Accra: The International Finance Corporation (IFC) has raised concerns about the sustainability of family-owned businesses due to inadequate succession planning and governance gaps. The organization emphasized the importance of establishing robust structures to facilitate smooth leadership transitions and ensure the long-term continuity of these businesses.
According to Ghana Web, succession presents the most significant challenge for family businesses worldwide, with particular difficulties noted in Africa, where many companies face hurdles in passing leadership from founders to the subsequent generation. Moez Miaoui, IFC ESG Advisory Lead for Africa, highlighted these issues at a Family Governance Workshop in Accra, noting their prevalence across various regions and business scales, impacting both developed and emerging economies.
Miaoui explained that family businesses often operate under the leadership of long-serving founders for 20 to 30 years, making planned transitions crucial. He identified a lack of preparedness among successors, who frequently lack the necessary exposure, skills, and experience to assume leadership roles. Additionally, founders often find it challenging to relinquish control due to emotional ties to the business.
To combat these challenges, Miaoui called for the implementation of strong governance systems within both the family and the business. These systems should include family constitutions, family councils, and formal decision-making structures. He described family councils as critical internal governance platforms where families can discuss succession, education of the next generation, philanthropy, and shared values, separate from business operations.
Miaoui further underscored the importance of corporate governance principles, noting that governance frameworks help balance the roles of ownership, family, and business operations. Effective governance requires clear structures for each of the 'three circles' of family business - family, ownership, and enterprise - to ensure coordinated decision-making.
Yewande Giwa, Senior Country Officer at IFC, also spoke at the workshop, emphasizing that family businesses are integral to private sector growth and job creation in Africa. She noted that about 90 percent of jobs on the continent are generated by the private sector. Giwa highlighted that family businesses are uniquely positioned to drive economic growth due to their ability to balance profit objectives with broader community impact.
Despite their importance, Giwa observed that many family businesses struggle to survive beyond the founder stage, primarily due to weak structures for succession and governance. She urged family businesses to establish boards or advisory committees and ensure leadership roles are filled based on competence and qualification, even within family-run firms.
The IFC stressed that strengthening governance systems and succession planning is vital to ensuring that family businesses remain sustainable across generations while continuing to contribute to economic growth and job creation.