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Family firms fight to survive virus hit

By Kamau Macharia | December 2nd 2020

One in every three family-owned businesses in the region is fighting to stay afloat owing to challenges brought about by the Covid-19 pandemic.

In a new report by the business advisory firm KPMG, a major issue that is giving families sleepless nights this year is staying alive until the worst of the pandemic passes.

A third of the businesses that participated in the survey, cited staying afloat as their most pressing priority this.

Other issues that family businesses are grappling with include growing turnover and improving profitability.

The survey was conducted in nine African countries including Kenya, Uganda and Tanzania.

“The most pressing priorities for the family businesses are increasing turnover (38 per cent), improving profitability (34 per cent) survival and keeping the business afloat (33 per cent) and diversification of products and services (12 per cent),” said KPMG East Africa Head of Enterprise Sandeep Main.

The report dubbed African Family Business Barometer shows that Covid-19 has affected the confidence of respondents and increased uncertainty about the economic prospects for their family businesses over the next 12 months.

This year’s barometer assessed entrepreneurial orientation and socio-emotional wealth.

Despite the challenges that Covid-19 has had on businesses, most entities are expected to weather the storm, helped by structures that they have put in place.

Besides, the ownership structures of family-owned companies is expected to enable them to survive. In many instances, they are unlikely to sell stakes or withdraw their capital from the business.

“Whilst the immediate future is uncertain, African family businesses are well placed for the recovery of their respective economies due to their natural characteristics – patient capital, a clear sense of purpose and community and a long-term focus on the future,” said KPMG.

“Patient capital in a family business represents business owners who are willing to balance the current return on their investment against long-term transgenerational potential and success.”

KPMG said while family-owned businesses focus on long-term and are risk-averse, in the post-Covid-19 era, they may be forced to reassess some of the traits that had enabled them to succeed.

“Family businesses face many challenges and the pandemic has tested their resilience, innovation and leadership during a difficult period,” said Alan Barr, Partner and Head of Private Enterprise for KPMG Africa.

Covid-19 calls for an accelerated focus on succession and the role of the next generation in governance, ownership and leadership.

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