DSE and the efforts to engage family businesses

By Moremi Marwa

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Family firms dominate the business landscape across economies – developing and developed. They are major contributors to both employment, availability of goods and services as well as to the

economic growth, measured by gross domestic product (GDP). According to some estimates, family businesses account for over 50 percent of GDP in many markets, ranging from micro-enterprises to some of the largest listed companies. In our case, here at home – some reports indicates that 10 families-run businesses’ control a relatively substantial part of our GDP. In the process of pursuing their enterprising motives these businesses generate wealth to owners while providing the much-needed jobs, facilitating the availability of goods and services, supporting large businesses supply chain, paying taxes to the government, etc. A recent survey by the World Federation of Exchanges (WFE) supports the same.

While family businesses share many of the same qualities as those of more traditional companies (some of which are listed in stock markets), they also have unique attributes and specific characteristics that impact the way they approach management, governance, and growth of their business.

In a family firm, for instance — professional life, work relations and business decisions coexist with emotional attachment where informal bonds and personal choices are all intertwined.

Under such circumstances, the integration of family and business can be both a source of strategic advantage, especially in cases where well-run family firms outperform other businesses, but also family-run businesses can potentially be the source of inertia and governance-related challenges, where in some extreme cases may create significant socioeconomic challenges to communities and societies in which they operate.

While the peculiar characteristics of family businesses are likely to influence how the family think about raising more capital i.e., via issuance of shares or bonds and listing into the exchange.

However, these companies are also be influenced by economic, financial and managerial considerations that have little or nothing to do with being owned and managed by a family.