The family business question in Uganda

…since 1853 (Levi Strauss)…since 1759 (Guinness)…since 1906 (KIWI)… since 1986 (Hotloaf).

You have read these and others. Anything special about this word ‘Since’? It communicates one key message: the resilience of these companies, virtually all of which were started as family businesses, as evidenced in brands like Guinness, Nestlé, Toyota, Ford, Cadbury, James Currey, Macmillan, Longman and others, which carry the names of their founders.

What explains this resilience across centuries, time zones and oceans? What has been the Ugandan experience and why? In this article, we attempt not so much to provide answers as to provoke debate, about the Family Business Question in Uganda. We have sought the views of different experts on the subject, approaching it from different perspectives, notably anthropological/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 family holds majority shareholding. This is regardless of the size of the enterprise or its form of ownership: privately owned or public listed company. And in most cases, this shareholding goes hand-in-hand with direct management, save for a few cases.

Anthropological/Historical Perspective

There is this intriguing and widely held view that Africans are poor at managing business, thus the high mortality rate of infant businesses, and the demise of the mature ones along with their founders.

Is this characteristic uniquely African, or it has an explanation?

James Tumusiime, the Group Chairman of the Fountain Group, subscribes to a different school altogether. A modern corporate guru and an authority on matters anthropological, he argues that Africans have historically had a successful history of 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, were family skills and passed from generation to generation’, he says. Even the art of beer brewing had its specialists. There were families known to produce good beer, a phenomenon that would have evolved into our own Johnnie Walker, Guinness or Gilbey’s if the evolutionary development train was not disrupted. Perhaps it is worth noting that a similar phenomenon existed in Europe at the time, evident in such names as Miller, Thatcher, Baker, Hunter, Fisher, Carpenter and similar names that defined family trades, exactly the same way it was in Africa.

So basically, both societies had similar economic practices, evolving 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 the same art and skill and runs in 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 did not survive the general disruption that came along with colonialism. He argues that Ugandans were never fully integrated into the new form of business, yet their own age-old had been disrupted and abandoned. The essential tools and utensils hitherto provided by these family businesses were replaced by imported ones, while some like spears and other arms, gin distilling, were outlawed.

The whole retrogression is summed in the dictum: the African entered colonialism with a hoe and came out of colonialism with a hoe. The difference is that the first hoe was locally made while the second hoe was imported, variously attributed to Prof Mamdani or Walter Rodney.

Children would no longer take up their fathers’ trades. Mr Tumusiime adds that those who acquired an education became civil servants while others became 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. The Ugandan was therefore never exposed to the intricacies of business management, a fact that explains the large failure of those businesses taken over in the wake of Amin’s ‘economic war’. A very small number succeeded, largely engaged in retail trade.

The Political Economy Perspective

In this respect the Kenyan experience is very instructive. Perhaps owing to the settler-colony experience that made the colonialists a visible living reality, post-independence government took deliberate measures at policy, legal and governance levels to empower the indigenous business class. Besides state parastatals managed by the indigenous Kenyans, labour laws enabled indigenous Kenyans take top management positions in foreign-owned companies, thus acquiring skills and expertise in modern management. ‘The skills acquired in these large companies enabled people to start and run their own family businesses successfully’, Mr Tumusiime says.

In the case of Uganda, even after the post-independence turbulence settled down, 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 retailer 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

Keneddy Sejjemba, a lecturer in the School of Business, Faculty of Economics and Management at Makerere University identifies corporate governance as the key factor in determining the survival or otherwise of a business. He corroborates Tumusiime when he talks of the low level of corporate leadership development, as a result of the political economy factor raised above.

The paucity 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 worked with Uganda Breweries, one of our biggest distributors always carried ‘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.

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 structures, agrees 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 Mzee Mulwana (RIP), who groomed his children to run the family business, these management gurus 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, or Advisory Council, to be the mentors, the referral board, in crucial matters that affect the business.

To be continued…

Photo credit: Image by Nattanan Kanchanaprat from Pixabay