Family Businesses that Have Collapsed in Kenya

Running and growing a business is not an easy journey for many entrepreneurs and various challenges have contributed to the collapse of businesses in Kenya. Studies show that about 33 percent of small businesses fall in the first 2 years, around 50 percent after 5 years, with 33 percent making it to 10 years or longer.

Although some family businesses make it to so many years even than public companies, some big family-owned companies have collapsed leaving behind lots of speculations. Studies show that 70 percent of family-owned businesses collapse or are sold before they are passed to the second generation, with about 90 percent going belly up before being passed to the third generation.

Various factors have been blamed for the collapse of family-owned companies. This includes poor succession planning, family conflicts, lack of trusted advisers, varying visions between generations, lack of financial education for children, exclusion of family members outside the business, poor strategic planning, and governance challenges, among others.

Many children born into wealth lack financial education thereby neglecting the family capital of the family business. In addition, unqualified family members mantle positions of power simply because they belong to the founding family, leading to the collapse of the businesses. Research shows that these businesses suffer most from internal factors than external factors.

Here are some of the big family-owned companies that have collapsed in Kenya in the recent past.

1. Tuskys

Founded in 1990 by the late Joram Kamau, Tuskys was one of the largest supermarkets in Kenya, creating employment for about 6,000 people. It also operated in Uganda employing around 150 people. Once, a retail giant, Tuskys crumbled as debt expansions, sibling rivalry, and poor management took a toll on the business. It has fallen from 64 stores to 5 open stores. The remaining stores are a shell of the retail gem with their sales yielding lower due to stock-outs as suppliers keep off. 

2. Nakumatt

It was founded in 1987 by the Atul Shah Family. Nakumatt grew as one of the most profitable supermarkets in Kenya. As of December 2015, Nakumatt had 65 stores in Kenya, Uganda, Rwanda, and Tanzania employing over 5,500 people. During that time, it had gross annual revenue of over US$450 million.

The company started experiencing cash flow issues in 2016 leading to the closure of 60 stores. In December 2019 the retail chain sold the last six branches to Naivas Supermarkets in a deal that saw Nakumatt completely disappear.

3. Akamba bus

It was founded by the late Sherali Hassan Nathoo. This bus company thrived in the East African region with headquarters in Nairobi and Kigali. It had a fleet of over 100 buses, raking in millions of shillings daily. Family conflicts, debt, and mismanagement drove the company into trouble. In 2011, the company’s properties, including buses, were auctioned to pay debts.

4. Spencon

It was a giant construction company founded in 1979 by Jitendra Patel. In the 1980s and 1990s, it had operations in Kenya, Tanzania and Uganda, India, Zambia, Malawi, Mozambique, and Southern Sudan employing about 5,000  people. In 2014, the company started experiencing a serious financial crisis leading to its collapse in 2016.

5. ARM Cement

The company was founded in 1974 by the late Harjivandas J. PaunranaIt. It grew to be one of the largest cement producers in East and Central Africa with operations in Kenya, Tanzania, Rwanda, and South Africa. Debt and mismanagement drove the company down in August 2018.