Kenyan Corporates battle sullied image

By PATRICK GITHINJI and JACKSON OKOTH

The list of companies struggling to mend their corporate image, reputation and identity from ruins is endless.

Flagging the corporate scene with muddied faces are courier firms, supermarkets, commercial banks, investment banks and stockbrokers, insurance companies, state corporations and telecoms.

The adventurous heists under G4S Kenya ‘s watch are examples of how corporate image are ruined.

The courier firm holds a contract with several banks to refill automated teller machines (ATMs) in the city and around the country to meet customer demands.

However, the cash-in-transit they are supposed to guard and safely transport has too often been carted away in schemes sometimes said to involve or been hatched by employees of the courier.

"We have to admit that there are issues, but we need to move forward," John Wheater, G4S Managing Director told Financial Journal.

As a result of the spate of daring robberies, the security firm has been busy rebuilding its corporate image, redefining its work ethic and culture as well as improving employees’ terms of service.

But it is not only G4S that is suffering from an image crisis.

Although the Government sold its 51 per cent stake in Telkom Kenya, the firm is still battling legacy issues and poor corporate image suffered in yester years.

Telkom Kenya was a cash cow for corporate raiders in the Kanu regime and this poor image has stuck in the minds of many.

At the time, as a monopoly in the telecoms sector, Telkom Kenya Ltd (TKL) suffered acute poor customer service, a monopoly for a long time before mobile phones entered the scene – and the firm has been fighting to keep customers and fix its past poor corporate image.

yet to gain foothold

In November 2007, the Government selected the consortium controlled by France Telecom as the preferred bidder for the acquisition of a 51 per cent stake in the Telkom Kenya.

And despite the fact that Telkom Kenya is the only fixed line operator, its dominance in the communication business is yet to be felt.

However, France Telecom with its Orange brand has been battling to change this poor image. France Telecom has been building its presence in Africa.

Present in 15 countries on the continent, today, Orange through Telkom Kenya is keen to curve out a new identity in the country.

Three years ago, retail chain Uchumi Supermarket closed doors, albeit temporarily, after failing to meet its financial obligations. This followed a botched expansion programme, which locked up most of its capital.

It is also believed that financial mismanagement and corruption played a great deal in bringing the once giant retailer to its knees.

In an effort to clean its soiled corporate image, the Government initiated an elaborate rescue plan that saw the retail chain reopen five outlets within Nairobi.

Today, the supermarket’s cash flow has improved significantly to enable it lift out of technical insolvency.

A return to the Nairobi Stock Exchange (NSE) is eagerly awaited as the chain strives to rebuild its public image and win back its lost market share.

The collapse of Kenya Cooperative Creameries (KCC) in 1999, a State corporation grappling with serious image issues, left hordes of dairy farmers impoverished from unpaid milk deliveries, seriously tarnishing the giant milk processor’s brand image, which was more than 60 years.

It is believed that competition, inefficiencies and other internal problems led to the gradual demise of KCC in the 1990s.

An initial symptom of its malaise was delayed payments for milk deliveries by farmers, which eroded farmer confidence in the processing plant.

It took the intervention of the Government to re-establish control at KCC in 2003, rebranding it New KCC. The work of rebuilding the firm’s public image has been ongoing.

Last year, Kenya Planters Co-operative Union (KPCU) was placed under receivership over a Sh700 million debt. Since then, this union has been struggling to dig itself out of debt.

Even as it is embroiled in a legal tussle with the regulator, Coffee Board of Kenya (CBK), over licence fees, KPCU is now staring a loss of Sh3.7 billion in loans to farmers.

In April 2007, a European Union report recommended an overhaul of KPCU management structures that would have resulted in directors being trimmed from 15 to six, as well as a cut on allowances.

The report had noted the union was in dire need of cash to pay its debts. The options were to seek further credit, sell its idle assets or aggressively pursue its debtors.

KPCU has assets estimated at Sh3 billion, collectively owned by 300 coffee societies with about 700,000 farmers.

By selling-off idle assets, KPCU was expected to reduce its debt burden by 75 per cent.

KPCU woes emanated from liberalisation of the coffee sector in the 1990s, which exposed the coffee processor to competition.

Matters were not helped by Central Bank of Kenya (CBK) failures to enforce certain provisions that allowed the union’s debtors to escape. The public image of KPCU is to date damaged and still reeling from a state of disrepair.

In 1998, CBK closed five branches of National Bank of Kenya (NBK) to save the institution from a huge bad debt portfolio. With the appointment of Reuben Marambii, the bank has been busy cleaning its books and restoring customer confidence.

"The biggest challenge to date is the negative public image that still dogs the institution," said Marambii.

Perhaps the worst case of low investor confidence and poor public image is displayed at the NSE where one stockbrokerage firm after another has been going under.

A clutch of violations by stockbrokerage firms has caused public image and investor confidence at the NSE to dip.

waning confidence

Even commercial banks, which had initially sought for a stockbrokerage licence, have since developed cold feet.

Retail investors have fled the bourse with the collapse of Francis Thuo, Nyaga stockbrokers, Discount Securities and Ngenye Kariuki.

Banks that sought to diversify their business by acquisition of investment and stockbrokerage licences have remained mum about their future in investment banking largely due to poor image of stockbrokerage business.

Regulator Capital Markets Authority (CMA) has taken over management of collapsed stockbrokerage firms in a bid to boost investor confidence and restore the NSE’s public image.

Also hit by poor corporate image is the motor underwriting business. The last firm to collapse was Invesco Assurance Ltd, which has left many with unsettled claims.

"Problems are still there and domino effects in the industry of collapsed underwriters will continue," Nelson Kuria, chairman, Association of Kenya Insurers (AKI) told Financial Journal in a past interview.

While the Matatu Owners Association (MOA), a majority shareholder in Public Transport Investment Company, (formerly Invesco), has attempted to revive the firm, the criminal infrastructure that brought down this outfit and other motor underwriters, is still intact.

While the industry has called for introduction of a structured compensation system for third party claims, a powerful network of ambulance chasers has fought this move.

Available figures indicate that 30 per cent of all claims in the insurance business are fraudulent, with the most prevalent cases involving outright theft being in the PSV underwriting and outpatient medical covers.

Troubled Rift Valley Railways (RVR) is also on the list of firms suffering from poor image problems. Although RVR was awarded a 25-year concession to manage the Kenya and Ugandan railway network, its performance has so far raised more heat than light in a region hungry for alternative mode of transport.

Prof Francis Kibera, a marketing and brand lecturer at University of Nairobi says there are some mistakes, which can shatter a firm’s public image for good, including nasty scandals.

"The application of patchwork or bandages only prolongs the agony," says Kibera.

He says large firms often resort to advertising to boost their brand visibility and enhance desirability to suppliers, employees, customers and borrowers, yet this is never adequate an exercise as a good image.

communicate actions

According to Public Relations Society of Kenya (PRSK) Chairman Peter Mutie, public relations cannot substitute a bad reputation.

"The only solution for an organisation suffering from a tarnished image is to take corrective action and communicate the same to its publics. Public Relations is not about putting white paper on wall cracks," says Mutie.

His opinion is that firms suffering from bad image need to invest in public relations research so that issues are clearly identified and addressed. This is to sustain the organisation’s public image.

He says corporate image is the mental picture that springs up at the mention of any firm’s name.

"This image continually changes with the firm’s circumstances, media coverage, performance and pronouncements," he says.

Unlike corporate identity, corporate image can change overnight from positive to negative or remain neutral. It is similar to a firm’s reputation or goodwill.

Unfortunately, the corporate image of a firm constitutes how the public perceives it rather than a reflection of the company’s actual state or position.

As an appeal to the public, firms in this kind of mess struggle to stir an interest among consumers in order to generate brand equity and boost product sales.

Justus Waimiri, a brand analyst with Brand Associates Ltd, says that it takes time, energy and money to create and maintain a positive corporate image.

"In the corporate world, maintaining a good image is key. Without this, no firm can get far," says Waimiri, adding that when a firm suffers from a negative public image, a lot of things can go extremely wrong.

"Corporate image is like a house of cards. Delicate and fragile like a crystal palace. It cannot have stones thrown at it," he says.

Saying that image is not a fort that one can attack repeatedly without any damage, Waimiri said a firm’s corporate image rests in the subconscious mind of customers and shareholders alike.