The contribution of family businesses in the French economy as a whole
is significant, and not only in agriculture
Didier Caraes, Permanent Assembly on Chambers of Agriculture (APCA)
The United Nations Organization (UN) has placed 2014 under the banner of family farming. The FAO thus acknowledges the fact that over 400 family farms in developed and developing countries are chiefly relying on family members to operate and manage them. The role of family farming in eradicating hunger is fundamental, since they account for 80 percent of all farms in developing countries. For its part, the European Union registers 12 million family farms.
What is the importance of family businesses in France and in Europe? The COPA-COGECA recently underscored the crucial role of family farming, now more than ever needed “in a world increasingly marked by uncertainty, market volatility and growing global food demand.”
In an article that is of particular interest and that we highly recommend1, Didier Caraes of the APCA points out that family operations account for 70 to 90 percent of all businesses (KPMG December 2013 survey). In France, the contribution of family businesses across the spectrum in the country’s economy is significant. Yet, Didier Caraes raises a paradox: As sizeable as they are in agriculture, it is difficult to identify family farms, due to a lack of data to make a clear distinction between the various farming statutes. Conversely, the distinction between family farms and other types of farms is clearly made in the United States.
We note another paradox: How can the current CAP ensure the competitiveness and survival of family farms when the dismantling of public support and the financialization of agriculture are under way? Because there will be no salvation for European family farming without principles of governance and regulation.
momagri Editorial Board
The FAO has declared 2014 as the year of family farming; it is a broad field that, in France, includes almost all farms (although the exact number is not known). The family nature of agriculture is not a peculiarity, there are quite a large number of family farms in France and they report quite remarkable financial results.
The economically sound French family businesses
The Peugeot Company is a jewel of the French automotive industry. Established in 1810, the firm has operated under the control of the Peugeot family for many decades. Today, the company’s performance has tapered off. Following the acquisitions by Chinese DongFeng Motors and by the French Government of stakes in the capital, the Peugeot family lost is leading role in the company’s direction. The event has prompted observers to point out the considerable weight of large family-owned corporations in the French economy.
Peugeot’s problems are going against the tide of a certain form of serenity and confidence claimed by family businesses. In December 2013, the audit firm KPMG published the result of its “European Family Business Barometer”. Between July and December 2013, KPMG surveyed various family businesses in Europe and examined the returns from 600 respondents.
The companies considered by the KPMG panel met three criteria: sales between €7.5 million and €100 million, businesses established before 1995 and 33 percent of capital owned by the founding family. Based on these conditions, family firms account for 70 to 90 percent of businesses operating in the various European nations.
The KPMG survey found that European family undertakings have regained some confidence after the extended economic crisis. Among these European firms, French businesses are expressing a particularly positive view:
• 58 percent of French family businesses surveyed feel confident for the future, against 54 percent for all European family businesses,
Analyzing the economic health of family-owned companies is a project regularly undertaken by the KPMG audit firm. In a previous report issued in 2008, KPMG provided a particularly positive profile of French family-owned firms. Among the features outlined in the document, some are concerning the agricultural sector:
• 79 percent of them recorded higher sales in the past six months (69 percent at the European level),
• Almost half of French family companies are considering making investments in the coming months.
• Family-owned businesses are using managing methods based on asset strategies, for which the goal is sustaining achievements over the long-term and ensuring the transmission of assets. That leads them to limit debt and to maintain ongoing investment efforts. They are also especially vigilant about finely managing their cash flows, an important feature when the economic situation is problematic and sales are declining.
This economic diagnosis on French family-owned businesses should suit agricultural undertakings, whose organization is also marked by asset-management aspects and favors a commitment to long-term sustainability. Farming indebtedness remains stable at a reasonable level and is similar to that of French family-owned businesses. French farms are also maintaining ongoing investment over the long term.
• Nevertheless such strategy is slowing down their progress since, thanks to their excellent long-term economic results, they could carry more debt to achieve growth investment.
The family aspect of French agriculture is not well known
The family aspect of French agriculture is acknowledged and the currently emerging corporate agriculture is still negligible. Yet, it is difficult to assess its genuine weight. In agricultural data, there is no “family-owned farm” classification that could be made based on the capital structure and collective operations. In the 2010 Agricultural Census, the family status of farm operators is assessed, but additional enquiries are required to identify, among the listed farms, those whose collective labor is mostly achieved by salaried staff, along with more exhaustive enquiries to identify farming operations where the majority of capital is not owned by farmers or joint-farmers, and to ultimately identify family-operated farms. Such is the paradox of French agriculture: it is said to be family-operated and yet we do not know how many of them are, or are not, actually family-owned. The year 2014 could provide an opportunity for a statistical study on the issue.
1 The comprehensive article is available from: http://www.chambres-agriculture.fr/fileadmin/user_upload/thematiques/Economie/LetEco1402_01.pdf