…says family businesses are essential to global economy success
…says Nigeria needs lasting family businesses for its annual growth potentials of 4% to 6%
The PwC Nigeria’s 2021 Family Business Survey Report has highlighted gaps in embedding professional governance structures.
It identified governance is imperative to a strong legacy, adding that family businesses are essential to global economy success.
The Report revealed that despite Family businesses reporting good levels of trust, transparency and communication, there was need to entrench governance to achieve a strong legacy.
“50 per cent of Family businesses surveyed have no governance policies in place,” the report showed.
It added that although a majority of Nigerian Family businesses see an opportunity to lead in sustainable business practices, about 91 per cent of them engage in some form of social responsibility activities, mostly involving contribution to the local community or traditional forms of philanthropy.
“Only a third of Nigerian Family businesses have a developed and communicated sustainability strategy,” the Report stated.
The Family Business Survey Report was based on 2,801 interviews conducted with family business leaders and decision-makers across 87 territories including Nigeria between October, 5 and December 11, 2020.
Some of the key insights were shared at the virtual launch of the Report held on Wednesday.
Guest speakers at the event were Group Executive Director, BUA Group & ASR Africa, Kabiru Rabiu, and Group Executive Director Nestoil & Obi-Jackson Foundation, Nnenna Obiejesi.
With the theme of this year’s publication as “From trust to impact – Why family businesses need to act now to ensure their legacy tomorrow,” key issues of the day were insights on what family businesses are thinking.
Speaking at the virtual launch of the Report, Partner & Family Business Leader PwC Nigeria, Esiri Agbeyi, said: “With global disruptions like COVID-19, there is the need to focus on factors that turn current businesses into legacies for generations to come.
“There is a big task for family businesses, especially in Nigeria to effectively manage emerging risks by adopting business resilience measures across all service lines – sales, production, human capital, technology and research.”
Associate Director Family Business & Foundations PwC Nigeria, Uma Kymal, on his part said: “Family businesses are essential to the success of the global economy.
“The largest 750 alone have combined revenues of $9 trillion a year and employ more than 30 million people.
“Additionally, family-owned businesses account for over 30 per cent of companies with sales over $1 billion.
“They helped the world reboot after the financial crisis; they need to be strong to do it again after COVID-19 and secure their legacy.
“Based on their significance, it is pertinent that lasting family businesses emerge in Nigeria if Nigeria will realise its desired growth potentials of 4 per cent to 6 per cent annually.”
The Panel session moderated by Fiscal Policy Partner & Africa Tax Leader, Taiwo Oyedele, focused on sustainable philanthropy.
On the issue of governance, Rabiu said that family businesses must continue to improve their governance by ensuring that they have good audit mechanisms and the right people at management and trustee levels.
“This will ensure that every naira invested is put to the best use,” he said.
The panel also noted the importance of balancing transparent disclosures to stakeholders with the desire of family businesses to be private.
Obiejesi, reiterated that communication and transparency are key ingredients for operating on a global platform and this will ensure the sustainability of the business from one generation to another.
Key findings from the Family Business Survey 2021 Report:
41% of family businesses in Nigeria expected a decline in sales growth in 2020 (46% globally).
63% Nigerian family businesses said one of their key priorities over the next two years is introducing new products/services well over the global average of 50%.
60% said that their digital capabilities are not strong, but only 34% have deemed it a priority. It was a similar picture globally.
50% had no governance policies (21% globally).
70% said that in order to succeed going forward they must deliver greater benefits for the planet and human society (global 53%).
Some implications for Nigerian family businesses:
Growth and sustainability is at low ebb – only 16% of family-owned businesses prioritise sustainability as a defined strategy in their business; and this was biased to large businesses and new-generation family businesses.
Fostered by the lack of responsibility to society, this emphasises a gap that needs to be closed to drive the long-term survival of family businesses.
The African Continental Free Trade Area (AfCFTA) holds expansion opportunities for businesses. Nigerian family businesses now consider business expansion a top priority to diversify their revenue sources and reduce the risk.
They can latch onto the opportunities created by AfCFTA and to tap into these opportunities, Nigeria family businesses must remodel their business process by seeking innovative ways to serve the world with the human capital at home.
Digitalisation must be embraced for growth and longevity because the ability of businesses to adapt to digital evolution will determine their longevity.
Therefore, openness to digital adoption, investment in emerging technologies, and collaboration with tech giants will support the growth of family-owned businesses in Nigeria.
The panel agreed that family businesses must professionalise family governance. A governance structure with traits like a clear conflict resolution process, adequate oversight and the absence of emotions and personal bias are important for family businesses in Nigeria.
In addition, to build family businesses that will last a lifetime; Environmental, Social and Governance (ESG) factors must be prioritised.
Family businesses must contribute to environmental safety and support the culture and values of their immediate societies.
Family businesses must integrate their sustainability practices and also start advocating new policies that positively influence the order of business operations; ensure tax transparency; promote the ease of doing business; and encourage the emergence of new entrants.
Special regimes for accelerator programmes can be considered to foster growth and expansion.
PwC purposefully, is to build trust in society and solve important problems. It is a network of firms in 155 countries with over 284,000 people who are committed to delivering quality in assurance, advisory and tax services.
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity.
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