Diversifying, investing and digitising

Middle East Family Business Survey 2021

Family businesses are transforming for a sustainable future

In an exceptionally challenging year, our latest Family Business Survey clearly illustrates the extraordinary resilience and agility of family businesses in the Middle East. While many have been hit hard by the pandemic, they remain optimistic that growth will return in the coming months and years, and are looking forward to the future.

Watch the video to find out which five key themes emerged from this year’s survey.

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Explore the 5 key themes from the Middle East findings
Resilience
59% of Middle East family businesses expect to see growth in 2021
Diversification
58% of Middle East family businesses consider expanding into new markets a top priority in the next two years
Transformation
60% of Middle East family businesses have the liquidity to change course at short notice
Family values
75% of Middle East family businesses have a clear set of values but only 47% say that the family is aligned on the direction of the company
Impact
59% of Middle East family businesses see an opportunity to lead on sustainable business practices

59% of Middle East family businesses expect to see growth in 2021

Due to falling oil prices, family businesses in the Middle East faced the COVID-19 pandemic in more challenging economic conditions than most. Before the outbreak, 59% of family businesses were expecting to grow in 2020. But as a direct result of COVID-19, 56% are now experiencing a reduction in sales, compared with 46% globally.

It’s no surprise then that Middle East family businesses are more cautious about the speed of recovery in the short term – 59% expect revenue growth in 2021 compared with 64% globally – although they are more optimistic about 2022, with 89% expecting growth.

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58% of Middle East family businesses consider expanding into new markets a top priority in the next two years

There is intense pressure on family businesses in the region to maintain the double digit growth rates that are required to sustain the standard of living of families that are, on average, double the size of family businesses in the US in terms of family members. Therefore, wealth creation and protection is front of mind.

To continue to grow, Middle East family businesses see diversification as the key to success in the coming years. As part of this diversification strategy, family businesses plan to expand into new markets, products and services. 

Business leaders in the Middle East also know that to thrive in the future they must transform, which includes making full use of innovative digital technology – an area that has suffered from underinvestment in the past – 55% plan to increase use of new technologies and 47% are planning to improve digital capabilities.

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60% of Middle East family businesses have the liquidity to change course at short notice

As the world recovers, family businesses are in a strong position to lead the way. 63% of Middle East family businesses say they have a strong leadership team in place and 70% agree that responsibilities are clearly set out. 

While they also have the liquidity they need to support agility, many regional family businesses still struggle to embrace change. Almost half (45%) said that there is a resistance within the company to do so.

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75% of Middle East family businesses have a clear set of values but only 47% say that the family is aligned on the direction of the company

Values and purpose are the glue that holds family businesses together and are particularly important in large families once responsibility is passed down from the founder. Many family businesses in the Middle East are reaching a critical stage of succession. Overall, 65% in the region, compared with 55% globally, have NextGen family members working in the business and 33% have a robust, documented and communicated succession plan.

While incidences of family conflicts in the region have risen in recent years, overall, family businesses feel that trust and communication levels are good. But there are signs of unrest. Only 47% say that the family is aligned on the direction of the company and only 48% agree that relevant information is shared in a transparent and timely way among family members.

Conflict within families is sometimes inevitable. 42% of family businesses in the Middle East admit that conflict does occur from time to time (compared with 33% globally) and for 15% of businesses conflict is a regular occurrence. Family harmony requires work and planning, and should be approached with the same level of professionalism that is applied to operational decisions and business strategy. While Middle East family businesses take governance seriously – 84% have some form of family governance policy in place – policies are not always fully implemented, leaving significant gaps.

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59% of Middle East family businesses see an opportunity to lead on sustainable business practices

Family businesses believe in giving back to the communities they serve and society as a whole. Overall, 93% of Middle East family businesses engage in some form of social responsibility activities. This commitment was seen clearly during the pandemic, when family businesses in the region were far more active than their global counterparts in supporting their staff, suppliers and local communities – 84% retained as many staff members as possible, 56% took action to support the local community and 45% provided financial support or loans to their staff.

Family business owners want, above all, to create an organisation that makes a positive impact and creates a legacy for future generations – and the actions of Middle East family businesses in recent months have lived up to that ambition. But the pressure on all businesses to contribute to a better society is increasing, bringing actions around a sustainability agenda into the spotlight.

The ability of family businesses to take a long term view on investments puts them in an ideal position to lead the way on sustainable business practices – a role that 59% of family businesses in the Middle East say they are willing and able to accept. 51% say that sustainability is at the heart of everything they do, but only 36% have prioritised sustainability and local community initiatives so far. Reclaiming the agenda means translating family business’ longstanding commitment to community and society into concrete, visible action.

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The time to take action is now

Financial resilience of family businesses makes them well-placed to succeed and fuel the post COVID-19 recovery. In order to retain their license to operate they will need to revisit their purpose and use the trust they have to create measurable non-financial impact. 

These final conclusions focus on the key areas where immediate actions will help secure a lasting formula for success for the generations to come.

Focus on transformation, especially digital

Middle East family businesses should draw on their experience of withstanding COVID-19 and build smarter, more resilient organisations. Recent events have shown that those who embarked on their digital journey were better placed during the crisis. Now is the time to act. The 27% of respondents who are not making this a priority and have not made progress will face significant challenges protecting their legacy.

Professionalise family governance

A professional governance structure and a clear process for conflict resolution (preferably involving an independent party) makes business sense, particularly when it comes to family businesses. A professional approach strips emotion and personal bias – a common stumbling block for families – out of the decision-making process.

Involve NextGen

NextGen family members will play a vital role in pushing family business forward in policy areas that are essential to their legacy. Younger generations are the driving force behind sustainability and, in family businesses, are looking for greater responsibility. ESG is a natural fit. NextGen members are also an important driving force behind digitalisation.

Communicate sustainability goals and achievements

Family businesses have a richly deserved reputation for prioritising the welfare of their employees and local communities in which they operate. But they are at risk of losing control of the narrative as listed companies claim the ESG agenda for themselves. Family businesses need to learn how to measure and communicate their ESG position and agenda to a wider stakeholder group.

“As the global economic recovery from COVID-19 begins, we are convinced more than ever that the spirit and agility of family businesses, and the extraordinarily strong values that drive them, will lead the way.”

Adnan ZaidiMiddle East Entrepreneurial & Private Business Leader

About the survey

PwC surveyed 2,801 owners and executives in 87 territories, including 73 in the Middle East, between 5 October and 11 December 2020. The purpose of the survey was to get an understanding of what family businesses are thinking on the key issues of the day.

 

Contact us

Hani Ashkar

Hani Ashkar

Middle East Senior Partner, PwC Middle East

Tel: +971 4 304 3100

Adnan Zaidi

Adnan Zaidi

Entrepreneurial & Private Business Leader, PwC Middle East

Tel: +971 4 304 3590

Amin Nasser

Amin Nasser

Private Business Senior Advisor, PwC Middle East

Tel: +971 4 304 3120

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