As the new year unfolds, many business leaders across Africa are assessing the 2023 year to chart an increasing resilient path ahead. Last year, major key events unfolded that had global repercussions on supply chains, businesses and the leaders of those businesses.
For family business leaders, it forced them to interrogate their organisation’s path and moved them to consider the need to adapt and diversify their approach amid increasing complexity. These sentiments are reflected in the Family Barometer 2023 report, that we issued with Julius Baer.
Striving to leave an enduring imprint and legacy
The report takes a deep dive into the nature of family affairs in business, the changing landscape of taxes and regulations, the role of family governance, the impact of political stability, and the dynamics of philanthropy.
The report found that families will have to continue to navigate levels of complexity and consult with trusted advisors to help them navigate today’s myriad challenges.
While most respondents were largely from Europe, Asia, the Middle East and the Americas, the key findings do resonate with family businesses in Africa. The majority of respondents were also from the Rising Generation (those aged 18-40), which reveals a cohort striving to leave an enduring imprint and legacy. The report focuses on the following five top trends.
Family affairs are becoming borderless
With increasing globalisation, more families are finding themselves dispersed across the globe. This cultural and geographical diversity makes family affairs more complex. As a result, strategies need to be adapted to navigate this complexity.
On the bright side, globalisation offers families a unique advantage as the experiences and knowledge acquired by the next generation can significantly enrich the family business if their insights are welcomed and valued.
NextGen who have gained international education, networks and experiences are a valuable resource to their family business. However, in many cases, they are under utilised as a resource. What should be encouraged are their new ideas and perspectives. The NextGen should be involved in family council and board meetings as this will help the business and bolster any existing communication or generation gaps in the family.
Taxes and regulation
Taxes and regulations were “the second most discussed topic between wealthy families and their advisors,” with more than half (57%) of respondents acknowledging the significance it plays for wealthy families. Taxes and regulations do increase the risk of non-compliance and incurring unnecessary fines, and are also subject to regular changes.
In South Africa for example, there has been a more specific focus on trusts’ regulations which directly influences many family business structures.
“Family businesses must stay nimble to leverage evolving tax and trade frameworks. With sound guidance, family enterprises can adapt to policy shifts while sustaining growth and job creation. Coordination between African governments is also essential for harmonising tax policies and reducing red tape, so family businesses can optimise opportunities, comply with disparate rules, and focus on building prosperity.“
– Esiri Agbeyi, Business Leader, Africa Family at PwC
Family governance
What is encouraging is that more than half (52%) of respondents say that families are starting to involve younger generations (between the ages of 26 and 35) in decisions about managing wealth.
A similar proportion (56%) introduce them to advisors at the same age, however families wait longer before involving NextGen in important decisions or giving them voting rights: more than half (56%) of respondents said their families wait until their children are over 35 for this. That said, younger generations do not always have to wait so long, as four in 10 respondents say their families give children a say between 26 and 35.
Political stability
Political stability ranked as the fourth highest topic for discussion this year on a global basis – one position lower than 2022.
The majority of wealthy families said they were concerned about political instability within countries, typified by political polarisation and rising nationalism. These families are taking political stability and geopolitics into account far more than before, not just in their investment decisions but also in how they structure their overall wealth.
For many families, this means refraining from investing in places where they believe the geopolitical situation might lead to added complexity or, at worst, a loss of assets.
Philanthropy
Philanthropy retained its place as the fifth most discussed topic by family businesses. Many families view philanthropy as an important way to give back to society, creating a positive impact and providing family members with a purpose that binds them and brings their values to life.
Discussing how philanthropy aligns with family values can foster cohesion between an extended international family’s different branches and generations. Involving the NextGen at a young age can also instil pride, responsibility, identification with family values, and foster a long-term commitment to specific philanthropic activities.
The 2023 survey affirms that global family businesses are once again facing a less predictable world, and one in which black swan events have a habit of materialising on a regular basis.
It’s a more difficult world for preserving legacies and the family business’ wealth and purpose. That makes careful long-term planning and structuring more important than ever. More importantly, achieving this is not simply a once-off exercise but an ongoing journey involving the whole family.
Duncan Adriaans | Leader | Private Business | PwC Africa | mail me |
