Interview with Yana Issakova, President of the Kazakhstan Family Business Association
The Kazakhstan Family Business Association was established in 2012. Since then, over 100 companies operating in various sectors and engaged in various industries have joined the Association. Chairwoman Yana Issakova spoke to Tharawat about family business in Kazakhstan and the goals for their further education.
Why are family businesses important to the economy of Kazakhstan?
Kazakhstan can boast of strong family traditions that are passed down from generation to generation for centuries. Kazakh business has been up and coming for the past 20 years and many of our traditions are slowly being formed. This represents an advantage as we have the possibility to learn from centuries of the experience of the global business community. But even these longstanding business practices have to be adapted to our national traditions.
According to the Global Entrepreneurs Council, about 70% of all companies in the world are family businesses. In this respect, Kazakhstan is not an exception to the rule: the vast majority of Kazakh companies are family businesses that employ other members of the family as partners, investors, or experts. Family members can be trusted more than anyone else.
It is very important to support and guide these enterprises so they can grow and be prepared to safely pass to the next generation.
What are the challenges and opportunity for family businesses of Kazakhstan?
Unfortunately, the existing legislation of Kazakhstan does not define the terms “family business,” “family enterprise” or “family company”. One of the objectives of the Kazakhstan Family Business Association is to get the family business recognised at the legislative level. It will allow us to initiate different programs in support of family businesses in the country, to represent the family enterprises at the international level and to further develop the national business practices.
On the other hand, I would not say that the lack of legal frameworks hinders the development of entrepreneurship in Kazakhstan: the number of new private companies is growing, and the entrepreneurs make long term plans not for the next one to five years only but at least for the next generation.
A lot of training programs are now being launched in Kazakhstan aimed at family businesses, including programs that educate the entrepreneur about how to get the family business to the next generation. The government offers tax benefits and other support to small enterprises.
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In my opinion, family businesses in Kazakhstan have a great future. The existing manufacturers and agricultural companies, service and trade enterprises, small retail shops and large investment holdings are all family businesses that already contribute to the development of the national economy. They open their subsidiaries throughout the country and are also looking for international partners with a view to establishing long-term cooperation, promoting Kazakh goods and creating effective partnerships.
In what industries do you see the greatest concentration of family businesses? Are they SMEs?
The majority of the family businesses operate in the service and trade sector: they are mostly small retail shops, consulting companies and other enterprises providing a variety of services (beauty shops, hairdressers, cafes and restaurants, small hotels and resorts, handcraft shops, event agencies and so on). Also, there are many family companies in the agricultural sector.
Some family businesses are now shifting their focus onto industrial production, for instance in the energy or food industries.
When and why did you set up your association? Who was involved?
The Kazakhstan Family Business Association was established in 2012. Since then, over 100 companies operating in various sectors and engaged in various industries have joined the Association. Though the companies greatly differ in their interests, goods and services and are located in different regions, they all are striving for success. Today, Kazakh entrepreneurs create successful companies and involve their family members to build up a stable financial foundation and to create jobs not only for themselves but for their children and grandchildren.
According to S&P 500 index, over the last decade the largest companies, which were created as family businesses, have turned out to be more successful financially compared to non-family firms. Moreover, they have been more prepared and efficient when dealing with the adverse effects of the economic and financial crisis.
The family business is becoming more popular every day. Family owned companies not only provide jobs for their family but are also more motivated to generate profit and develop the business. As the income will stay with the whole family, all its members will be interested in increasing profits.
The world has known a number of family business dynasties whose history began, for instance, with a tiny family farm, and ended with an international corporation consisting of dozens of factories and hundreds of shops and thousands of restaurants, cafes and stalls. Such dynasties can be found in any economic sector. If we look closer, we may find family connections even between business rivalries. Over decades or even centuries, some families built powerful monopolies and this strategy helped them to live through global crises.
This is why we believe that family business traditions need to be developed and cultivated to serve as basis for creation of successful companies that would live for decades and centuries.
What is your mission for the association? How will it support family businesses?
Our Association developed several programs to help family companies develop and introduce corporate communication systems and business processes. We consult entrepreneurs, in particular on how to do business with partners.
The family business in Kazakhstan is only beginning to develop its own traditions. This is the right moment to lay the foundation for long-term and successful relationship between the stakeholders in the family-owned companies of Kazakhstan. Our entrepreneurs will soon face inheritance issues and they need to know where to go for help to properly proceed.
Furthermore, many entrepreneurs have already come across the problem of educating their heirs. In many cases their children are either not ready or not willing to lead the business. Our Association is working to find the best answers to the questions we receive from entrepreneurs. In the case of the family business it is not only the business but also the family side that is important to balance.
Are family businesses in Kazakhstan interested in being educated on governance and succession?
I do not think that the entrepreneurs in Kazakhstan are ready to learn about succession. This lack of interest can be explained by a number of factors such as the ongoing crisis, economic instability and unpredictability of the market. As a result, many of the entrepreneurs are mostly busy “fighting the fire” and responding to current problems and challenges.
However, I believe that the situation will change in the future. Our entrepreneurs are facing the succession problem: they involve their children in the business only after they grow up, usually at the age of about 20 years old, and thus miss the chance to prepare them for succession. They send their children to European Universities and very often the children do not come back home after graduation. Sometimes, they start perceiving the family business only as source of income but not as their own business that needs to be taken care of, developed, and expanded.
However, I am absolutely confident that the family business in Kazakhstan has a bright future!
Tharawat Magazine, Issue 27, 2015