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Family businesses need to support startups in Palestine

Wamda

Majd Zghyer is the strategy officer at uMake, an entrepreneurship support organisation (ESO) based in Ramallah, Palestine.

In recent years, we have witnessed greater attention being paid by family businesses across the Middle East and North Africa (Mena) region to the entrepreneurship sector. Generally speaking, an increased appetite by family businesses for investing in and partnering with entrepreneurial ventures can lead to new prospects for economic growth where disruption and legacy merge together to create the transformative opportunities of the future. In fact, we are constantly hearing about huge investment rounds into Mena-based startups being led by well-known family offices and endowments, especially by family-owned businesses from the Gulf Cooperation Council (GCC) countries – where family businesses contribute around 60 per cent to the gross domestic product (GDP) of GCC economies and employ over 80 per cent of the labour force.

Inspiring examples of this increased role of family businesses in supporting entrepreneurship include the recent acquisition of Mumzworld by Saudi Arabia’s Tamer Group and the lead investment of Egypt’s Sawiris family office in Egyptian proptech startup Nawy. However, the role of family businesses does not stop at allocating financial capital, they can play a far bigger and more influential role – by providing their expertise, networks, sophisticated supply chains and deep technologies – in nurturing and incubating startups at the earliest of stages. One such successful model is being developed by UAE-based Crescent Enterprises (CE) through its CE-Creates platform which aims to turn concept-stage ventures into socially relevant and economically viable businesses that can complement CE’s operations and generate positive sustainable impact.

Mena-based family businesses which built wealth through investing in traditional legacy industries - such as energy, trade, logistics, tourism and real estate – are now recognising the crucial role of technology in today’s world and the enormous opportunities that can be unlocked through diversification of their investment portfolios. In addition to economic opportunities, these family businesses are playing a critical role in nurturing the development of their local entrepreneurial ecosystems by providing much needed mentorship, credibility, market insight, resources and capital to startups. Importantly, they view startups and entrepreneurial ventures as opportunities rather than threats, and therefore, they are more likely to engage with them in ‘win-win’ partnerships that deliver robust growth opportunities for both parties and for the overall economy.

Palestinian family businesses: a missing piece in the puzzle?

Similar to the situation in other Arab countries, in Palestine, family-owned businesses - from micro, small to medium and large sizes – represent the backbone of the national economy and massively contribute to job creation and productive value-added activities. Unfortunately, there is a lack of sufficient data on the exact number of Palestinian family-owned businesses and their contribution to the country’s economy. However, according to research conducted by Middle East Business Magazine, family-owned companies constitute around 85 per cent of total enterprises that operate in Palestine.

These pioneering Palestinian family-owned businesses have managed not only to build viable and resilient business models through different generations, they have also been giving back to society through their effective corporate social responsibility (CSR) policies and philanthropic activities. For example, Bank of Palestine (BoP), one of the most impactful and future-looking corporations in the country, was established by members of the Shawa Family in Gaza in the early 1960s. Despite being a publicly listed company on the Palestinian Stock Exchange, BoP has managed to maintain the deep roots of its founding family and play a significant role in empowering the Palestinian economy through its commitment to financial inclusion and cutting-edge innovative financial practices. Similar impactful roles can be seen across multiple sectors as well - such as the role of Nassar Group in the stone and marble sector, Masrouji Group in the pharmaceuticals sector and Sinokrot Holding in the food and beverage (F&B) sector. Indeed, the successful examples are limitless and could be realised across different social and economic dimensions.

Yet, while it’s known that family-owned businesses in Palestine lack the huge financial and technical resources of their counterparts in Egypt or the GCC countries, they can still be considered as an enormous untapped resource that will be largely needed for the development of Palestine’s nascent entrepreneurial ecosystem going forward. Palestinian families have traditionally succeeded in overcoming the unique challenges that face most businesses in Palestine while also managing to build globally integrated and viable companies with solid commercial and social foundations. Accordingly, their experience in the nuances of the Palestinian market as well as their connections to regional and international markets are exactly the experiences that Palestinian founders desperately need in support of their entrepreneurial journeys. On the other hand, the economy-wide implications of the fourth industrial revolution (4IR) requires family businesses to keep innovating and exploring new ways of doing things in order to stay relevant in the rapidly changing age of digital disruption. Hence, the relationship between traditional family businesses and early-stage startups should not be seen as a zero-sum game (where the gain of one implies the loss of another) but rather as a form of strategic partnership where mutually beneficial cooperation benefits all parties involved.

More importantly, understanding the essential role that family businesses play in the structure of the Palestinian economy can certainly lead to the realisation of many untapped opportunities that can be unlocked through greater involvement of the entrepreneurship sector from this underutilised, and sometimes overlooked resource. Strictly speaking, more active engagement from family businesses in the Palestinian entrepreneurship scene can provide additional layers of business acumen, innovation and complementary offerings. The added value from engaging with family businesses can also help to address challenges and fill several gaps that cannot be filled by the government or donor-funded entrepreneurship support projects alone. In essence, this added value could be realised in the following areas:

In spite of the challenges associated with doing business in Palestine, family businesses are changing, and they are embracing a more collaborative and futuristic approach. Specifically, this change has been driven by the rise of second and third generation business leaders who recognise the importance of innovation and digital disruption for the sustainable viability of their companies. Besides, their investment theses have also changed and are taking a more diversified long-term view. One such example is being developed in the city of Hebron where a group of wealthy Palestinian families came together to establish Izdehar “Prosperity” fund – a private equity fund with a committed capital of $100 million. Although most of the fund’s investments will be allocated to infrastructure projects, there will be sufficient capital to invest in the technology sector and partner with emerging Palestinian startups. Ultimately, we will start seeing more active engagement from Palestinian family businesses across the country in the entrepreneurship sector where the combination of legacy and disruption helps unlock new opportunities for prosperity and sustainable impact in the Palestinian economy.

 

November 7th 2021, 1:41 am
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