A study by financial consultancy PwC has established that less than half of family business owners in Kenya have plans to hand-over their companies to the heirs-in-waiting.
A majority (32 per cent) of the heirs want to take the helm of the family businesses but are not sure of their position in the family business.
Only 28 per cent of the “next generation” are ready heirs while another 11 per cent hope to take up a senior role but not necessarily the helm, according to the 2016 Next Generation Survey by PricewaterhouseCoopers.
The study by PricewaterhouseCoopers (PwC) further found that 60 per cent of the next-in-line are waiting impatiently to take over the mantle, pointing to possible future succession conflicts.
Succession planning ensures continuity of family businesses, but only 23 per cent of the Kenyan enterprises surveyed have a plan in place.
The death of the owners of such enterprises often marks the beginning of vicious wrangles and tedious court battle to pick their successors.
“Succession planning helps to grow the leaders and ideas of tomorrow and well as in managing expectations and as another way of avoiding conflict,” said the PwC associate director Moses Nyabada during a Family Business Conference held in Nairobi.
The survey also found that about 31 per cent of owners admit that company succession planning will be a key challenge in five years’ time.
Kenya has recently seen a steep rise in the number of family feuds over control of wealth left behind by the super-rich. Some of the high-profile succession battles that have found their way to court include those of former cabinet minister Njenga Karume, ex-police chief Philip Kanyotu and Nakuru businessman Stephen Kungu.
Handing over the family business and relinquishing all responsibilities continues to prove unpopular for founders with 61 per cent admitting that they were finding it hard to let go while 52 per cent are concerned that handing over means they will spend more time managing family politics.
The founders and heirs’ differing perspectives on leadership, succession planning and governance also continues to be an impediment while running a family.
According to the survey, 69 per cent of the next generation prefer to bring in non-family managers, expand into new geographic market (60 per cent) and diversify products and services (59 per cent) while about 47 per cent prefer to establish a new entrepreneurial venture. On the other hand, most founders prefer to stick to the original business plan and not to bring in outsiders.
Joseph Okelo, the founder of Association of Family Business Enterprises said that obsession deters most founders from drawing a succession plan as some are worried that next of kin may not have the ability to manage and grow family wealth if and when left behind.
Property management firm Knight Frank published a report in March which stated that Kenya’s Super rich are more worried about ability of succession plans they have put in place for their businesses than taxes or stock market instability.
The report found that 76 per cent of the 8,962 dollar millionaires in Kenya expressed doubts over their children’s readiness or willingness to oversee continuity of the family businesses in their absence.
The report also highlighted that69 per cent of family businesses in Kenya have experienced sales growth over the past 12 months, 56 per cent are looking to grow steadily over the next five years, and 32 per cent plan to grow their businesses quickly and aggressively;35 per cent will generate sales from exporting goods or services to foreign markets in five years’ time, mostly within the East Africa region; 55 per cent have a succession plan in place for at least some senior roles, while 23 per cent have put in place a succession plan that is robust and documented and 73 per cent have at least one procedure/mechanism in place to deal with conflict