The International Finance Corporation (IFC) warns that weak succession planning and governance gaps threaten the survival of family-owned businesses. This critical issue puts companies at risk, particularly in Africa, where many firms struggle to transition leadership between generations. Stronger structures are necessary to ensure smooth leadership changes and long-term business continuity.
Succession remains the most critical challenge facing family businesses worldwide. Many founders remain in leadership for 20 to 30 years, making structured transition planning essential. A major challenge involves successors often lacking sufficient exposure or skills to take over leadership roles. Founders also struggle to exit due to deep emotional ties to their businesses.
This issue fits into Ghana’s broader economic narrative where private sector growth is paramount for development. Family businesses form the backbone of the private sector, contributing significantly to job creation and economic output. The lack of robust transition plans can lead to business failures, impacting employment and overall economic stability. The IFC’s warning underscores a persistent structural weakness in Ghana’s business landscape.
Moez Miaoui, IFC ESG Advisory Lead for Africa, stated at a Family Governance Workshop in Accra that succession issues affect businesses of all sizes across regions. He said, “In any family business setting, succession is the most critical challenge that the family will face and the business will face.” He highlighted that successors are often unprepared, and leaders are unwilling to let go because their identity ties closely to the business.
To overcome these challenges, strong governance systems are vital within both the family and the business. These include family constitutions, family councils, and formal decision-making structures. Family councils act as internal governance platforms, allowing discussions on succession and education of the next generation, separate from daily business operations. This structure is like a board of directors for the family, ensuring alignment and shared values.
Yewande Giwa, Senior Country Officer at IFC, emphasized that family businesses are central to private sector growth and job creation in Africa. She noted that approximately 90% of jobs on the continent come from the private sector. Ms. Giwa explained that while most family businesses have good intentions, they often lack the right structures to improve productivity, strengthen governance, and expand their impact. Establishing boards or advisory committees is crucial to ensure leadership roles are filled based on competence.
Kyle Kelhofer, IFC Senior Country Manager for Ghana and Liberia, reaffirmed the IFC’s commitment to supporting private sector development. He stressed that the sustainability of family businesses directly links to the broader economy’s sustainability. Effective governance, professional management, and well-planned succession processes help businesses survive beyond their founders. This preserves jobs and creates opportunities for future generations.
The Family Governance Workshop is part of IFC’s wider efforts to strengthen governance and long-term sustainability among family-owned businesses and small to medium-sized enterprises (SMEs) in Ghana. The Swiss State Secretariat for Economic Affairs (SECO) supports this program, partnering with IFC for over a decade. SECO believes a strong financial sector is essential for investment, business growth, and job creation. Strengthening governance systems and succession planning is critical for these businesses to remain sustainable and contribute to economic growth.