Trustee chairman of Njenga Karume’s estate George Ngugi (left) and the
politician’s daughter, Ms Jane Karume, at a press briefing. The trustees
have been on the spot. FILE PHOTO | NMG
A planned auction of politician Njenga Karume’s Jacaranda Hotel
in Nairobi has flashed new light on trustees’ ability to oversee
businesses.
While trusts are solely tasked with
preserving assets and managing transition to ensure a business thrives
and even grows in line with the founder’s vision, recent happenings
reveal a glaring gap in Kenyan trusts.
The Karume Trust
has been embroiled in many suits filed by the family, who have in the
past accused the trust of running down his properties.
There
are also several families feuding over assets left behind by their
departed kin. These disputes, when not quickly addressed, invariably
lead to the collapse of once vibrant businesses.
Advantech
Consulting managing director Joseph Waruingi says family conflicts and
collapse of once successful businesses are due to lack of management
processes and systems that perpetuate loopholes for theft and wastage.
“The
best way to prepare for expansion is to engage professionals who will
set up management structures and help you understand future prospects of
your line of business.
Founders and their children hardly have management expertise for
businesses that grow beyond a single branch,” said Mr Waruingi, a
former PwC partner, whose firm has advised government and private sector
agencies in 23 African countries.
Mauritius-based
attorney Asaad Abdullatiff, who runs Axis Fiduciary, which advises on
wealth management, transition and corporate structure formation, says
trusts, when well managed, should enable firms and families to smoothly
negotiate transitions.
“A trust does not necessarily
have to take over the management of a business, but should oversee its
operations with the inclusion of heirs in their respective roles, or as
top shareholders,” he tells Sunday Nation.
The founders, he adds, must oversee allocation of specific roles to their children, thereby reducing conflicts.
“Founders
sacrificed and spent sleepless nights to build the businesses while
their children watched it grow, but the third generation found all was
smooth and sweet. It is this generation that plunders the wealth like
there is no tomorrow,” Mr Abdullatif says.
“The first
disaster is subdivision of property that sees wealth broken down to
uneconomical units while those remaining in business squander every
opportunity for growth by using emotions and childhood rivalries in
decision-making,” he adds.
He warns that blind
expansion without proper corporate structures in place exposes the
business to further family feuds fuelled by increased mistrust.
“A
successful business takeover by a new generation grows the value of the
business, but family feuds threaten collapse of any enterprise
regardless of its size,” warns Mr Abdullatiff.
Axis,
which is planning to launch a Kenyan office to oversee East Africa
clients, draws its clientele from a cross section of businesses such as
real estate, technology firms, fast moving goods firms and retail
chains.
Mr Abdullatif says operationalisation of the
double taxation treaty between Kenya and Mauritius could unlock
formation of more trusts keen to enjoy the benefits of a trust office in
Mauritius.
“This is good for both economies since we
manage the funds that are re-invested in Kenya, creating jobs and
helping families,” he says.
While trusts are growing in
popularity, Mr Abdullatiff says they keenly scrutinise all requests for
enrolment to prevent incidents where Mauritian banks are used as havens
for stolen funds.
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