More than 90 per cent of all commercial activities in the Middle East and Africa is controlled by family-owned businesses. The GCC alone has more than 5,000 such businesses, which have combined assets of over $ 500 billion and employ around 70 per cent of the workforce, he said at the DIFC.
The UAE and other GCC countries currently require family-owned firms to list 55 per cent of their shares when going public, but family run companies have been reluctant to list on the region’s exchanges out of fear that they would lose control. The financial crisis has intensified pressure on region’s economies to support and broaden collapsing equity market.
“This is really the best time for governments in the GCC region to allow family businesses to float their IPOs at minimum 25 per cent without losing control of their companies,” Dr Saidi told Khaleej Times after speaking at a seminar called: ‘Families, Governance and Markets: Building & Sustaining Wealth’ at DIFC.
Many family owned businesses are larger than listed companies, and there is a need to make them realise the advantage of going public, he said.
NASDAQ Dubai already allows to list a minimum of 25 per cent of their shares and is considering a further reduction.
In his presentation, Dr Saidi said family businesses face challenges to preserve and increase their wealth and ensure continuity of their operations, while coping with globalisation, competition, growing numbers of family members in each generation, succession planning and governance.
“Today, family businesses are at a crossroads in their development. With the vast economic growth of the region, family enterprises have grown and diversified tremendously. However, to sustain their growth in today’s economic environment, they need to more fully institutionalise their structures and practices,“ said Nasser Al Shaali, CEO of DIFC Authority.
“As the region integrates more closely with the global economy, family businesses need to stimulate greater innovation and adopt new business models to stay competitive. To attract capital and deal with the challenges of generational transition, they need to realign their organisations, management processes, and governance frameworks.”
According to MEED, entrepreneurial-led firms only have an average lifespan of about 24 years; only 30 per cent survive into the second generation, 10 per cent into the third and a mere 3 per cent into the fourth.
