Family business a key pillar in various economies across the globe

By Thandisizwe Mgudlwa

Cape Town – The future of the family business model is proving to be a viable solution for a number of economies globally, according to the 8th Price Waterhouse Coopers (PWC) Family Business Survey conducted recently.

The model, the report says, has proved to be a huge success for many of the world’s biggest brands.

Dominant in Africa are the likes of Remgro, Pick n Pay, Dantata Organisation, Ibru Organisation, METL Group and Bakhresa Group.

Globally, there are the likes of Phillips 66, Richemont, Foxconn, Nike, Volkswagen, Samsung Electronics, Facebook, Walmart, Novartis and Roche to name a few.

Authors at the global auditing firm interviewed 2,802 senior executives from family run business across 50 countries. Consisting of interviews on firms approaching their first generational transition, the research also focused on those groups that can measure their longevity in centuries.

According to PWC, key issues stay constant every year, with some changes.

PWC says that its survey team spoke to company founders, next generation owners, and professional CEOs and discussed with them global megatrends such as digital and globalisation, and the challenges of ‘keeping it in the family’.

The report states that in 2012, the dominant themes were skills, scale and succession.  By 2014, this evolved to a focus on the need to professionalise both the business and the family. This agenda is far from complete, though progress is being made.

This year, the shift is perhaps more fundamental, from the short term and tactical, to the medium and long term.

The study also reveals that the challenge is currently the missing middle. The report states that companies are finding it hard to balance having a strategic plan that links where the business is currently to the long term and where it could be. “This is what we are referring to as the ‘missing middle’,” reads the report.

In addition, the report highlights that family firms are ambitious and want to grow to ensure the long-term success of their business, but it is clear that many of the issues they face derive from a lack of strategic planning and primarily focus on the daily operations of the business as opposed to long term planning.

Moreover, family firms remain a vital part of economies across the world contributing the bulk of GDP in many territories.  And PWC said they are committed to working with family firms and helping them make an even bigger contribution to growth and prosperity.

Recent global business research shows that almost half of entrepreneurs come from family run businesses highlighting that the spirit of entrepreneurship still lies at the heart of many family businesses.

Nishant Arya, the executive director at JBM Group in India, notes that, “My father has always encouraged technology. He has always been prepared to invest in it, and takes risks to be a front runner in the field of technological advancement.” Arya’s dream was to create JBM as the equivalent of ‘Intel Inside’ for the automotive industry. He wanted ‘JBM Inside’ to be as powerful a product and of the same quality as Intel. He is confident his dream was realised and is now focused on further building the company.

Family businesses are especially important in Middle Eastern economies contributing 60 percent to GDP and employing over 80 percent of the workforce. Many of the region’s largest companies are family-controlled, and in a sector like retail, some of the biggest Western brands are actually managed as franchise operations by local family firms.

The Seddiqi family has built its own successful legacy and brand. Ahmed Seddiqi & Sons has a reputation as a trusted destination for luxury watches and jewellery in the Middle East, representing more than 60 luxury timepiece brands across 65 locations in the UAE. The company was originally founded in the late 1940s, and four generations later, is still owned and run by the family, with new ventures in education, healthcare, services, and real estate co-ordinated through a holding company.

Osama Ibrahim Seddiqi is CFO of Seddiqi Holding, and first got involved in the family firm during school vacations, working as a sales assistant. “This is where I learned one of the secrets of our family’s success: we treat our customers as long-term friends, not just one-off clients. That’s as important now as it was in the 1950s. That’s why I sometimes make a point of delivering some of the client’s timepieces. That’s part of our culture,” he proudly says.

Milaan Thalwitzer, non-executive chairman at the Bosveld Group, citrus fruit producers in South Africa, comments that: “One of the family firm’s great strengths is its rootedness in its community. We’ve interviewed companies for this survey in the past that have been going for over 50 years and have worked with the same suppliers all that time.”

“Many family firms turn these relationships into a unique competitive advantage, and take pride in the positive role they play in creating local employment, and supporting local communities.  The Bosveld Group of South Africa is a great example.”

Thalwitzer also notes that the company was founded in the 1960s, and is now South Africa’s largest private citrus fruit producer exporting 5.5 million boxes of fruit to 50 countries across the world.

He is the current non-executive chairman, and three of his sons-in-law hold management roles with one as CEO.

Thalwitzer was named National Farmer of the Year in 2014, in recognition of the company’s commitment to land reform, and making black empowerment agenda a reality.

Bosveld committed to Broad-Based Black Economic Empowerment 13 years ago, and is now involved in a number of pilot projects in which the company leases land from black communities on long-term contracts, and then pays rent from the proceeds of the fruit growing business.

Training for local people is built into the scheme, so that the owners of the land get a chance to work on it too.

Thalwitzer continues, “If we can get this right, it should be a win-win for everyone. Land reform is a complex and sometimes divisive issue here, but we can find a way forward if the farmers themselves play an active part in finding the answers.”

Bosveld is committed to South Africa, because the family has always been committed to South Africa, “When people ask me why we’ve been so successful I say it’s down to three things: keeping pace with change, seizing new opportunities, and our commitment to this country.

“In the next five years our plan is to make the most of the energy the next generation are bringing to the business, and empower our local communities so we make a positive and sustainable impact. We have no plans to diversify our fruit production internationally. South Africa is a land full of potential and we must first invest in our own future and the future of our people,” he says.

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