By TBY | Qatar | Nov 14, 2017
Back in the time when Qatar was laying the foundations of the state, some small family workshops leveraged oil findings and emerged as strong trading houses, importing Western products that […]
Back in the time when Qatar was laying the foundations of the state, some small family workshops leveraged oil findings and emerged as strong trading houses, importing Western products that were never seen before in the country. By the time Qatar’s economy started hatching in the 1990s, those families had already accumulated significant wealth and financial power to expand across a range of sectors. Besides oil and gas, construction and real estate became the private businesses’ choice in the country’s path to build its infrastructure. Today, as in every part of the GCC, family conglomerates create 65% of job opportunities and have a major responsibility in the country’s economic development.
Some of these family-owned businesses have evolved into large multi-generational firms with interests across a spectrum of industries. This business model is supporting Qatar’s adaptation to a post-hydrocarbon environment and its diversification of economic sources. Moreover, the lack of government cash flow, which was previously coming from oil revenues, requires family holdings to enhance their role in national projects.
However, family businesses are currently facing a double challenge, which could put their key role into question. While their financial results have been severely hit by the dump of oil prices, families are confronted with a succession crisis. In fact, more than half of GCC family businesses are currently planning a transition from the second to the third generation. Those entrepreneurs who established a business legacy in their families will now test their institutional structure, and this conversion can represent a complex stage in their business cycle. As a matter of fact, coming up with an efficient corporate governance structure that can adapt to the changing demands of the market becomes imperative to ensure continuity and stability in their business and overall in the Qatari economy, thirsty for a stronger private sector.
With challenging times ahead, going public is an option that many Qatari family businesses are contemplating, especially when there are growing concerns about liquidity issues. This is a rising trend in the region which started in the UAE and that the former Prime Minister of Qatar, HE Hamad bin Jassem bin Jabor Al Thani, wanted to replicate in 2013 when he encouraged family conglomerates to be listed in the Qatar Stock Exchange (QSE). In fact, concerns about the lack of tradable shares on the Qatari stock market also led to calls for the family businesses to publically list at least part of their capital. This is the case of Rayyan Mineral Water, subsidiary of Al Rabban Holding, which has sought a listing since last year.
Some of these big conglomerates are going public to trim themselves and stay afloat among strong international competition. The Investment Holding Group (IHG), one of the leading contracting and trading firms in the Qatari construction sector, has recently received approval from the Qatar Financial Markets Authority (QFMA) to list its paid-up share capital through an IPO. It will be the first Qatari family business to receive approval to list its shares on QSE through an IPO.
The Qatar private sector is increasingly playing an integral role in further developing the economy, proving to be a real partner in supporting the government’s efforts toward achieving a sustainable economy and society. In this sense, family businesses must work to improve the efficient management of their share capital by means of expanding their shareholder base by listing on the stock exchange. At the same time, these families are building business legacies that will last for generations to come and will move Qatar forward.