Keeping Business in the Family

Keeping it in the family may be good for business in a world where most fail within their first year. It’s not that easy, but statistics say it’s certainly worth a try.

It’s a story drenched in wealth, love, and conflict.

It’s called a family business; it’s rarely dull and is a strong prospect, in these difficult times. As from the corner deli, restaurant, farm, or even the local spaza shop, a family business is one bonded by blood and nurtured by a shared spirit of entrepreneurship.

Samsung, Volkswagen, Pick ‘n Pay, METL Group, Bidco Oil Refineries, Richemont, Nike, Kinder Morgan, Anheuser-Busch InBev and Walmart were all founded by families. According to PricewaterhouseCoopers (PwC), family businesses are the backbone of the economy.

In Africa, family businesses have made some of the continent’s richest people. One of them is Uganda’s Hassan Basajjabalaba. This serial wealth creator founded many companies, among them the Kampala International University – Uganda’s leading private University, The Global Village Tea – considered the best black tea quality production factory in Uganda and businesses in real estate. Over the years, his children and relatives have gone into the business.

Mariam became a software engineer and is studying towards a PhD in Data Science. This made her a lot more useful to the family business.

“I am also the collaborations coordinator for our university which now has campuses in Kenya, Tanzania, and an upcoming one in Congo.  My studies as well as watching my father over the years prepared me for this role. My other relatives are also employed within the family businesses in different positions from board membership to management to low level jobs. Roles are distributed depending on the capability or skills level of each individual or family member. My father is very clear about that because that can make or break the businesses,” she says.

According to Mariam, these family businesses have plans to grow for generations to come.

“To make sure we are on the same page, my father leads the companies and makes sure we understand its future. My siblings and I are also shareholders and when we are actively involved in the business, we have clearly defined roles and responsibilities to help move the businesses towards our vision,” she adds.

Even in a crisis like the COVID-19 pandemic, family businesses like this one continue to drive global growth and employment.

“Family businesses are the most trusted form of business, they are potentially more agile, and are relatively free from short-term market pressures,” says Family Business Leader for PwC Africa Schalk Barnard.

As such, PwC’s Annual Global CEO Survey 2021 found that 89% of Africa’s family businesses are expected to grow next year even with the disruptions caused by the pandemic. In fact, 69% of African family businesses said they had no need for additional capital in 2020, and only one-third are cutting dividends during the crisis.

“It is encouraging to note that African family business leaders are more optimistic about their growth and economic recovery than their global counterparts. Despite the optimism, there is still much more for family businesses to do – thriving in today’s world will require a change of mindset; a rethinking of priorities and behaviours, including heightened investment in the digital tools needed for economic resilience; and a new definition of legacy,” says Barnard.

According to the Family Business Association of South Africa (FABASA), 63% of businesses in the United States belong to families and 75% of registered businesses in the United Kingdom are family businesses. In Mediterranean countries, the percentage of registered businesses that are family-owned is even higher with Italy at 94%. It is estimated that more than 70% of the world GDP comes from the hard work of families.

One of South Africa’s most successful family farming businesses was founded by Ina Lessing in 1994.

“My mother started making jam and it took off so much that she has to invest, take loans and work very hard to grow that business. In 2012, she wanted to sell the business and I was in one of the meetings for that when I realised that she had worked so hard for so long and I just couldn’t let it go. It’s in our blood, it’s who we are, it’s the reason why we are what we are. So, we decided to run it as a family,” says Ané van der Walt, the daughter.

Today, Ané van der Walt does the marketing and distribution while her brother and sister are part of the production team; her other sister handles the finance. The mother, Ina, comes in as an advisor.

“We got help to set up our vision and mission as a family for this business and we drew up contracts to govern that. The biggest misconception is that if you are working for a family business or are a shareholder in that business you can do as you want. In fact, the pressure is more, hours are longer, and you work even harder because if you fail the business fails and your family fails,” she says.

With all these successes, there are still plenty of family failures. Often, it’s difficult to train and convince children to run the family businesses. Family fights can get in the way along with lax governance and the lack of a succession plan.

“Most family businesses fail simply because they don’t have a family constitution. The family business constitution is the roadmap of values and guidelines as to the way the family conducts itself as a family and a business. Essentially the constitution helps the existing and future generations to deal with the benefits and complexities of a family business,” says Diederichs.

Most businesses in South Africa fail within the first year – five out of every seven go under. But if you are related to the people in your business, there is a good chance that you won’t be one of them.

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