Tuesday February 12 2013

Tracking Uganda’s family business legacy

By Matsiko Kahunga

Here we go: “...since 1853(Levi Strauss)...since 1759 (Guinness)...since1906 (KIWI)...since 1986(Hotloaf).”
You have probably come across the above lines and others. Anything special about this word ‘Since’? Perhaps it communicates one key message: the resilience of these companies, virtually all of which were started as family businesses.
Strong brands that have a global outlook including Guinness, Nestlé, Toyota, Ford, Cadbury, James Currey, Macmillan, Longman among others, carry names of their founders, however, few if any would care to know who Mr Toyota is.
What explains this resilience across centuries, time zones and oceans? What has been the Ugandan experience and why?
In this first part of a three-part series, we attempt not so much to provide answers but to provoke debate, about the family business question in Uganda.
We sought views of different experts on the subject, approaching it from different perspectives, notably cultural, corporate governance, business ethics and the political economy
For the present purposes, we shall use the generally applied definition of a family business as being an enterprise where one or more families hold majority shareholding.
This is regardless of the size of the enterprise or its form of ownership: privately-owned or publicly listed on the stock exchange.
And in most cases, this shareholding goes hand-in-hand with direct management, save for a few cases.

Historical perspective
There is this fascinating and widely held view that Africans are poor at managing business, thus the high mortality rate of infant enterprises, and the expiry of mature ones along with their founders.
Is this character uniquely African or it is an easy explanation of hypocrisy and laziness of those that such businesses are passed to?
Mr James Tumusiime, the Fountain Group chairman, subscribes to a different school of thought.

He says many Africans including Ugandans have historically had successful businesses running through generations.
This is evident in the fact that trades and skills ran in families and clans, passing from generation to generation.
“ ...trades like pottery, ironmongery, carpentry, craft-making, are family skills and are usally passed on to generations,’ he says.
Even the art of beer brewing has had its specialists with some families in the west being known for their speciality of good beer that has run in the family for over generations.
Brands like Johnnie Walker, Guiness and Gilbeys have evolved through generations growing from backyard breweries to global iconic trademarks.

It is worth to note that similar phenomenon brands have existed before in Europe in the names of Miller, Thatcher, Baker, Hunter, Fisher, Carpenter and such others defining centuries of family trades, just like how it has happened in Africa.
Hence based on the above argument, both societies (the West and Africa) have had similar business practices that have evolved independent of each other.

One other art and skill that entails high scientific knowledge is cattle breeding. This is evident in the practice of selective breeding that produces a single colour herd.
This remains up today, in the face of ‘modernisation’. Horse breeding in Europe is basically the same art and skill and runs through generations.

This therefore negates the erroneous school that Africans are not wired to manage successful and lasting businesses. What then explains the current situation?

Mr Tumusiime contends that the African entrepreneurship, its tenets, values and virtues do not survive the general disruption that came with societal changes like colonialism and capitalism.
He says during colonialism Ugandans were never fully integrated into the new formal business practices, yet their age-old trades had been disrupted and abandoned.
Essential tools and utensils hitherto provided by family businesses had been replaced by imports, with some like spears, arms, gin distilling, getting even outlawed.

The whole retrogression is summed up in a famous dictum by Makerere University Prof. Mahmood Mamdani: Africans entered colonialism with a hoe and came out with a hoe.
The difference is that the first hoe was locally made while the other was imported.

He goes on to say that children could nolonger take on their parents’ trades as those who had acquired some education chose to become civil servants ...while others panted to become manual labourers in factories and plantations.

The nature of the colonial economy was deliberately structured to leave the indigenous Ugandans on the periphery.
The Europeans were in manufacturing, while the Asians were the middlemen both as distributors for the factories and suppliers of raw materials from the Ugandan farmers.
Ugandans and Africans in general were thus never exposed to the intricacies of business management, a fact that explains the large failure of businesses taken over in the wake of Amin’s ‘economic war.”

The political economy perspective
In this respect the Kenyan experience is very instructive owing to the settler - colony experience that made the colonialists a visible living reality in post-independence Kenya.
Besides managing state parastatals, employment laws enabled indigenous Kenyans to take up top management positions in foreign-owned companies, thus acquiring skills and expertise in modern management.

‘The skills acquired in these large companies enabled Kenyans to start and run their own family businesses successfully,’ Mr Tumusiime says.
In the case of Uganda, even after the post-independence turbulence, no such deliberate government action was made in favour of the indigenous business class.
The few that got involved with multinationals were largely at distributor or retail levels, thus remaining at the mercy of the multinationals. Related to this is the political risk and uncertainty.
People would not plan long term beyond a regime, not sure of what will happen to their business in the event of regime change.

The corporate governance factor
Mr Keneddy Sejjemba, a lecturer in the School of Business, Faculty of Economics and Management at Makerere University identifies corporate governance as a key factor in determining the survival or otherwise of a business.

He corroborates Mr Tumusiime argument when he talks of the low level of corporate leadership development, as a result of factors related to the political economy of Uganda.
The scarcity of experienced and skilled corporate leaders in Uganda has meant that the economy remains largely informal, a factor that yields the ‘one-man’ business phenomenon.
‘When I was working with Uganda Breweries, one of our biggest distributors used to carry ‘all his company’ in his briefcase,’ Sejjemba narrates his experience.
And as fate could have it, when the man died, the business collapsed and the building that was his headquarters now houses a bank. It was taken over.

Mr Sejjemba identifies four corporate governance variables that are essential to the survival of a business beyond its owners and founders.

Primary of these is systems, beyond the one man management style. This creates a self-propelling organisation, ensuring continued operations and survival.
Systems and methods, agrees Mr Tumusiime, plus manpower, are the key drivers of the other ingredients of business success and prosperity.

Second to this is a shared vision and mission of the business, with the family, shareholders, employees, and this translates into a succession plan, another key variable.
Citing the case of Mr James Mulwana (RIP), who groomed his children to run the family business, Mr Sejjemba emphasise the building of trust and transparency about the key aspects relating to the life of the business.

Related to transparency is the other crucial factor of mentors. Beyond the directors who are often shareholders, a business needs a reliable board of trustees, to be the mentors, the referral board, in crucial matters that affect the business.

Look out for part two in our Prosper issue next week