Background

Every man is mortal. Death comes as a thief in the night and shall never get us prepared!. As such, the daily worry of a sensible being is, how his or her possessions, will be preserved to sustain the next generation for the benefit of his legacy.

Born between 1981 and 1996, millennials differ more from their parents, than the last two generations, exhibiting a greater sense of purpose, willingness to move abroad and eagerness to explore new opportunities.

This leaves aging parents who own family businesses wondering about the future of their companies. Family businesses, among the most common forms of organizations around the world, are firms owned or managed by one or more founding family members. Passing the business onto the millennial generation, however, appears to be more difficult than it was previously.

Despite being more educated, technologically adept and global in vision, few children intend to take over their respective family businesses.

Does the older generation need to urgently adapt, or should they leave the family business to outsiders? It depends. Children’s participation may actively rejuvenate some businesses, improving the agility of the company in the face of economic, digital and socio-political change.

However, children with different ideas about how to run the business may also create unhelpful turbulence in the family and its company, suggesting they might be better off using their talents elsewhere unless assisted by our professional transitional team.

Among wealth advisors, there is a saying that, “the first generation makes the money, the second spends it, and the third blows it.” Hence the mantra, “rags to rags in three generations.”

According to Ajay Bhalla, Aneesh Banerjee and Joseph Lampel, The Quest to live beyond 100: cases of Resilient UK family Businesses, https://www.ifb.org.UK, The Family Firm Institute, 30% of family businesses survive into the second generation, 12% into the third, and just 3% reach the fourth. One story that affirms this phenomenon is that of Cornelius Vanderbilt, (America’s richest man of his time). When 120 members of his fourth generation met for a reunion in 1973, none amongst them was a millionaire. Years before, perhaps out of experience with inherited money and privilege, his son, William Vanderbilt had said, “Inherited wealth is a real handicap to happiness, a death to ambition as cocaine is to morality.”

Fearing that like Vanderbilt’s, his offspring would also end up living extravagantly, yet doing nothing to preserve the fortune, Baron Hilton, the son of the founder of Hilton Hotels, which boasts of $9billion annual revenue, 216,379 rooms (584 hotels) in 94 countries, after seeing her debauchery, reality shows and lavish parties flaunting wealth, didn’t leave any money to his grandchild, socialite Paris Hilton.

Of course there are so many family businesses that have defied such occurrences; the Rothschild’s have been at it since the 1760’s, Hoshi Ryokan Hotel is in its 46th generation etc., however, evidence shows that across all continents, family business succession is complicated. Unfortunately, (and contrary to popular belief), the more money, the greater the potential for fights and disagreements. The bigger the business, the more enticement for foul play and cheating.

Sometimes wealth is left in the hands of those who do not understand the sweat, pain, and sacrifice invested in accumulating it. As such, the heirs don’t have much motivation to develop the values needed to create wealth and try to outdo each other in fulfilling their fantasies.

In Uganda, this phenomenon cuts across with several examples to demonstrate this; When the proprietor of Tuwereza Bakery, a one Angello Kasirye died hardly a year passed when his businesses started closing over petty cash sharing battles and poor management. 

In his book, The Tide of Fortune, Manu Bhai Madhvani, referring to his family wrangles [The Madhvani Group Uganda’s largest conglomerate with interests in sugar, safari lodges, packaging, glass manufacturing, construction, Insurance, security services, horticulture, power generation, steel, real estate, tea, etc.] said, “Initially, when the founder is still active in the business, it avoids differences and sets priorities.

However, once the founder dies, he notes, the business is transformed from sole entrepreneurship into a partnership of equals, irrespective of ability or experience. As each of the partners’ families grows, the stresses and strains increase on the partnership. Some partners are more risk-taking than others, some work harder than others; some are talented and hardworking but are not team players. The permutations are endless, but the bottom line is that it will inevitably result in the division of the family’s assets. Thus, family businesses shrink in size. It is called the law of business gravity”.

In Uganda, many wealth homes have run afoul of these management skills and preparation and we have seen castles, Kingdoms and wealthy affluent, opulent homes collapse as a result of lack of or poor estate management and planning, during the weak age of the founder and after their demise.

The inter-generational sustainability of wealth, require a robust estate management plan which should be established and tested in the lifetime of wealthy generator before it is handed over to the beneficiaries of his or her Estate.

The reality is that this failure has not spared whether small or affluent homes. It is proven that the families that have had a good management strategy and succession plan have lived beyond the odds and the wealth spawned and spanned to generations.

Classical examples in Uganda Families that have kept wealth for generations like Agha Khan, Madhivani, Metha among others developed estate plans that are implemented by the subsequent generations.

In the inverse, those who miss use own land end up in ordeals. In Kitgum, The watchdog, reported that; “109 year old woman killed for ‘stealing’ late brother’s land.”

This story concerned a lady Sverina Lamunu, a resident of Aloto North village, Aloto parish, Lalano sub county, who left her marital home over 30 years ago, was given 100 acres of land on their fathers land, squandered it and returned to rival over the remaining share of her brother.

On 14^th May, 2013, Davie Daniels, wrote, “Kampala business man dogged by theft allegations from family”. The gist of this story was that family members and mostly orphans accused a prominent business man, Dick Kizito Ssekalala of Kizito Towers among other properties for grabbing and selling off family property which was left by their grandfather Lawrence Kizito to help them as a family. The disputed properties includes a 100-acre farm in Kacheera–Rakai district which had more than 50 heads of cattle, two vehicles, a tractor, motorcycle and maize milling factory in Kooki Ward C in Lyantonde, 9 acres of land in Kyamiyonga-Lyantonde and the 5 million shillings which the tycoon Kizito allegedly withdrew from their late father Kizito’s account in the then Uganda Commercial Bank (UCB) before he closed it, among others.

On September, 10, 2022, New vision wrote, “Kalita’s family split over estate control”. Following the death of the transport mogul, Patrick Lucky Mugisa in 2013, intrigue bedevilled the governance of his Bus Company and property.

This led to several death threats between the two widows where by, the first wife Shamim Karungi accused Loy Hope Kaganda for the death threats who was also accused of obtaining fraudulent powers of attorney and stole huge amounts of money from the bank account of the Bus Company. Leading to the collapse of the once mega Transport Company and mismanagement of real estate.

The recent being the family of the late Mabirizi. Kibirango Patrick, “Olutalo Ku MMaali owa Mabirizi complex”, Bukedde, Thursday, March, 23,2023, page 4

(War on the riches of the proprietor of Mabirizi complex), this wrangle is a dispute on the authenticity of the Will of the late husband between the two wives.