Home » Family business resilience leads to generational wealth

Family business resilience leads to generational wealth

by Tsitsi Mutendi

Family businesses are rarely viewed as a sector that could influence economic growth, but the Africa Investment Forum started recognizing them as essential players on the continent.

In 2019, for the first time at an economic conference of this nature, families running business empires were given a platform to share their views on how Africa’s unexplored wealth could benefit all who live on the continent.

One of the strengths of family businesses is their ability to create roots similar to trees that embed them in the space they are in. Family businesses, by nature, often build lasting relationships, valuable in any investment climate. They create a connection with the community, and they hold out hope for jobs and services and products, as well as livelihoods for the economies they serve. 

Often frowned upon, we have seen many people cry that family businesses need to be professionalized. However, it has been proven that Family Businesses are the more resilient models of business when it comes to time and growth. In the Asia Pacific Business Review of April 2012, a paper submitted by Bruno Amann and Jacques Jaussaud on Japanese family businesses, they noted that it is widely documented in the academic literature that family businesses perform better and enjoy a sounder financial structure than non-family businesses. 

Furthermore, in the results of their research, they found that family businesses achieve stronger resilience both during and after an economic crisis compared with non-family businesses. They resist the downturn better, recover faster, and continue exhibiting higher performance and stronger financial structures over time. One of the oldest surviving family businesses in the world is Hoshi Ryokan: a Japanese inn-style hotel founded in 718 CE and has been in the same family for 46 generations. This longevity has led to an incredible understanding of the business and its history, which anyone outside of or relatively new to the business would be unable to replicate.

Looking at the elements that are so characteristic of family businesses, a number of things invariably always emerge. Long-term thinking is one of them. Non-family firms draw up their goals for the next quarter. Family firms, however, think years – or even decades – ahead.

A longer-term perspective is an excellent way to foster a clear strategy and decision-making culture throughout the business. Family businesses are aware that what they are doing today is not a conclusive story, but that the next generation may take over and lead the business into the future and become stewards of the wealth created. That long-term approach translates into more sustainable relationships with their customers, suppliers, and employees.

For example, the Ibru Organization, Nigerian businessman Olorogun Michael Ibru started in 1957 by importing and selling frozen fish from the back of a truck. As his fish trading business grew, he chartered his first fishing boat and went into large-scale fishing, acquiring fishing trawlers. From fishing, the company expanded into other business sectors such as brewing, construction, petroleum distribution, bulk storage, bulk liquid products, warehousing, and importation.

Ibru’s first son, Oskar, took the helm of the organization in the 1980s and has been responsible for steering the wheel since then. From humble beginnings, the family business has grown into a formidable multilateral organization that heralds employment and wider economic growth for the country and continent. 

Another such story of resilience is Raymond Ackerman and Pick ‘n Pay, which remains a family business and straddles its reach across the African continent and Australia. Raymond Ackerman was born in 1931 into one of South Africa’s leading retailing families. His father Gus Ackerman had founded the Ackermans department store chain in 1916. After a long journey working in the family business and then moving on to work for others, Raymond founded Pick’ n Pay in 1967 as a family-controlled business with four small stores in the Western Cape. The founder of the chain is Harry Goldin. Raymond Ackerman purchased the small chain of supermarkets from Goldin and developed Pick n Pay into South Africa’s largest supermarket group. Pick ‘n Pay Stores Ltd. is South Africa’s leading food, clothing, and general merchandise retailer.

The Cape Town-based company has long been a champion of “consumer sovereignty,” focusing primarily on the discount retail market. Pick ‘n Pay operates through several retail formats, including 14 Pick’ n Pay hypermarkets and 1,628 (968 company-owned and 660 franchised) The company also operates the Pick’ n Pay Pantry convenience store format, as well as franchise grocery operations under the Pick’ n Pay Family format; more than 130 Score retail stores throughout South Africa, as well as in Botswana and Swaziland; and a small number of stores in Namibia.

In addition, the company owns the Franklins supermarket group in Australia. In June 2006, Pick’ n Pay expanded its South African presence again with the acquisition of Fruit & Veg City, which operates nearly 90 company-owned and franchised stores throughout South Africa. The company also has extended its range of customer services by creating the Go Banking joint venture with Nedbank. Listed on the Johannesburg Stock Exchange, Pick’ n Pay remains controlled by founder and Chairman Raymond Ackerman, and Sean Summers serves as CEO. 

What is unique about this vast empire is that it grew from just a locally owned business to a global conglomerate—following in the true steps of enterprise and the enterprising family. Raymond saw his father working on and building a family business. His father, Gus, had a business empire of his own. Gus’s Ackermans had been founded just after World War I but was sold to the Greatermans group in 1940. He later took lessons from that journey and built his own business to solve a problem he saw in the community he chose to serve. Raymond grew a business that employs thousands of people and feeds into an ecosystem that continues to grow. 

Resilience in turmoil is not new to this business. When initially attempting to enter the Australian market, Pick ‘n Pay found some resistance. With Pick’ n Pay’s rise to the top of South Africa’s retail scene in full swing, Ackerman attempted to expand the company’s format into a new market and took his idea to Australia with a highly successful store in Brisbane in the early 1980s. However, the company’s attempt to open a second store in Melbourne in 1984 became embroiled in the growing international resistance to South Africa’s apartheid policies. Ironically, Pick ‘n Pay itself had long served as a model anti-apartheid group.

The company had long been a champion of South Africa’s anti-apartheid movement. Many years before the end of apartheid, the company’s management had been fully integrated, with some 50 percent of all management positions held by black South Africans. And this may be attributed primarily to the fact that Family firms tend to have a greater sense of commitment and accountability at their heart than non-family firms, as it is not just the needs of the business at stake, but the needs of the family too and the reputation of the family. The social capital that endears the family to the community that they serve.

We can, however, see from the continued growth of the Ackermans empire that they overcame many issues that tried to stop their growth. Raymond’s wife, Wendy, and his four children, Suzanne, Kathryn, Jonathan, and Gareth, all work for Pick’ n Pay or its charity. On Oct. 21, 2009, Gareth took over his father’s duties, and on March 1, 2010, the chairmanship.

While it is clear that there are plenty of benefits to family-owned companies, they also have their downsides, including:

Lack of family interest, which can be padded by teaching next gens to understand the three-circle model and instead become responsible owners/shareholders. They may not work for the company, but their financial investments need them to be aware of the operations and decisions that concern the family.

Conflict between family members, which is sometimes inevitable. Where there is a dynamic between different family members, family history and a blurred boundary between family life and work life, can all cause conflict within any family-run business. And family relationships can often make such issues challenging to resolve. It can sometimes cause irreparable damages to the company because the conflict becomes deeper than just process or organization. 

From the examples cited, we can see that for any business, a large part of future success will be down to creating great products and services and drawing up a business strategy that is flexible enough to move with any market changes and enter into new investments. However, in family-run businesses, a vital consideration is ensuring that the next-generation talent is identified, nurtured, and knows what to do and how to do it to continue the business’ growth.

Tsitsi Mutendi is a co-founder of African Family Firms, an organization that aims to facilitate the continuity of African family businesses across generations. She is also the lead consultant at Nhaka Legacy Planning and the host of the Enterprising Families Podcast.

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