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THE GUARDIAN, Sunday, July 14, 2013
SPECIAL REPORT
... Mole In Private Investment CONTINUED FROM PAGE 21 the Department of Business Administration and Management Technology, Lagos State University, Ojo, note that entrepreneurs running family businesses should recognise succession problems can constitute a great threat to the sustenance of the business and constitute a clog in the economic development of Nigeria. According to them, “the rivalry between the siblings and spouses that follows the demise of polygamous entrepreneurs coupled with a variety of cultural laws guiding inheritance in Nigeria does not make for an objective selection of the best material as successor. Where a competent CEO material exists, he may not put in his best to revamp or manage the family business. After all, it can later be taken from him by the elders and shared to the other children.” They argue that it might be difficult to see a competent man from another tribe assume executive management of the business founded by another tribe. They say, “the Extended Family System also creates severe pressures for the successors and the family business as cultural values and customary laws operational in Nigeria give them a claim to the properties of the entrepreneur. The extended family, which includes uncles, aunts, nephews, nieces and cousins, could also be deemed survivors to the estate of the enterprise founder. In fact, the founder’s choice of a successor may be reversed or the enterprise fragmented upon his or her death as a result of fierce posthumous antagonism within the family members. This is a great threat to the sustainability of the familyowned business.” The experts say, the way out is for entrepreneur to craft a succession plan early enough. “The plan must reflect a true management succession. No such plan works without being people-and market-focused. The founder must, choose the best person to succeed him as the family business will neither benefit anyone nor the society if an incompetent family member runs the business down,” they note. Investment analysts say a lot of Nigerianowned big businesses have found it very difficult to divorce themselves from the influences of the immediate and extended families of its founder. As a result of this, there’s always the tendency to extend tribalism and nepotism into the company. In his The Gospel of Wealth (1889), Andrew Carnegie argues against wasteful use of capital in the form of extravagance, irresponsible spending or self-indulgence. As a result, the wealthy should administer their riches responsibly and not in a way that encourages “the slothful, the drunkard, the unworthy.” Carnegie based his philosophy on the observation that the heirs of large fortunes frequently squandered them in riotous living rather than nurturing and growing them. According to Jacob J.Okwudiri, founder of Integral Global Media Network Limited (IGMNL), “the drive and motivation of the owners is lacking in the lives of (the would be) benefactor(s).” He also says, “unresolved legal suits after the death of the founder contribute to death of the business.” Okwudiri reveals, “it is a painful experience to watch one’s family business die. The struggles and gains of years gone by are left to rot away. It leads to a lot of economic loss to the family of the founder.” But these collapses have been driven down not just by incompetence and family squabbles, recession and regulation also contribute. Okwudiri figures lack of mentee, lack of interest, change in technology, extended family interest, lack of capital for renovation; drive to get rich quick and unhealthy government policies as also responsible for some of these failures. He pointed out that as long as the desired stability needed to develop an economy is
Abiola Bookshop... waiting for attention not there; it will be increasingly difficult to do business in Nigeria. According to investment analyst, a lot of manufacturing companies are closing down because of import problems, raw materials, power and capital. In the words of Richard Branson, chairman of Virgin Atlantic, “Nigeria is one of the worst places to invest.” According to him, Virgin’s ill-fated attempts at setting up a new airline in Africa, in conjunction with Nigerian government, are better imagined. “We put together a very good airline-the first airline in West Africa that was ever IOSA/IATA operational safety audit accredited but unfortunately it got tied down to the politics of the country… we led the airlines for 11years… we fought daily battle against government agents who wanted to daily make fortune from us, politicians who saw the government 49 pr cent as a meal to seek for all kinds of favour… watchdogs (regulatory body) that didn’t know what to do and persistently asking for bribes at any point... Nigeria people are generally nice but the politicians are very insane… that may be irony because the people make up the politi-
PHOTO: CHARLES OKOLO cians… but those politicians are selfish…we did make N3billion for the Federal Government of Nigeria during the joint venture… realising that the government didn’t bring nothing to the table/partnership except dubious debts by the previous carrier, Nigeria Airways. The Joint Venture should have been the biggest African carrier by now if the partnership was allowed to grow, but the politicians killed it. Nigeria is a country we shall never consider to doing business again.” The spectre of failed business is hurting Nigerians. It has gradually etched into the psyche of investors, discomfortingly. In the last decade, the number of thriving businesses has shrunk, unemployment has soared and thousands of small firms have failed. As a result of high cost of production, the manufacturing capacity utilisation remains on the down side, most businesses groan under intense pain due to overhead cost incurred in providing alternative infrastructure such as power. The manufacturing sector is further bogged down by massive decline in capacity utilisation resulting from high exchange rate of the Naira and congestion at the ports.
A total of 834 manufacturing companies closed shop in 2009 as a result of their inability to continue to cope with the challenges posed by the harsh operating environment in Nigeria. According to a survey carried out as part of its membership operational audit in January 2010 by the Manufacturers Association of Nigeria, the 834 figure represents the cumulative aggregate of firms that shut down their operations in 2009 across the country. In the same vein, the nation’s paint industrY has collapsed because of inadequate capital, frequent breakdown of machines, incompetent employees, lack of access to distribution channels, delay of payment by the distributors, lack of support from the government and high number of paint producers and weak infrastructure, especially that of power. But it’s not all doom and gloom for local businesses. With Tribune Newspapers, still waxing strong, 26 years after the sage, Chief Jeremiah Obafemi Awolowo’s demise, perhaps, there’s hope for family businesses.