businesses across Africa told PwC they believe their customers trust them (South Africa: 58%; Nigeria: 48%; Kenya: 53%).
Andrea Benkenstein Kruger, PwC South Market Family Business Leader, says: ‘The results of the survey reveal a disconnect between traditional views about trust and their impact on how family businesses operate today. Family businesses know that the trust of customers and family members is essential, but those businesses need to be more proactive in building trust with their wider key stakeholder groups, especially employees and the general public, as expectations around how people receive and interpret information, and assess the actions taken or lack thereof by businesses, has considerably evolved.’
THE NEW TRUST FORMULA
The PwC report outlines four pillars for building trust. They also focus on a new three-pronged trust formula that asks family businesses to assess whose trust they need, what these constituents require to earn trust, and what they are using to gain trust.
Adriaans says: ‘Trust has a tangible impact and can be systematically built, but if family businesses are to protect their trust advantage, it will require transformation. Of the 4 410 executives who participated in PwC’s 26th Annual Global CEO Survey, 39% of family business respondents said their company will not be fit for purpose in ten years’ time if it stays on the same course. In sub-Saharan Africa, 46% of family business leaders feel this way, and in South Africa, 39%.’
TRANSFORMING FOR THE JOURNEY AHEAD
When these family business owners were asked what their top five priorities are for the next two years, feedback differed between countries. ‘For Nigeria and South Africa, rethinking their business models was among their top two priorities,’ Benkenstein Kruger says. ‘Kenyan businesses had increased investments in innovation and research and development (R&D) in their top five, while Nigeria and South Africa had it in their bottom five. Only South African businesses had reducing dependencies along their value chain and improving their digital capabilities in their top five.’
Part of mapping your business’ forward-looking trajectory is considering the pertinent matter of sustainability, and under the new trust formula, strong environmental, social and governance (ESG) credentials are essential.
In PwC’s 2023 Global Consumer Insights Pulse Survey of more than 9 000 consumers in 25 territories, 82% of South African respondents said they were willing to pay more for food produced in an ethical way. In the 2022 edition of the survey, half of the consumers said ESG considerations influenced their trust in a company and their decision to recommend it or its brands to others.
Esiri Agbeyi, PwC Africa Family Business Leader, says: ‘Capitalising on that kind of trust requires a clear ESG narrative and two-way communication, including channels for customer feedback. However, business owners participating in our latest Africa Family Business Survey do not identify ESG issues as a top priority and that is concerning as prioritising matters of sustainability is no longer negotiable for businesses who want to remain ahead of the curve.’
Of the family businesses interviewed:
- 12% considered themselves to be ‘very advanced’ in having a clear ESG strategy
- 70% said they put little or no focus on ESG
- 20% said minimising the company’s impact on the environment is a priority, and
- 11% said reducing their company’s carbon footprint is a priority for the next two years
Given these findings, Adriaans says the message from this year’s survey is clear: ‘Family businesses not only need to make transformative changes to build trust, but have to make their efforts visible and communicate them clearly to their stakeholders. They need to be more transparent and take a stand on matters that are important to the public. If they can learn to transform to build trust, there is every reason to believe in a bright future.’