Heirs' urge to sell is ruining old, wealthy Kenyan families

Monday February 15 2016

By BITANGE NDEMO
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I had promised to continue my discussion of Agoa, before I bumped into a more compelling story.

It is a matter we rarely dare discuss, so I will devote time to it and revisit the Agoa opportunities later. 

Today’s sad story is about the seeming inability of our rich families to multiply or even hold onto their wealth soon after the patriarch dies.

Many of our rich entrepreneurial empires are crumbling like a house of cards after the demise of the family patriarch, and in rare cases, the matriarch.

Our dire situation came alive to me last week when I got a lifetime opportunity to interview one of the most successful entrepreneurs in Kenya. 

The opportunity came as a surprise, since I had made several unsuccessful attempts to interview this old entrepreneur from Kiambu.

When I finally sat down with him, I asked him if he had any succession plan for his enterprises and how he sees the future of his empire. 

After deep thought, he asked me if I could accompany him to his birthplace. 

I obliged.

We drove through what used to be vast coffee plantations. He would tell me, “Look at that. It used to belong to so and so. He is now dead.”

After a few minutes, we would pass another estate and he would make a similar comment. He would tell me that the tycoon’s children had sub-divided the land and were now selling it in bits to real estate developers. 

ENDANGERED SPECIES

“These coffee plantations you see used to employ thousands of people and were the source of Kenya’s foreign exchange, but virtually all of them are gone. There is no employment here. The maize you see in the coffee plantations belongs to squatters on the land. There is no enterprise here. We are taking entrepreneurship into our graves,” he told me.

This matter was obviously weighing down heavily on him, and I was helpless as he became emotional.

Finally, he asked me why I wanted the information. I responded that it was for my continued research on the effects of culture on entrepreneurship. I told him that I have always been intrigued by the destructive nature of resource abundance.

This abundance has a way of turning itself into poverty, which is what we are witnessing here today. 

Some of these entrepreneurs went out of their way to educate their children at top schools in the hope that they would come back to sustain the family enterprise.

What is happening in Kiambu and many other parts of the country is something these entrepreneurs never anticipated in their wildest dreams.  

I told him that this phenomenon is not unique to Kiambu or Kenya. In fact, Uasin Gishu, which used to be the breadbasket of Kenya, is witnessing the same trend. 

Rich large-scale farmers are becoming some sort of endangered species, just when the population is increasing and creating greater demand for food. 

“That is not consoling, young man,” the old man told me. I could see he was quite empathetic to the Uasin Gishu large-scale farmer he had never met.

Second-generation farmers are increasingly subdividing their land and selling it off as the number of subsistence farmers keeps growing and productivity takes a nosedive. Where we used to harvest 40 ninety-kg bags per an acre, we hardly get 10 ninety-kg bags.

BLURRED VISION

Looking into my eyes, he asked me a surprising question. “Do you think this is some sort of curse?” 

I didn’t want to sound like a know-it-all, which I am not, so I responded, maybe. Perhaps it is God’s own ways of redistributing wealth. 

From research, I can tell you that unlike many other parts of the world, enterprises in Kenya do not last long enough to benefit the third generation.  Most entrepreneurs work extremely hard to build their empires, only for the edifices to collapse when the second generation takes over.

In the United States, for example, the Ford family have seen Ford Motors' ownership change hands through many generations.

Other families like the Mellons, Waltons, Lauders, Rockefellers and the Bushes, to mention but a few, have kept the wealth within the family for a relatively long time.  

It is true that children born of successful entrepreneurs have far greater opportunities such as education, health and other luxuries than their parents did but they often fail to sustainably manage their inheritance. 

What is puzzling is why well-educated people run down successful enterprises. Does abundance of wealth blur our ability to see what drives a successful enterprise? 

We may never answer these questions but the problem seems to be global. The Chinese for example have a proverb, which says, “Wealth does not pass three generations.”

In other words, the proverb is explained as: “The first generation works extremely hard to build the family fortune. The second generation reaps the benefits. The third generation squanders the wealth. While the second generation may see the value of hard work, the third forgets it.” There is almost a similar proverb in virtually all communities in the world. 

However, most of these communities have mitigation measures, such as reducing ownership through public offerings while remaining with a minority share.

LEAVING THE VILLAGE

Some founders remember to write Wills and arrange for the process of executing them. Given the number of cases in court over wealth, it is clear that our patriarchs hardly write Wills.

Asian families suffer from a similar problem of abundance. However, they mitigate the disaster of succession by involving their children in family businesses early on and their enterprises tend to last longer than those owned by Africans.  

Some Asians opt to run the enterprises with professional managers, sharing the profits from the corporation. However, this is not the same among the Africans. The ‘me’ factor is destroying us and heralding poverty for future generations.

The joy of overcoming the ‘me’ syndrome is that we can own land as a body corporate without subdividing it into uneconomical pieces that continue to impoverish our people. 

Perhaps the best mitigation measure is to make the children aware that a large amount of wealth will not be inherited and that most of it will go towards enhancing philanthropy in Africa, which would mean that every child would have to work to create their own wealth.  

Scarcity helped many of my generation to work extra hard just to get out of the village. I still recall that whenever our pastor told us to quietly ask God what we wanted, my prayer used to go like this:

“God please help me to leave this village so that I never get to pick tea, pyrethrum and coffee ever again. Amen.”

Although God answered my prayer, the shamba work I so hated became my saviour as it instilled in me the discipline that made me who I am today.

ANIMALS KICK OFFSPRING

Clearly, a tinge of adversity helps us to remain steadfast with our lives. Abundance undermines our creativity, which is perhaps why some communities ask their children to leave home as soon as they turn 18. 

The world gets to teach the children things their parents did not, hence the Swahili saying asiyefunzwa na mamaye, hufunzwa na ulimwengu (he who cannot be taught by their mother, is taught by the world). 

I have watched animals kick their offspring away from them to teach them how to survive. Strangely, human beings, especially those with abundant resources, fail in this simple but important initiation to adulthood and independence. 

Little wonder then that some children have decided to take their parents to court for irresponsible parenting.

At the policy level, we need to agree on land use in the country if we are to realise food security. It is evident that subsequent generations aren’t utilising land as it was utilised before. We probably need to tax idle land as a strategy to ensure proper land use, considering the fact that the economy is suffering from the non-use of the land.

For example, coffee production, according to the International Coffee Organisation, has dropped more than 60 per cent from a high of 90,000 tonnes in 2,000 to a low of 42,000 tonnes in 2014. 

It is Buddha who said, "To live a pure unselfish life, one must count nothing as one's own in the midst of abundance". 

Let us learn to be philanthropic and give unselfishly to those who lack as a strategy to close the loopholes of indiscipline.

The writer is an associate professor at University of Nairobi’s Business School.Twitter: @bantigito