- Ethiopia's Family Businesses Face an Uncertain Future
Family-owned businesses have long been the backbone of Ethiopia's economy, with many enterprises passed down through generations. However, these traditional family firms now face an uncertain future as they struggle to adapt to modern challenges. Rapid globalization and technological change have increased competition. Younger generations show less interest in taking over aging operations. Access to financing is limited and consumer tastes have shifted. Without professional management, these businesses find it difficult to keep up strategically. As legacy shops falter under these cumulative pressures, Ethiopia's cultural heritage and the livelihoods of many families are at stake, Meseret Alem writes.
Family businesses have been an integral part of Ethiopia's economy and society for generations. However, "sustaining their operations and passing them down to future generations remains a challenge many face," according to Solomon Gizaw, CEO of HST Ethiopia. Through dedicated research and community outreach, experts are working to address these problems and strengthen this important sector.
Solomon leads one such organization undertaking in-depth studies on family enterprises. As CEO of HST Ethiopia, he has analyzed common struggles specific to these businesses. "Disagreements over leadership and strategic direction often arise when passing control to younger generations with differing perspectives and priorities," Solomon notes. Many children also doubt their abilities compared to past leaders, reducing interest in taking over.
Without clear structures or succession plans, untrained relatives may mismanage assets and cause losses when the founding family member falls ill or passes away. Most concerning is how few make it past the third generation due to these hurdles. If not addressed, the economy risks losing many established operations and jobs they create.
To address this, Solomon's team focuses on educating families. They present findings emphasizing the need for open communication, record keeping, and mentoring heirs from a young age. Developing the next leaders ensures continued operation and legacy. The full study will offer actionable solutions once launched this fall. Their goal through the Ethiopian Family Business Forum is preserving these invaluable businesses that employ millions.
One such multi-generational enterprise is the retail shops of the Mami family in Addis Ababa. Mami Shiro co-owns two stores with her two sisters, expanding the business their mother originally established. The tight-knit team navigates both benefits and difficulties working so closely.
"Major decisions requiring formal procedures elsewhere can be handled more casually among family," Hiwot Kebede notes. However, emotions also risk clouding judgement, as she acknowledges. "It's not easy to address underperformance from a sister the way another employee could be fired. Finding the balanced approach is an ongoing learning process."
Growing together presents its rewards, like seeing the business their mother began thrive even bigger. They now employ 10 people total who rely on the operation. As expansion continues, many more livelihoods will be supported. Still relatively new, overcoming difficulties opens potential for immense growth.
Hiwot acknowledges government assistance could make a big difference for challenges facing family businesses. "Issues like high tax burdens and lacking stable foundations hinder growth for many struggling to establish or maintain their operations," she points out. Targeted benefits like tax adjustments or dedicated support agencies could help strengthen enterprises that significantly contribute to employment and the national economy.
Her co-owned stores exemplify the importance of multigenerational family businesses to communities. The original shop established roots and trust over decades that the expanding operation now taps into. Without her mother's founding efforts, their current progress and supported jobs simply wouldn't exist.
Preserving this legacy requires navigating both family ties and professional responsibilities smoothly. With open communication and a shared vision for the future, Hiwot aims to continue growing what her mother established into new heights alongside her sisters.
Limited technological integration is another challenge. The digital revolution has revolutionized how consumers make purchases and gather information. But most family firms lack resources to establish websites or social media presence necessary to reach wider markets.
Greater financial vulnerability exacerbates capacity to modernize infrastructure and diversify product lines. Small domestic market size discourages mass productions as competitors. Adapting traditional crafts into contemporary fusions while retaining cultural authenticity takes experimentation which is risky without capital. Another looming setback stems from succession issues as the next generation shows waning interest in inherited family vocations.
Amanuel Mengistu, who runs a retail store in Merkato, has witnessed both sides through managing his family's Merkato retail store for years. As a second generation leader, he understands the benefits "experience in the trade from youth provides," he notes. Existing connections to loyal customers and reliable suppliers built over decades create invaluable assets and opportunities.
These relationships ease expanding into new ventures through distribution channels and credit terms a startup may struggle to obtain. Within a family dynamic, major business decisions can also be handled more casually through informal discussion rather than official procedures, as Amanuel points out.
However, emotions do risk clouding objectivity. "Taking charge as the son presents acceptance challenges from elders set in tradition," he acknowledges. Disagreements regarding profits, direction shifts or underperformance naturally arise when interests diverge over time.
Not all relatives dedicate equal effort yet expect equal compensation, sowing seeds of mistrust. "Choosing skilled non-family for crucial roles creates tension balanced family desires," Amanuel explains. Overall separating household relations from professional responsibilities proves complicated.
Addressing such conflicts requires open communication and a shared vision. "Tracking sales transparently finds equitable solutions," he advises. Strong, focused leadership provides stability through mentoring next leaders. "Allowing technological adoption maintains relevance with modern consumer demands," Amanuel notes.
Amanuel understands family enterprises stabilize local economies through diversity and job creation easing public burdens. While viewed similarly to other businesses, dedicated support could uplift most relying solely on experience over formal training. "Separate problem identification and specialized knowledge access would significantly boost their contributions," he asserts.
With diligent cooperation and gradual progress navigating inherent complexities, multigenerational enterprises flourish. Both Amanuel and Mimi’s families exhibit this potential through maintaining operations established by forebears. Their experiences emphasize preserving such invaluable local roots through collaborative perseverance.
Solomon’s extensive studies reveal this persevering spirit across Ethiopia's family businesses. Most overcome inherent obstacles through open-minded cooperation instead of division. Findings show "educating future leaders from youth and instilling regular communication habits prove pivotal to sustaining legacies," Solomon concluded.
Record keeping and clear responsibilities maintained order during transitions of control. Support networks advising specialized issues strengthened resilience facing hardships. Overall, "prioritizing unity of vision and patience navigating disagreements allowed generations to carry torches lit before them," his research determined.
Through the Ethiopian Family Business Forum, Solomon's team presents these insights nationwide. Their goal strengthens the entire sector supporting millions through economic diversity and job creation. Specific recommendations will soon provide a "roadmap for smoother multi-generational operations," he predicts.
If implemented, targeted tax benefits and training institutes could uplift struggling worthy enterprises. Better succession planning and leadership development programs cultivate next leaders. "Modernization assistance accessed problems facing technological adoption barriers," Solomon suggested.
With diligence applying professional best practices amid family dynamics, the potential remains immense. Multigenerational businesses supply invaluable continuity cementing local roots. Preserving such community cornerstones requires understanding both their complex nature and significance.
