Family-owned businesses urged to court professionals

Wednesday May 29 2019

bpr

Of the Rwf160 billion loans disbursed by BPR Atlas Mara, Rwf45 billion has been disbursed to SME’s, most of which are family businesses.PHOTO | Cyril NDEGEYA 

MOSES K. GAHIGI
By MOSES K. GAHIGI
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Family businesses in Rwanda have potential of growing into large enterprises that can even operate beyond the borders, if they can professionalise management, have a long term plan and refrain from moving revenues out of business to buy personal property.

Most of the small and medium businesses in Rwanda are family businesses, started by a husband and wife, or between brothers from savings to support their families, but many have remained small even when they had potential to grow.

Many of them are faulted for not sticking to their core business, and moving into new ventures, which among other things, limits them from gaining experience in the core area.

Maurice Toroitich, the chief executive of BPR Atlas Mara and chairman of Rwanda Bankers Association says most businesses in Rwanda especially SME’s are mainly family businesses with risk of failure being high.

“Most of the family businesses were started as a means to earn daily bread. They operate without a proper growth plan, where family members even get money out to buy property.

There is a need for them to transition from bread providers to wealth creators,” he said.

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He said the only way family businesses can grow is when ownership is separated from management of the business, and professionals hired.

Cedric Munyura runs Mibirizi Coffee and Foodstuffs Ltd, a family business, which processes and exports coffee.

The business was started by his father, but the children now run most of its daily activities.

He says one of the key challenges family businesses face is limited access to financial services.

“It is hard to get access to finance because the business is for just one family; banks are more receptive if you come as a co-operative or better if it’s a company with multiple owners,” he said.

New trend

He noted that much as some family businesses are still not able to separate the business needs from their family needs, the trend is changing with the next generation of family business owners.

“There is a need for trust between banks and family businesses, the banks should not let the negative perception against family businesses influence them, they shouldn’t put all family businesses in one basked” said Mr Munyura.

Of the Rwf160 billion loans disbursed by BPR Atlas Mara, Rwf45 billion has been disbursed to SME’s, most of which are family businesses.

Some of the biggest businesses have faced political problems, especially when the founder or the children got involved in politics, of fled over political reasons, which has resulted in public auctions of some of the business assets.

On the continental level, family businesses in Africa are facing challenges such as decline in profitability, access to finance and political uncertainty, which is not the case with their European counterparts, according to a 2019 survey done by KPMG.

The survey indicates that the impact of political uncertainty, especially in Nigeria and South Africa, has seen fewer family businesses expand their operations in other markets over the past 12 months.

Only 16 per cent of family businesses in Africa said they have increased their activities abroad in the past 12 months, compared with the 53 per cent in 2016.

While the war for talent is not top of the list of issues for African business families, 85 per cent of respondents indicated that they plan to invest in recruiting the right people and training their employees Mohammed Dewji, a chief executive of MeTL Group, a Tanzanian commodities trading business founded by his father in the 70s, in the recently concluded Africa CEO forum, said planning succession is crucial if the family business is to last more than three generations in Africa.

He is one of the few success stories in cross generational family businesses, having increased MeTL's revenues from $30 million to over $1.5 billion between 1999 and 2018, according to Forbes Magazine.

It contributes 3.5 per cent to Tanzania’s GDP, and employing over 28,000 people in eleven African countries.

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