The Group Executive, Private Banking and Wealth Management, FirstBank of Nigeria, Idowu Thompson, has called on family business stakeholders to ensure continuity and make sure that the next generation gets involved.
He also called on family businesses to develop structure to ensure easy adaptation for succeeding generations. He added that successors of family businesses need moral guidance to be able to understand the place of money and to remember how difficult it was for the generations before them to get the money. He stressed that they should realize that they are custodians of the future and that they should learn the art of saving.
He said this at a recently held Family Business Summit 2023 in Lagos, sponsored by FirstBank, PwC, CEIBS and others. This was on the heel that family businesses constitute the backbone of modern economies.
The guest speaker, Special Advisor to President Bola Tinubu on PEBEC and Investment, Dr. Jumoke Oduwole, had earlier put the importance of family businesses in Nigeria into context. She said family businesses in Nigeria contribute nearly $200 billion to the country’s GDP annually.
She said family businesses the likes of Dantata Organization, Yinka Folarin Group, Doyin Group, Emzor Pharmaceuticals, Leadway Insurance, Elzade, Dangote Industries, Coinoli Group, BUA Group, Globacom, etc. make up to 50% of Nigeria’s GDP and 60% collectively of Micro, Small and Medium Scale Enterprises (MSMEs).
Dr. Oduwole further said that 39.7 million MSMEs in Nigeria today account for roughly 96% of businesses and 88% of jobs. She cited that 23.8 million of them are family businesses.
Still accentuating the important role of family businesses, Oduwole said 750 family businesses employ more than 30 million people globally with a combined revenue base of $9 trillion annually.
Among others, she listed Wal-Mart, Guinness, Ford Motors, Mercedes Benz, BMW, Cadbury, LG, Tata & Sons, General Electric, Coca-Cola, Comcast, Dell Technology, Nike etc.
Also marking the event, a survey published by PricewaterhouseCooper (PwC) revealed that 94% of Nigerian family businesses do not have clear and communicated environmental, social and governance (ESG) strategy. This is against the continental average of 88%. Kenya averaged 85%, while South Africa averaged 88% in the lack of clear ESG strategy.
The report further stated that on average 65% of African family businesses do not communicate their purpose externally. By comparison, 62% of Kenyan family businesses, 43% of Nigerian family businesses and 71% of South African family businesses don’t communicate their purposes externally.
Also, of a continental average of 85% of African family businesses that do not take a public stance on important issues. The report says Kenya constitutes 91%, Nigeria constitutes 94%, while South Africa constitutes 88%.
And, in terms of diversity, equity and inclusion (DEI), of a continental average of 76%, 88% of Kenyan family businesses don’t have a purpose statement that advances DEI, 64% of Nigerian family businesses don’t, and 82% of South African family businesses don’t.
The Family Business Network (FBN), in collaboration with PwC report was developed to highlighted the widening disconnect between family businesses and stakeholders, including employees and customers, which, by extension, affects the global economy.
PwC notes that trust has been, and remains a vital competitive advantage that sets family businesses apart from other companies. The Edelman Trust Barometer confirms that family businesses are trusted more than other businesses: their trust score is six percentage points higher than that of businesses in general.
The barometer, however notes that they have been losing trust advantage when you compare the years 2013 to 2023.
According to the Chairman, Family Business Network International, Forhad Forbes, the survey findings show that the need to work closely with new generations of future owners and establish family governance structures and practices to professionalize the family business.
The survey also highlights the importance of reigniting trust with external stakeholders and employees by walking the talk on purpose and values, committed to ESG, and accountability.
Hence the report highlighted that among customers, African family businesses need the trust of 96% but have the trust of only 56%. They need the trust of 94% of its employees but have the trust of only 47%.
“Transparency is key to this, as it has become an increasingly important tool for fighting unethical behaviours and fostering trust. Collectively, family businesses represent 70% of the global economy. They can play a unique role in restoring trust and promoting a more sustainable business model,” Forbes said.
According to PwC, “The good news is that trust is tangible and can be systematically built. But if family businesses are to protect their trust advantage, it will require transformation, a reality that many business leaders are already acknowledging. Of the 4,410 executives participating in PwC’s 26th Annual CEO Global Survey, 39% of family business respondents believe their company will not be fit for purpose in ten years if it stays on its current course; a similar percentage of the cohort identifying as family business leaders say the same thing. For Sub Saharan Africa the percentage is 46% and for South Africa, similar to the 39% global 39%.
PwC’s Africa Family Business Survey2023 is an Africa market survey of family businesses. The goal of the survey is to get an understanding of how family business leaders perceive their companies and the business environment. The survey was conducted online in collaboration with the Family Business Network (FBN). The survey conducted 172 interviews in 12 African territories between October 20, 2022 and January 22, 2023.