Succession a major issue in family firms
Steve Umidha @SteveUmidha
Family-owned businesses are bullish about the future as fiscal recovery from virus shocks looms.
However, they still lack succession plans, according to the latest report by consultancy firm PricewaterhouseCoopers (PwC).
In its East Africa Family Business Survey report, PWC estimates that a staggering 66 per cent of these firms expect growth in 2021, while 96 per cent expect growth in 2022.
Its findings come after a new high-frequency data indicator showed early evidence of a near-full rebound from the pandemic.
“Family businesses have proven robust and adaptable and as we have come to expect.
They are prioritising expansion into new markets, client segments, products and/or services as well as new technologies, digital capabilities and business models that are more responsive and agile,” says PWC in the report released yesterday.
Coronavirus has left many businesses and industries suffering the brunt of a forced change in lifestyle as the government imposed measures to cut the spread of the disease.
The trend forced many companies to reduce capacities as others shut down, leading to income and job losses for many working Kenyans, while others were forced to take pay cuts.
“Family businesses have a long history as drivers of job creation and economic output and have become even more resilient during the pandemic, their sights are firmly set on the future,” notes the report which also looked at Rwanda, Uganda and Tanzanian markets.
The report further noted that family businesses in East Africa are optimistic about future growth, with over 70 per cent planning to continue to grow steadily in the region, while 21 per cent plan to grow quickly and aggressively.
An estimated 69 per cent intend to expand into new markets and 51 per cent plan to launch new products.
However, the report warns of lack of continuity measures for businesses even as owners maintained open communication channels.
“Within these businesses themselves, there are generally high levels of trust and communication.
Yet very few of them have properly considered and documented governance and succession frameworks,” said Sunny Vikram an Associate Director at PwC Kenya, Entrepreneur and Private Business.
Devki Group of Companies founder Narendra Raval told Business Hub that professionalism is essential because business owners cannot do everything.
“We can’t sign every cheque. That’s why it’s important to have a good system and the right people in place,” he said.
Statistics by Asoko Insight indicate that key drivers to Kenya’s economy is its strong and successful family-owned business segment.
Asoko figures show that there are over 490 family-owned firms in Kenya earned in excess of $10 million (Sh1 billion) across a wide range of industries.
Of the 490, 14.3 per cent or 70 companies earn more than $50 million (Sh5 billion), 22 of which earn over $100 million (Sh10 billion) per annum as of 2019.