Family companies drive economy in South Africa

Family companies drive economy in South Africa

It is family businesses which are driving the South African economy.

Director, Head of Family Business

KPMG in South Africa

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The below article originally appeared on The Herald supplement.

“WHAT we are seeing with our clients is that it is family businesses which are driving the South African economy,” KPMG Family Business South Africa head Alan Barr said.

The South African unit, which is part of KPMG’s Global Family Business Centre of Excellence, is based in Port Elizabeth. This is because of the existence of the country’s only university-based Family Business Research Unit at Nelson Mandela Metropolitan University (NMMU), and because of the high number of successful family businesses in the Eastern Cape.

According to Barr, KPMG works closely with the NMMU Family Business Unit (FBU) to identify and meet the many challenges facing family businesses across the country and farther afield.

KPMG provides these businesses with access to best practices in terms of how they deal with the unique challenges they face, instead of travelling abroad for the same insight. The Family Firm Institute of Boston in the US estimates that 30% of family-owned businesses survive to the second generation, while only 12% survive to the third generation and a mere 3% to the fourth generation and beyond.

Research undertaken by the NMMU FBU is helping to identify the main challenges facing family businesses in South Africa, according to unit director Prof Elmarie Venter. Findings are shared at regular family business forums and conferences hosted by KPMG and the NMMU FBU. The consulting firm and the FBU also work together where necessary to assist family-owned and run businesses, according to Barr. “It is a collaborative relationship,” he says.

Around the world the experience is that healthy family businesses are needed to create sustainable jobs and create wealth. They face a number of unique challenges. A recent survey of 100 South African family businesses found that about 26% of respondents were apprehensive about the transfer of the business to the next generation, stating that they would not have the required skills and aptitude to own and run the company. Another 22% foresaw that there would be conflict between the family and those managing the company. However, Venter said, the FBU is helping family businesses across the country to overcome the challenges through short courses and the training of family business practitioners. Owners can also have a free one-hour introductory consultation at the FBU. Despite the challenges of both the economy and managing family-run businesses, they continue to flourish.

Prof Venter says family businesses in the Eastern Cape and the rest of the country that are growing are doing so because they are innovating and embracing the King Code of Governance principles. Instead of seeing them as a burden, they see them as a guide to doing business properly.

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