Inside Politics

In spite of slow growth, CFOs forecast rosy future for firms

Thursday, November 25th, 2021 00:00 |
Elizabeth Kalunda, Convener- Research and Development Committee at ICPAK, the Kenya Industrial Estates MD Parmain ole Narikae, and Doug Hunter, Head of Customer and Ecosystem Enablement at SYSPRO-Africa during the launch of the report. Photo/Courtesy

by Jacktone Lawi

Only one out of 10 manufacturing companies in Kenya have fully recovered from the effects of the pandemic on their businesses. According to findings of a report titled Manufacturing CFO 4.0 2021 Survey further revealed that the industry has been slow in embracing technology with 41 per cent of Chief Financial Officers (CFOs) saying they are yet to record their digital return on investments.

The survey by global enterprise resource planning software provider SYSPRO, and Institute of Certified Public Accountants of Kenya (ICPAK) conducted among CFOs in the manufacturing sector, only 7 per cent of businesses surveyed said the trading environment had recovered to pre-Covid-19 pandemic levels, while 36 per cent projected their businesses will stabilise from 2023.

Speaking to Business Hub, Doug Hunter, the Customer and Ecosystem Enablement head at SYSPRO Africa said the pandemic has prompted the need for diversification and innovation to help businesses adapt to the ‘new normal” of the digitised world.

Uptake of technology
“Kenya’s uptake of technology has been much slower in the manufacturing and distribution sector despite a global wave that has seen companies move towards diversification, particularly in digital transformation,” Hunter said.
He said that there is a low uptake despite the CFOs acknowledging that innovation is essential in the growth of their businesses.

“Interestingly, as many as 41 per cent of the CFOs surveyed have yet to record their digital return on investments – with 7 per cent not being sure if any were received and 31 per cent are still planning on investigating,” The survey findings also showed while global financial leaders have pushed for expansion through continued expenditure, Kenya has elected to place its faith in older stock.

Kenyan manufacturing companies have continued utilising traditional cost-cutting as their main contingency measure, with the curbing of discretionary expenditure being most prominent at 70.93 per cent, followed by debt collection at 40.70 per cent.

Fifty-one per cent of the CFOs surveyed said that managing cash flow remains the biggest business priority for 2022 while 40 per cent felt investing in research and development (R&D) and new products and services are not far behind.

What seems to be true is that logistical and resource constraints have, up until now, impeded moves into more future-focused spaces. In addressing returns on investment on digital investments, it was a bit of a mixed bag with 30 per cent receiving returns and 28 per cent not receiving any returns.

The indication, therefore, seems to be uncertainty in the realm of digital returns on investment which does explain its slower uptake across the country.

The survey findings revealed that while globally CFOs in the manufacturing sector showed insistence on rapid diversification as a Covid-19 countermeasure, Kenya’s ability to weather the storm through more traditional means proves that there is no one-size-fits-all solution.

“The return on digital investment comes down to how companies deploy the technology they acquire. It is not how much you spend that matters; it is how you spend it. User experiences can also influence how technology is used and eventually affect the return on investment,” added Hunter.

Innovation was seen as a likely solution to these hurdles, however, a look at the spending structures of Kenya’s manufacturing companies put the sector on an uneven playing field from a global perspective. Edwin Makori, ICPAK chief executive said that internationally, most companies were able to expand through the help of stimulus.

New initiatives
“However, the survey findings showed 60 per cent of Kenyan businesses are aiming to support new initiatives through direct purchase, dwarfing other means such as 3rd party financiers (38%) and pay for user subscriptions (20%),” he added.

“We saw businesses eager to diversify largely favour uptake of enterprise technologies and expectedly, the re-engineering of supply chains to improve business-to-business (B2B) trading come in a close second.

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