Why African family businesses should prioritize succession planning

Family businesses in Africa play a pivotal role in driving economic growth and creating employment opportunities across the continent. However, they often face significant challenges related to digital transformation, family governance, and succession planning. Faizal Bhana, the Director overseeing Middle East, Africa, and India at Jersey Finance, shed light on the importance of addressing these issues in a recent interview with CNBC Africa. The lack of proper succession planning is a major concern for many family-run businesses in Africa. Shockingly, nearly 30% of these businesses fail to transition successfully to the second generation. This poses a threat considering the entrepreneurial spirit that is rapidly expanding throughout the continent. Bhana emphasized the critical role that family businesses play in the economy, contributing significantly to the GDP and employment rates. Globally, family businesses account for 70 to 90% of the GDP and employ over 60% of the workforce. Similarly, in Africa, these businesses are vital economic players and interact closely with various stakeholders, including customers and the wider public. The impending intergenerational wealth transfer, estimated at $68 trillion globally, is also expected to impact Africa, with private wealth held by families projected to increase by 30% in the coming years. Given their substantial economic contributions, it is imperative for family businesses to focus on succession planning to sustain their legacy and ensure continued growth. While discussing the challenges faced by family businesses amidst digital disruptions, Bhana emphasized the importance of strategic planning. Transparency, stakeholder buy-in, and clear delineation between ownership and management roles are essential components of a successful family business operation. The COVID-19 pandemic accelerated the involvement of the next generation in many family businesses, prompting a closer look at integrating technology and adapting to the changing business landscape. The younger generation, known for their tech-savvy and innovative approach, is disrupting traditional business models and pushing for immediate results. Their active role in driving digital transformation within family businesses signifies a shift towards more agile and technology-driven operations. By leveraging the younger generation's expertise and embracing digital tools, family businesses can navigate the challenges of modern-day business environments and ensure long-term sustainability. In light of these developments, it is crucial for family businesses in Africa to prioritize succession planning, embrace digital transformation, and strengthen family governance practices. By equipping themselves with the necessary tools and strategies to adapt to evolving market dynamics, family businesses can secure their legacy, drive continued growth, and contribute to the long-term prosperity of the continent.