Sometime back, I was on a live discussion where someone who was in Germany was asked why African family businesses were not multi-generational. I will forgive their ignorance as they have never actually been on the continent because they fell into the assumption that African families are close and are about community. Therefore, the assumption is that they automatically have multigenerational businesses.
This is a huge assumption that is highly inaccurate. Being African, raised in Africa, and working with African businesses, I have seen that family governance is the biggest problem that family businesses on the continent face.
The family itself and the various intricacies that are part of the African family contribute to a lot of the issues that then affect the business and its transfer thereof. The unity in African families is usually held intact by a matriarch or patriarch (usually the founder) who has a dominant voice in the family and its activities and various relationships.
On the passing of this individual, in most cases, the family then fails to stay together and the disintegration of the business then happens rapidly afterward. The closeness that we see in African families is usually held intact by the culture of family governance.
It dictates the relationships and the positions within the family and the interaction of the various family members. To focus on family governance in relation to business would be a great injustice to the African cultural governance which reigns supreme over all interactions within the family. It must always be considered and never overlooked when dealing with governance within the business system and family system scope.
My take on the discussion is that the biggest challenges for family businesses in Africa have to do with the family system and not with the business system. The main issue is how these two systems are being navigated to find the harmony that happens in transitions such as succession, estate planning, and generational transfer, especially in wealth and business.
I will clarify below by stating the obvious but not normally highlighted other non-cultural nuances that are challenges for African family businesses in no particular order:
- Educating but not integrating the next generation: Most African families value education a lot and invest a lot in their children getting the best education. It is usually the main driver for providing the best for their family that drives founders to set up their businesses. This drive also lends itself to having founders send their children to the best schools globally to ensure they get the very best in education. Given that the founders themselves then remain in their home countries focusing on the business, they never truly experience the same experiences that their children do in their time away from the home country’s environment. This then sees either the children returning to work in the family business or not returning but choosing a life abroad. Let’s look at both cases as separate challenges. In the case of the founders who have children who decide to stay abroad and not return home-the business itself may then end up being sold as the founders pass on or decide to retire and move to be in proximity to their children. This becomes a loss to the community in terms of the goods or services the business supplies. A loss in skills that the business provided and an overall loss in the economy of a viable and functioning business. In the other case, where the children decide to return home, the founders, because of their many years at the helm of the business, are reluctant to integrate the new generation with their new or foreign ideas into the business. The founders forget that they educated the new generation for the purpose of continuity and instead see themselves and the business as one entity and the new generation as a looming threat to both their existences. This usually means that the children feel rejected and then either refuse to join the family business, join and then leave, or start their own business similar to that of the family. All of which leads to the family business not becoming multigenerational.
Possible Solution: It would be important for the founders to not look at the next generation as a pest or as a threat to their success, but to see them as their legacy. The next generation is an investment that could not only double their success and continue building their company but also give them their chance at immortality (through building the name and the heritage of the business). By simply accepting the differences that may be caused by many years apart or even by differences in education and beliefs and using them to work together towards a better and more diverse solution, there is the ability to merge their joined experience for the advancement of the business. In the cases of next-gen who do not want to return to the country or business, the option of selling the business and maintaining ownership that gives access to financial benefits is also an option. The next generation may not immediately see the benefit of such a move, but the long-term financial investment is always a good option, more so if the business provides the community with essential goods and services and skills cultivation.
- The looming honor system: In Africa, we have a deep-rooted culture of putting our elders on a pedestal and never challenging or questioning their authority. Because of this, many next generations are “gagged” and stopped from speaking openly about issues that they feel may be affecting the family. They cannot judge or challenge the decisions of the founding or elder generations. This ends up with many, many situations of Next Gens not being made fully aware of complex situations that they then inherit on the retirement of the founder, which in most cases happens when the founder passes on and is no longer there to answer to or provide guidance as to their wishes in the handling of the situations. Some of which may involve complex relationship issues like children who were unknown to some members of the family, and spouses who were unknown to some members of the family. Promises and agreements that were undocumented but only known to some members of the family. Unclear ownership and succession situations need clarity. The issues that children may have heard of but were never clarified, including unclear intentions around the succession of the company and its management thereof. When the founder then demises, because of the honor system, sometimes succession decisions are then left to elders or the presumed elders of the family who may not be savvy to the operations of the business and may not know what needs to be done to ensure the business stays in operation. This may in turn cause the business to close down or stop operations whilst legal or family wrangles are being resolved. Depending on the nature of the business, this usually leads to the business eventually losing customers, market share, credibility, critical staff, and finally it’s eventual folding.
Possible Solution: The honor system is a global phenomenon where the elderly have always been seen to hold more wisdom because they have lived longer and have more experience. This should not change, but the adoption of inclusivity may be an advantage for the advancement of all societies, especially African society. Representation of the younger and next generation is essential on all platforms of decision-making. Not just token representation, but actual representation, which gives them a voice that is heard and respected. Sharing critical information is also necessary. It may cause embarrassment or shame for the interested parties, but once difficult issues are put forth for discussion, one can start putting in place possible resolutions, healing and acceptance become an option, and future losses are mitigated or stopped. Communication is not easy, but it is essential for the resolution of all issues or the beginning of healing thereof.
- The family matriarch and patriarch with an uncertain succession plan: As with the previously mentioned points, when the founder holds all powers and no family governance or corporate governance is exercised appropriately in the business, the business owners are faced with issues of uncertainty indefinitely. The matriarch or patriarch who holds court, as did the kings and queens of old, is faced with the same dilemmas if they do not clearly state who their successor is. Worse still, if the founder does not train the successor and make it clear their role and also acclimatize the family to this new leader, the major issue in business is that the operations of the business are not as easily run as with the family. In a family, the assumption is that the oldest son or, at times, the oldest daughter automatically takes the headship of the family. This does not always translate to business, because the assumed “heir” by default may have little to no knowledge or interest in the business and maybe instead, be a hindrance or a cause of business bankruptcy or failure. It would be essential for the founder, who is either a matriarch or patriarch, to state their intentions for succession clearly and ensure they have prepared the proper successor and given them the right tools to succeed on the job. As well as rallying the family to the successor so that there is little to no in-house fighting that could spill over to the business.
Possible Solution: Succession is always a hot topic. With many players wondering if they will be the “chosen” one. Experience has taught us that birthright has always been the most convenient succession selection plan, but it has not always been the most successful or right plan. Not all people are suitable for the “office” or for “leadership”, and not all people choose leadership. In fact, many people shy away from leadership and choose to be in a contributing team and do so effectively. And the matriarch or patriarch may have successfully managed to lead their family, but it is also their responsibility to identify and nurture the right successor based on the values they hold dear as well as based on the qualities needed to head the family. It must be kept in mind that the successor to head the family may not necessarily be the same successor who heads the family business. The skills-set needed for both these jobs may be different. The founder must be clear about this and set up the family and business for the right leaders and if indeed the leaders are different, the founder must take responsibility for teaching these two unique leaders to work hand in hand for the success of the family and the business. Moreso, the family business is the uniting tool of financial interdependence that will eventually foretell the financial destiny of the collective family.
- Power play as a way of family life: All families have dynamics. Moreso, complex families are as large and intertwined as the African family. We embrace all relations, and the traditional nucleus of the family as known in the Western complex is not known in Africa, where totems and family branches are as deep and multi-rooted as the baobab trees. In such families where relationships can be blurred and interchanging based on assumed seniority, the law sometimes can govern the relationship but not always.
Possible Solution: In the case of business and family, family is complex and can be counterproductive if not governed correctly. And even in spaces where family governance is taken seriously and adhered to, it is necessary to implement legal advice and structures that may become the final power instrument to ensure a family multigenerational business survives or even thrives. Getting legal advice to enforce the constitution may seem extreme, but even in Africa, the law can trump the sometimes long-winded and exhausting traditional rites and practices.
At the end of the day, what makes family businesses unique is family. The family is the anchor that makes the business begin and weaves the history of the business. Without the family, the business would likely not survive or thrive. Family brings with its resilience, togetherness, and the thread that all humanity lives for “a story” and “a history”.
Once we learn this and implement the right structures to allow the story to become multi-generational, we will create the businesses and solutions that change communities and contribute to human history, and our families will become the “legends” that are spoken about throughout the timeline of man.
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.