How family business empires are preparing for a generational shift

What you need to know:

Families are passing on the baton to the young generation. A PwC East Africa Family Business Survey report published in 2021 shows the Madhvani Group is one of the largest diversified private sector organisations in East Africa.

No story of a Ugandan family business is complete without a mention of the wealthy family business empires; Madhvani, Mukwano, Mulwana, Mbire, Nzeyi, Bitature’s Simba Group, and Ruparelia Group. The list keeps on growing.

Most of Uganda’s wealthy family businesses transcend generations, and some are preparing for a change from the old guard to the young Turks.

The generational transition of Uganda’s wealthiest families is more visible and has been taking shape for the last decades.

Wealthy names such as Sudhir Ruparelia, ranked as Uganda’s wealthiest at US$1.2 billion in 2018 by the Forbes magazine with interests in real estate, hospitality and finance is letting the young Turks into the family business.

32-year-old Rajiv Ruparelia, a son of Sudhir has in the last five years grown through the ranks to assume the role of the managing director at the Ruparelia Group taking on roles that previously were a preserve for his father. 

Sudhir Ruparelia’s son Rajiv Ruparelia has grown through the ranks at the Ruparelia Group. PHOTOs/ STEPHEN OTAGE (L) Patrick Bitature, founder of the Simba Group of Companies is grooming his daughter for senior roles(R)

At Simba Group run by group chairman and London School of Accountancy graduate Patrick Bitature, one can easily notice that his daughter, British educated Dr Nataliey Bitature is now chief of staff, and is being groomed for more senior roles. 

Her elite education at Keele University in England and investments into innovations such as Musana Carts has shaped her into a shrewd businesswoman.

She was named in the Forbes 30 under 30 in 2015, a coveted ranking for the most elite young entrepreneurs in Africa.

The story of Mulwana Group is no different, and it began in 2013.

James Mulwana, an industrialist who died in 2013 left behind a fortune with interests in dairy farming, manufacturing and real estate.

 After his death in 2013, Ms Barbara Mulwana, now an executive director at Nice House of Plastics took on the stewardship for the family business empire along with other siblings.

However, the most living example is the Madhvani family.

A PwC East Africa Family Business Survey report published in 2021 shows the Madhvani Group is one of the largest diversified private sector organisations in East Africa.

Business legacy

A successful business legacy is told in the report of the Madhvani legacy companies, with origins in Uganda as far back as 1914.

It has developed into a multi-sector conglomerate with a presence in various African countries, the Middle East, India and North America.

Today, Madhvani Group’s interests include agriculture and agro processing, hospitality, information technology, media and communications, packaging and construction.

The Group’s flagship business is Kakira Sugar Limited in Uganda. Over many years, the Madhvani family and Kakira Sugar have weathered political turmoil and successive generations of leadership.

A man packs sugar at Kakira Sugar, Madhvani Group’s flagship business. PHOTO/ Dennis Edema

Following the death of the Group’s founder, Mr Muljibhai Madhvani in 1958, the development of the Group in East Africa fell onto the shoulders on his two elder sons, Mr Jayant Madhvani who died in1971 and Mr Manubhai Madhvani who passed on in 2011.

 In 1972, the Group in Uganda suffered a huge setback with the imprisonment by Idi Amin of Mr Manubhai Madhvani.

Since then, the experience taught the family some important lessons on the importance of professionalising the family business. 

The PwC report shows to date, professionalism remains pivotal to the success of the Madhvani Group.

Kamlesh Madhvani, the joint managing director of Madhvani Group, in an interview published in the PwC report indicates that the family’s unwavering commitment is professionalisation.

The commitment has a special focus on corporate governance, talent management, and solid systems and processes.

The Madhvani family has retained ownership of Kakira Sugar and other group companies but has appointed experienced, independent non-executive directors and professional managers.

“No family has an endless supply of the expertise needed to deal with all business challenges,” says Kamlesh Madhvani in the interview.

 Independent non-executive directors constitute half of Kakira Sugar’s Board, for example, and the family has delegated important levels of responsibility to professional managers; both the directors and managers have diverse backgrounds, relevant expertise and experience.

Good governance

Kamlesh notes that Madhvani Group’s governance model has demonstrated the power of effective leadership. “Empowering individuals - both family members and outside professionals - is easier,” he says.

Good governance has supported the family’s culture of hard work, commitment, knowledge, expertise, emotional intelligence and innovation. Another aspect of the family’s culture, passed down from Mr Muljibhai Madhvani, is “our wealth is our people,” according to Kamlesh. 

Another example of how families are passing on the baton to the young generation is Crest Foam Limited.

Crest Foam, a Uganda-based family business first opened its doors in 1987 and now produces a range of standard, high density and orthopedic mattresses as well as pillows and cushions.

Joseline Kateeba, the managing director of Crest Foam is quoted in the PwC report speaking about her journey as a second-generation family business owner.

 Crest Foam was started by Joseline Kateeba’s father, the late Joseph Kateeba, and led for many years by his wife and Kateeba’s mother, Petua Kateeba, who remains Crest Foam’s Co-Founder and Executive Director.

 Before she joined the family business in 2014, Kateeba had a successful career that took her far beyond Uganda.

In global roles with a consulting firm and an engine, filtration and power generation manufacturing company, she gained experience in strategy development, business analytics and world-class manufacturing that has served her well as Crest Foam’s Managing Director.

As successful as she was, her mother began calling her back to the family business as early as 2011.

“She wanted me to join her and take over running the business, so that she could transition to retirement,” she says in the report.   

The transition from global industry to local family business was not smooth.

“I underestimated the extent to which it would be a challenge for me,” she says.

With a number of family members in senior positions, some of them with over 25 years of experience in the business, Kateeba had to find her niche and try to implement a culture of greater accountability and professionalism - similar to what she had experienced elsewhere.

“When I came in and started to implement things, I was accused of being impatient. There was a certain polite reluctance to getting things done,” she says.

Polite reluctance or otherwise, Kateeba was clear that certain things needed to change. First, she revitalised the company’s Board of Directors.

With the guidance and support of the chairman, a former senior-level banker in the development finance sector, she worked to earn her mother’s buy-in as she implemented good governance standards and other changes consistent with a professional, formal business operation.

Working outside of the family business can also be very helpful and instructive, as Kateeba herself has done, because “it gives you confidence in business.”

“When I returned to join the family business, I was keen to analyse our strategy for the future,” she recalls, pointing to what she had learned to work in strategy consulting.

“The family had a very conservative approach to growth and we had been a medium-sized business for a while. I started to think about our size as a business and different products, and how we could leapfrog to the next level,” she adds.

For the owner/founder generation, Kateeba recommends that they expose the next generation to the business from an early age, even as interns in secondary school, and communicate an openness to new ways of working.

Head offices of Uganda Batteries in Bugolobi Industrial Area, Kampala.  PHOTO/ STEPHEN OTAGE

Succession planning

Succession planning is one of the most sensitive issues in many family businesses, with only 21 percent of the respondents indicating that they have a succession plan in place across the East African region.

Amongst the survey respondents captured in the PwC report, 48 percent of respondents reported that their family business is already in its second or third generation.

Meanwhile, 55 percent expect that the business’s shareholder majority will be second generation family members in five years’ time, and a further 14 percent expect it to be held by the third generation. 

Charles Ocici, a seasoned entrepreneur, shares that founders of a business will leave at some point in time since their energy and health will go below the kind of momentum that the enterprise has, hence the need to get family into running the business.

Howeve, Ocici says since children are not born ‘genetically business people’, there should be a structured process to nurture the next generation that will lead the business.

On the other hand, Ocici says children normally feel ready to carry on the founder’s favour just because they feel they are part of the family.

However, the big issue is children inheriting an empire that has taken 30 or more years to build, yet some have an experience of three years.

“A large empire with a large stakeholder base including government needs proven experience to manage or else that is where many family businesses collapse,” he says.

Ocici says there is need for a structured transition for a family business separating ownership and running the business.

Sim Katende, partner at Katende, Ssempebwa & Company Advocates is quoted in the PwC report saying in East Africa, an estate planning process would begin with a conversation within the family, with an attorney or a trusted business advisor.

Estate planning

Katende says there are many benefits to estate planning, including protecting the interests of the owner and ensuring that their wishes are carried out.

Estate planning allows them to choose how their finances and assets are managed, should a person become incapacitated or pass on suddenly.

“Estate planning also protects the family’s wealth for future generations and a Trust can help protect assets from bad decisions, physical and mental infirmity, outside influences, creditor problems, divorce and other challenges,” Katende notes.