Categories: South Africa

Proper planning essential for family businesses

Family businesses form a key segment of the SA economy and agriculture in particular.

Family-owned businesses form approximately 80% of all registered businesses in SA, while approximately 95% of commercial farming concerns operate as family-owned businesses, said Andre Diederichs, founder of the Family Business Association of SA (FABASA), speaking at Senwes’ recent Future Focus Day in Bothaville.

“The secret of family business’ long-term sustainability sound governance structures,” said Diederichs. These should prevent emotions affecting business decisions.

A ‘Family Business Constitution’ is the best tool to ensure sound governance principles and structures, said Diederichs. This will determine the long-term vision, values, business objectives and rules for succession.

“It removes all uncertainty and gets all members of the family on the same page,” added Diederichs.

Francois Strydom, Senwes CEO, said the value of any business was contained in the intellect and intellectual value that had been built up over years and even more so in family businesses. A significant percentage of the South African family businesses that dealt with his company were bigger than ZAR X businesses.

The lack of in-depth long term planning, especially detailed succession planning, in family businesses was disturbing, said Senwes CEO Francois Strydom. Very often succession plans were only made public the day the will of the owner was read.

“This is unacceptable and more often than not jeopardizes the very survival of the business,” added Strydom.

DJ van der Linde, 2016 Free State Young Farmer of the Year, who took over the family farming concern in Vierfontein from his father and grandfather, said clear and ongoing communication was essential for the long-term survival of a family business.

“It’s vital that all role players in a family concern are fully aware of what the governance structures and succession plans entail. That can only be achieved through honest, open and regular engagement,” said Van der Linde.

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