Uganda’s Family Firms Face a Quiet but Severe Crisis
Uganda’s economy is built on a tapestry of small and medium-sized enterprises, with family-owned businesses forming the backbone of many communities. Yet new findings point to a troubling generational challenge: fewer than 10% of these family firms survive beyond the founders. The trend threatens financial security for thousands of workers and the long-term resilience of the economy. As researchers from the Economic Policy Research Centre (EPRC) and other institutions caution, a lack of durable succession planning is the critical bottleneck.
Why Family Firms Are Crucial in Uganda
Family-owned businesses are deeply embedded in Uganda’s social fabric. They provide employment, contribute to regional development, and often serve as a training ground for future entrepreneurs. In many districts, a single family enterprise can be the main employer, the engine behind local supply chains, and a source of community wealth. The reliance on family capital and informal governance, however, can also magnify vulnerabilities when the founders step back or pass away.
Root Causes of the Survival Problem
Experts identify several interlinked factors that impede the transition from founder-led to professionally managed firms. In many cases, there is a lack of formal governance structures—such as boards, fiduciary practices, and documented succession plans. Family dynamics, including sibling rivalries and unclear ownership arrangements, can derail long-term strategy. Access to capital for expansion or management training is often constrained, especially for smaller firms that lack collateral or formal financial histories. Finally, economic shocks—rising costs, currency volatility, and nonlinear market changes—test even well-structured family businesses, making continuity a rare achievement.
Consequences for Workers and Communities
The high rate of dissolution beyond the founder era translates into job instability, disrupted supplier relationships, and lost opportunities for employee development. When a respected founder exits without a plan, firms may shutter, and skilled workers—many of whom have decades of tacit knowledge—lose a stable livelihood. For communities dependent on a single family firm, the impact can be especially acute, altering local tax bases and limiting access to affordable goods and services.
Strategies for Improved Survival Rates
There is no one-size-fits-all remedy, but a combination of governance, finance, and leadership development can tilt the odds in favor of continuity.
- Formalize governance. Create a documented succession plan, establish a family council, and set up an independent board of advisors to provide external oversight without eroding family control.
- Professionalize management. Hire non-family managers for key roles and invest in management training, performance metrics, and transparent compensation structures.
- Clarify ownership and rights. Develop clear shares, voting rights, and buy-sell agreements to prevent disputes as the business grows and founders reduce their day-to-day involvement.
- Access capital strategically. Explore blended financing options, including local banks and development financing, paired with grant or loan programs designed for SME expansion and succession planning.
- Plan for the long horizon. Succession planning should start early, with milestones and a pipeline for leadership development that includes next-generation talent groomed in both operations and governance.
Policy and Community Roles
Beyond individual firms, policymakers and development organizations can support a stronger ecosystem. Initiatives to promote SME governance, provide affordable advisory services, and incentivize long-term investment can reduce the risk of abrupt firm dissolution. Local universities and business associations have a role in offering practical training in finance, governance, and entrepreneurship. When combined with targeted financing, these measures can help Uganda’s family firms not only endure but thrive across generations.
A Call to Action for Ugandan Family Firms
Survival beyond the founder era requires more than luck; it demands proactive planning, disciplined governance, and access to the right resources. For owners, opening the business to earned expertise—both inside and outside the family—can unlock growth and preserve jobs. For communities and policymakers, supporting succession-friendly ecosystems will preserve local wealth, sustain family legacies, and promote broader economic resilience in Uganda.
