About 60 per cent of wealth in family businesses are lost in Africa due to improper structures and failures by owners to put in place succession plans.

Family businesses play a key role in the economy, contributing about 40 per cent of the country’s total market value of goods and services produced in a specific time period.

Association of Family Business Enterprises Chairman, Joseph Okello said, family businesses – classified under the small-scale enterprises (SMEs) –  across the world face almost similar fate, especially after the owners exit the scene.

“In Asia, it is not uncommon to find tycoons actively running their businesses well into their 80s, with ‘succession’ only taking place when the person actually dies,” he said.

Okello said while speaking during the launch of Deloitte’s new survey, “Global family business survey 2019:Long-term goals meet short-term drive” in Nairobi yesterday, that what happens in Asia also happens in East Africa, Kenya in particular.

He said to deal with issues affecting family businesses there is a need to ensure that even if the families do not want to relinquish the leadership, there is proper succession in place.

Succession and strategy

Joe Eshun, Deloitte East Africa Chief Executive Officer, said the future of  SMEs is brilliant only if issues such as governance, succession and strategy is looked into. 

He said Deloitte has been working with SMEs across Africa to ensure they deliver what is within their mandate.

Several family businesses, Eshun added, have thrived and become larger firms’ beyond their border,  saying enterprises that are run professionally grow bigger as long as the vision is maintained. 

He said family firms make up two-thirds of all businesses in the world today, contributing  between 70 and 90 per cent of global gross domestic product.

Statistics show that only 13 per cent of family businesses survive to the third generation and four per cent to the fourth. 

“A study of family firms done across Taiwan, Hong Kong and Singapore over a 10- year period found that businesses lost almost half their value or wealth,” Eshun added. He said a survey they did in Africa on the family business owners revealed that two-thirds of respondents expect to hand over their businesses to families.

“The basis of such thinking is linked to non-economic goals such as sustaining family members’ identification with the firm, cultivating emotional attachments to the family and firm (such as pride), and maintaining social relationships,” Eshun said.

Growing bigger

Mabel Ndawula, Africa Deloitte Private Leader, said families growing bigger and more complex and events such as death, marriage, divorce and disputes create the potential for disruption. 

She called on the businesses to start thinking about succession in business early enough. “Anybody who has the ethos and values of a family business can drive them forward,” Ndawula said.

 Phyllis Wakiaga, CEO, Kenya Association of Manufacturers  said, family businesses can do better if they are well managed  and have structures and succession plan in place.