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Namibia: Family Businesses Become Backbone of World Economy
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New Era (Windhoek)
14 April 2008
Posted to the web 14 April 2008
Catherine Sasman
Windhoek
Family owned businesses (FOBs) are a growing phenomenon and form the backbone of the world's economy in a globalised world where "restructuring and re-engineering" is the order of the day and where most large companies move towards their core businesses and outsourcing non-core activities, said Old Mutual consultant, Andre Diedericks.
This often results in downsizing of large companies, with smaller FOBs emerging to provide more jobs than their big counterparts.
Diedericks estimated that FOBs form about 80 percent of Namibia's economy, on par with that of South Africa, where only 20 percent of the workforce is absorbed in the formal market. Also in South Africa, 64 percent of the market capitalisation of the Johannesburg Stock Exchange comes from FOBs where they generate as much as 30 cents to the Namibian dollar compared to non-family owned businesses.
With over 24 million jobs lost globally last year due to restructuring and downsizing, family owned businesses have become the backbone of the world economy, said Andre Diedricks from Old Mutual in South Africa. The world economy is worth US$44 trillion, with the United States making up 25 percent.
According to Diedericks, 78 percent of that US wealth is in the hands of family owned businesses. In Finland, 79,9 percent of businesses are owned and run by families, and in the United Kingdom, 75 percent of businesses are FOBs. In South Africa, 80 percent of businesses are FOBs, with the formal economy only able to absorb 20 percent of the workforce there, said Diedericks. Diedericks was addressing Namibian FOBs at a seminar held in Windhoek yesterday. A similar seminar is planned for Keetmanshoop. In Namibia, the oldest family owned business is Wecke&Voigts, in existence since 1892, followed by Woermann Brock established in 1989. Another notable family owned business is the Pupkewitz Group.
The existence of FOBs here, said Diedericks, is a sign of a strong economy. He has visited over 15 countries internationally to study the trend in the growth of FOBs, and observed that while 98 percent of jobs were held in the mining and agricultural sector globally in the pre-industrial age (1880), the trend by 2000 was exactly the opposite - 98 percent of jobs are created "elsewhere", and notably in service industries, which today absorb 70 percent of the global workforce.
In Africa, criticised Diedericks, too much of the labour is still caught in the old industrial era mode with not enough intellectual coinage. Diedericks said for businesses to survive in an increased competitive environment, businesses have to look at their competitive advantages and Southern Africa's advantage is eco-tourism. This becomes especially critical when considering that in South Africa 80000 jobs were lost to China last year. One of China's biggest advantages, he said, is its cheap labour - in the automotive industry China pays N$3.50 per hour, while the hourly rate in South Africa, is N$46. India's hourly rate in the same industry is N$8.
A challenge for FOBs, said Riana Grobler, is that only 30 percent of FOBs survive to the second generation and 13 percent to the third generation.
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Where succession of FOBs means the transition of the business from one generation to the next, she said it is vital for businesses to recognise the intrinsic risks and plan the future of such companies realistically.
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