Kenya’s economic growth has been held back by a failure to fully exploit the talents of the country’s professional accountants, says the ACCA in a new report.
In many ways Kenya’s economic growth is a success story on the African continent, and the accountancy profession has played a key supporting role. However, in a new report the Association of Chartered Certified Accountants (ACCA) has said that the country is being held back by a failure to fully exploit the skills and experience of its professional accountants.
The ACCA argues that with a greater use of professional accountants the central Government, counties and state corporations would benefit from a higher quality of financial management. The report points to the core competencies of professional accountants as key values that could be better taken advantage of, including effective financial management, reporting and planning; effective use of resources; revenue generation; data analysis; and high standards of corporate governance. In particular the country needs to improve both the perception and reality of its corporate governance.
“Kenya is an economic beacon in East Africa, but in global terms the country could, and should, do much better. Corruption remains a serious endemic problem for Kenya, undermining efficiency in both the private and public sectors,” said Maggie McGhee, Director of Professional Insights, ACCA Global. “Professional accountants are often on the frontline of facing ethical questions in business. Employers across the private and public sector need to work with the accountancy profession to ensure that accountants realise their full potential in their role in Kenya’s economic development.”
The report argues that weak corporate governance is the reason behind why some of the country’s largest companies have experienced financial difficulty, including Uchumi Supermarket and CMC Holdings. Part of the problem stems from the use of accountants that are either not qualified or are presenting false credentials. These individuals have not become qualified through a rigorous training and examination process and bring the accountancy profession into disrepute.
“Policy development is a key opportunity for the Kenyan Government to improve Kenya’s accountancy sector and overall economy. Stronger regulation of the accountancy role would prevent individuals without the necessary skills or ethical standards of conduct to hold the job title ‘accountant’,” said McGhee. “The occupation of ‘accountant’ needs to be protected in law and reserved for those who are recognised by a reputable accountancy institute, such as ACCA or ICPAK. It is also necessary for the accountancy institutes to enforce discipline and combat inefficiency cause by corruption. Kenya’s competitiveness is currently held back by high corruption levels. Tax evasion and fraud in public procurement hinder Kenya’s long-term economic growth.”
“The Kenyan Government should work closely with professional bodies that are already seeking to make strides in this direction. ACCA’s newly updated qualification assists accountants in being strategic and forward looking; an integral part for developing the accountancy profession the world needs,” added McGhee. “The integrated case study, ‘Strategic Business Leader’ is aimed specifically at developing strategic finance leaders who can think in an integrated way that combines financial and nonfinancial considerations. Similarly, the newly updated Ethics and Professional Skills module requires students to evaluate ethical dilemmas in the context of realistic scenarios faced today, and in the future.”
These qualified accountants need to participate in policy development, the report continues, to strengthen the state of the country’s fiscal position and overall economy. The ACCA argues that that accountants need to sit close to the Government and can help to improve revenue raising, and assist with planning procedures for handling natural disasters, a persistent risk in Kenya—2017 saw the country suffer under an extreme drought with significantly hinde4red the country’s economic growth for the year.
Furthermore, whilst the country is also facing a pressing issue of unemployment, many Kenyans work within the informal economy. As the Government is seeking to improve revenue generation and efficiency it is important that it moves to formalise the informal economy and increase the country’s potential tax base.
“Kenya’s government particularly needs the expertise provided by professional accountants in designing tax strategies, and optimising, and managing fluctuations in, tax revenues” continued McGhee. “Government should do more to strengthen its tax base and revenue generation. Professional accountants can play a central role in this, and not just as state employees.”
The advantages that utilising professional accountants can bring is not limited purely to the Government sector and handling broad macroeconomic issues. Kenya private sector is dominated with a number of small firms but many of them chose to not make use of the services of an accountant, said McGhee. These firms instead often opt for individuals with a much broader set of skills, leading to financial mismanagement and issues of corporate governance.
Using more qualified accountants would overall improve the quality of financial management and assist these SMEs in achieving much higher rates of growth. The report also analysed the skills that the professional accountants of the future will need to add value to their employers and clients. There are several technical skills, knowledge and abilities that accountants will need in the future, says the ACCA, which are referred to as the accountatn’s professional quotients (PQ).
“Each accountant’s professional quotients (PQ) will reflect their competency and skill across seven constituent areas,” the report said. “Technical skills and ethics (TEQ) and experience (XQ) will be combined with intelligence (IQ) and digital awareness (DQ); interpersonal behaviours, skills and qualities will be reflected in quotients for creativity (CQ), emotional intelligence (EQ) and vision (VQ). Just as individual IQ scores can be raised (sometimes significantly) by appropriate teaching, experience, training and development, so too can TEQ, CQ, EQ, VQ and XQ.”
In particular the report points to technical expertise and ethics as vital skills with technical knowledge likely to increase in value with new knowledge and skills also likely being required. The optimal mix of skills will vary depending on the organisation, geography and role in question and will need to evolve in response to changes.