Kenya: Family-owned ventures defy hard times to record rapid expansion

Family-owned enterprises in Kenya have defied tough economic conditions and regulatory hurdles to spread their footprints into the region.

This comes as more families cede direct management of their companies in a bid to professionalise and adapt in a changing, more globalised business environment.

This is according to the 2016 edition of the Kenya Family Business survey released yesterday by consulting firm PricewaterhouseCoopers (PwC).

"Almost all family business owners we spoke to stated that they are looking to expand into the region, with 67 per cent of them stating that they will raise the funds internally," explained Mr Michael Mugasa, a partner at PWC.

Although family-owned businesses make up a big portion of the country's economy, it has been difficult for policy makers to establish their exact number or contribution to the country's economy.

According to the Association of Family Businesses Enterprises, family businesses contribute 60-80 per cent of the country's GDP and labour force.

"It is not easy to establish an accurate picture of family businesses in the country because these are businesses that are not listed," explains Mr Mugasa.

Some of the large, well-known family firms include Nakumatt, Tuskys and Keroche Breweries.

The average life-span of family firms across the sector is three generations, with only 12 per cent making it that far and less than these making it to the fourth generation.

In Kenya, 44 per cent of business owners administer first generation family firms with 31 per cent on second generation firms and 19 per cent on third generation firms.

The Government has however been faulted for giving undue attention to established firms and multinationals while overlooking smaller, more competent family firms.

"The focus on policy has been on attracting foreign direct investment and the family firms we spoke to are asking the Government to also provide them with policy incentives to build their businesses," said Mr Rajesh Shah, a partner at PwC.

"Businesses want predictability in economic policy and regulation especially in the current changing market conditions and many firms cited this as a hurdle to growth," he said.

The findings come in the wake of new amendments to the Banking Act 2015 signed into law in September capping the interest rates to a maximum of 4 points above the base lending rate.

This has seen a dramatic reduction in the uptake of credit to the private sector as banks shy away from high-risk borrowers to protect their dwindling margins.

"The survey did not capture effects of the new interest rates law since it was done before it was enacted," explains Mugasa.

"However, a large majority of family businesses express confidence in their current cash positions with 67 per cent of them stating that they will turn to internal revenue sources for growth-capital," he said.