Johannesburg - Family businesses must do more to focus their efforts on dealing with succession planning and must implement robust plans to address it, a study by PwC South African edition for 2016/17 Family Business Survey has found.
The study, which was released yesterday, identified the key potential failure of family businesses was succession planning, with only 17 percent of family entities having a succession plan in place compared with 13 percent in the 2014/15 survey, it found.
Andries Brink, the PwC leader for entrepreneurship and private business, said the moment of transition from one generation to the next was the fault line of this business model. “There is no point in having detailed plans for business continuity if the single most significant risk to this is not addressed,” he said. Of the South African respondents, 70 percent had next generation family members compared with 69 percent globally.
“This suggests that there is a strong pipeline of potential next-generation leadership, but with no formal succession plan in place, internal family conflict may undermine future growth, profitability and ultimately the existence of the business,” Brink said.
The report found that 50 percent of South African correspondents agreed that professionalism was a key challenge for the next five years compared with 29 percent in the 2014/15 survey.
What companies such as McCain Foods and Pick n Pay have in common is that both successful businesses came from humble beginnings and were first and foremost family businesses.
The survey said that family businesses had maintained a consistent level of performance over the last financial year. Overall 78 percent of domestic family businesses, which were surveyed, reported growth in the past 12 months compared with 64 percent globally. South African family businesses were also bullish about the future, with 84 percent expecting to grow.
In addition, 80 percent of South African correspondents believed they offered stability to the economy and looked after their staff even in the bad times. The study found that the success of family businesses was boosted by high levels of innovation and production.
The companies participating in the survey ranged between R1 million and more than R1 billion and surveyed 2 800 senior executives from family businesses in more than 50 countries, of whom 130 were from South Africa. The survey represented sectors including agriculture, retail and manufacturing.
BUSINESS REPORT