Poll jitters derail medium-sized firms’ regional expansion plans

 

Kenya Top 100 project manager Robert Onyango (left) UAP Life Assurance Jerim Otieno and Nation Media Group marketing director Ann Gitao- Kinyua during the announcement of the UAP life joining the Kenya Top 100 project at sponsors at Kshs. 2.5million worth. UAP Life joins Sage Pastel, the Nairobi Securities Exchange and Strathmore business school of the Top 100 Survey. This year’s winners will be announced today at a gala night at the Carnivore Restaurant, Nairobi. PHOTO/FILE 

In Summary

• A survey carried out on the Top 100 Medium Sized Companies indicates that only half of the companies reviewed this year had plans to expand their operations in the East African Community member countries – Uganda, Tanzania, Rwanda or Burundi – a decline from 61 per cent of the firms surveyed last year.
• The Top 100 Medium Sized Companies survey was established in 2008 in Kenya, Uganda (2009) and Tanzania (2010) by KPMG East Africa and the Nation Media Group’s Business Daily.
• This year’s winners will be announced today at a gala night at the Carnivore Restaurant, Nairobi.

By JOSHUA MASINDE
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Uncertainty over the March 4 General Election and a tough operating environment damped this year’s business activities for medium-sized companies, forcing most of them to hold back on regional and local expansion.

A survey carried out on the Top 100 Medium Sized Companies indicates that only half of the companies reviewed this year had plans to expand their operations in the East African Community member countries – Uganda, Tanzania, Rwanda or Burundi – a decline from 61 per cent of the firms surveyed last year.

The survey attracted more than 245 companies.

“Less companies compared to last year are willing to go regional or to pursue international expansion this year with some citing a difficult operating environment,”

KPMG’s director, transaction and restructuring services for mid markets, Sheel Gill said. Only 53 per cent of the firms planned to expand to Uganda this year, down from 61 per cent in 2012 and 75 per cent in 2011.

Only 41 per cent of the companies expressed interest in expanding to Tanzania, down from 60 per cent in 2012 and 72 per cent in 2011, and only 49 per cent of the firms surveyed had plans to expand to Rwanda, down from 55 per cent last year and 59 per cent in 2011.

HARSH CLIMATE

The companies blame the high interest rate regime, government bureaucracies, stiff competition, currency instability, lack of financing, poor infrastructure and human resource challenges for their failure to roll out their expansion plans in the region.

The Top 100 Medium Sized Companies survey was established in 2008 in Kenya, Uganda (2009) and Tanzania (2010) by KPMG East Africa and the Nation Media Group’s Business Daily.

The survey has since attracted various sponsors including Sage Pastel, Nairobi Securities Exchange, Ipsos Synovate, Kuza Biashara, Strathmore Business School, and UAP Life.

“We realised that many firms are focusing on revenue growth at the expense of profitability and sound cash flows. Unless revenue growth translates into profits and cash, you should not be going for it,” KPMG’s East Africa MD Josephat Mwaura said, adding: “As you focus on growing your business, you have a very clear focus on profits and sound cash flows.”

This year’s winners will be announced today at a gala night at the Carnivore Restaurant, Nairobi.

“About half of the businesses also face working capital and funding challenges mainly arising from delays in payments from customers,” Ms Gill noted.

Most of the businesses surveyed are well-established, with 67 per cent of them having been founded 10 years ago and only seven per cent being fairly new businesses.

Most of the businesses are in sectors like construction and real estate, leisure and hospitality, manufacturing, transport and travel, energy and petroleum, media and information technology.

About three-quarters of the companies are fully Kenyan-owned