According to Asoko Insight’s FOB500 research, Nigerian family-owned businesses make up 36% of companies within the Economic Community of West African States, (ECOWAS).
These businesses have been vital to the socio-economic development of Nigeria and have been instrumental in the region’s back-to-business strategy amid the COVID-19 pandemic as a mechanism of securing their legacy.
It is important to note that family-owned businesses globally, including Africa, experienced adverse consequences as a result of COVID-19. Mandatory lockdowns and the general restriction of movement contributed to creating this challenging operational environment that required family businesses to adapt to survive. Policies such as ‘working from home’ took a new impetus.
Responding to these challenges, many family-owned businesses have embraced new ideas and forward-looking innovations by developing resilient business models with purpose and values at the core of their operations. Such business models have enabled them to attract investors who are equally ESG-minded, enabling the family business to broaden their financing sources, while presenting an opportunity for them to align their operations to environmental, social and governance (ESG) measures.
PwC’s 10th Global Family Business Survey, ‘From Trust to Impact: Why family businesses need to act now to protect their legacy tomorrow’, found that close to 91% of Nigerian family-owned businesses exercise their corporate social responsibility and are currently aligning these to ESG measures.
Perhaps now more than ever, most are focused on their businesses having a positive impact beyond shareholder return, but particularly on the wider community of stakeholders relevant to their sustainable business operations. Examples of these businesses include the Aliko Dangote Foundation and The Mike Adenuga Foundation, which have showcased solidarity with the Nigerian people by supporting the Nigerian Federal Government in the fight against the pandemic.
Additionally, Nigeria’s commitment to improving access to affordable, reliable energy and transitioning to the use of cleaner energy, in line with the global target of net-zero emissions by 2050, demonstrates the need for various stakeholders to play their role in protecting people, planet and profit. Such initiatives attract investor interest as they highlight impact rather than solely the bottom line, enabling these businesses to integrate with the society in which they operate.
Due to border closures and the uncertainty in trading during these unprecedented times, most family-owned businesses have tried to maximise their opportunities. Regional blocs and treaties, such as the ECOWAS trading bloc and the African Continental Free Trade Area, (AfCFTA), have allowed these businesses to enter new markets, expand their customer base and develop new products and services.
Another key trend that has emerged in this post-covid world is the need for family-owned businesses to adapt and change their ways of thinking in terms of legacy planning.
While many businesses have shown true resilience throughout the pandemic, PwC’s 2021 Global Family Business Survey highlights the fact it’s no longer enough to simply rely on family values and heritage.
Interestingly, the report found that while family values clearly matter, only half of the family businesses surveyed had a documented vision and written purpose statement, and only 30% had succession plans in place.
Typically, as founders or business owners become less involved in the day-to-day operations, or as the business moves away from the scope of the family’s expertise, the need for governance becomes increasingly important. The report by PWC states that only 15% of them have a well-established guideline for resolving conflicts whereas 50% of them have no governance policies at all.
Introducing a professional governance policy, through a well-defined framework, and having clear conflict resolution mechanisms in place, not only improves decision-making processes and communication, but it also creates the much-needed balance between both the family and the business.
Family businesses that can establish an appropriate governance strategy with robust succession planning – preferably utilising the experience and expertise of a professional, independent party – will be more likely to create a profitable environment with high investor appeal that will enable the company to successfully grow and prosper.
What success stories tell us, time and time again, is that careful planning and engaging experienced experts early provides the foundations for the preservation and protection of the family business, thus ensuring its continued survival and operation.
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