FirstBank Advocates Stability and Strategy as Family Businesses Boost GDP by $200 Billion

The Group Executive in charge of Private Banking and Wealth Management at FirstBank of Nigeria, Idowu Thompson, has issued a passionate call to family business stakeholders, urging them to prioritize continuity and ensure the active involvement of the next generation. He stressed the importance of establishing structures that facilitate seamless adaptation for successive generations within family businesses.

Furthermore, Thompson emphasized the critical role of moral guidance for the successors of family businesses, emphasizing the need for them to appreciate the value of money and the challenges their predecessors faced in accumulating wealth. He urged them to recognize their role as custodians of the future and to cultivate the habit of saving.

Thompson made these remarks during the Family Business Summit 2023, which took place in Lagos and was sponsored by FirstBank, PwC, CEIBS, and other notable organizations. This summit was convened with the understanding that family businesses play a pivotal role in modern economies.

The guest speaker for the event, Dr. Jumoke Oduwole, who serves as the Special Advisor to President Bola Tinubu on PEBEC (Presidential Enabling Business Environment Council) and Investment, shed light on the significant contributions of family businesses to Nigeria’s economy. She revealed that family businesses in Nigeria collectively contribute nearly $200 billion to the country’s GDP on an annual basis.

Dr. Oduwole underscored the substantial impact of family businesses, citing prominent entities like the Dantata Organization, Yinka Folarin Group, Doyin Group, Emzor Pharmaceuticals, Leadway Insurance, Elzade, Dangote Industries, Coinoli Group, BUA Group, and Globacom, among others. She noted that these family businesses account for up to 50% of Nigeria’s GDP and collectively represent 60% of Micro, Small, and Medium-Scale Enterprises (MSMEs).

Additionally, Dr. Oduwole highlighted the extensive presence of MSMEs in Nigeria, numbering 39.7 million businesses, which collectively account for approximately 96% of all businesses in the country and provide employment for 88% of the workforce. Notably, 23.8 million of these MSMEs are categorized as family businesses.

To further emphasize the global significance of family businesses, Dr. Oduwole mentioned that 750 family businesses employ over 30 million people worldwide and generate a combined annual revenue of $9 trillion. These businesses include renowned names like Wal-Mart, Guinness, Ford Motors, Mercedes Benz, BMW, Cadbury, LG, Tata & Sons, General Electric, Coca-Cola, Comcast, Dell Technology, and Nike, among others.

As part of the event’s proceedings, a survey conducted by PricewaterhouseCoopers (PwC) revealed that a substantial proportion of Nigerian family businesses, approximately 94%, lack a clear and communicated environmental, social, and governance (ESG) strategy. This figure stands in contrast to the continental average of 88%, with Kenya at 85% and South Africa at 88% also lacking clear ESG strategies.

The PwC report went on to highlight that, on average, 65% of African family businesses do not communicate their purposes externally. Among specific countries, 62% of Kenyan family businesses, 43% of Nigerian family businesses, and 71% of South African family businesses refrain from external communication regarding their purposes.

Furthermore, the report indicated that an average of 85% of African family businesses do not take a public stance on important issues. In this regard, Kenya stands at 91%, Nigeria at 94%, and South Africa at 88%.

Diversity, equity, and inclusion (DEI) also emerged as a significant concern. Out of the continental average of 76%, 88% of Kenyan family businesses lack a purpose statement that advances DEI, along with 64% of Nigerian family businesses and 82% of South African family businesses.

The report, a joint effort by the Family Business Network (FBN) in collaboration with PwC, illuminated the growing gap between family businesses and their stakeholders, including employees and customers. This disconnect, in turn, has repercussions for the global economy.

PwC emphasized the enduring competitive advantage of trust for family businesses, as indicated by the Edelman Trust Barometer. Family businesses are generally perceived as more trustworthy than other types of companies, with their trust score being six percentage points higher than that of businesses in general. However, the report noted that family businesses have been losing this trust advantage over the years, especially when comparing data from 2013 to 2023.

According to Forhad Forbes, Chairman of the Family Business Network International, the survey findings underscore the need to collaborate with new generations of future business owners and establish family governance structures and practices to professionalize family businesses. The report also emphasized the importance of rebuilding trust with external stakeholders and employees by aligning with their stated purposes and values, demonstrating commitment to ESG, and ensuring accountability.

The report pointed out that African family businesses require the trust of 96% of their customers, yet they only enjoy the trust of 56%. Similarly, they need the trust of 94% of their employees, but they currently only have the trust of 47%. Transparency emerged as a critical factor in this equation, serving as an essential tool for combating unethical behaviors and fostering trust. Family businesses collectively represent 70% of the global economy and have a unique role to play in restoring trust and promoting a more sustainable business model.

PwC offered a ray of hope by noting that trust is a tangible asset that can be systematically built. However, preserving the trust advantage will necessitate transformation, a reality acknowledged by many business leaders. Notably, 39% of family business respondents in PwC’s 26th Annual CEO Global Survey, which included 4,410 executives, believe that their companies will not be fit for purpose in a decade if they continue on their current course. This sentiment is consistent with similar figures for Sub-Saharan Africa (46%) and South Africa (39%), indicating a global recognition of the need for change.

The Africa Family Business Survey 2023 conducted by PwC provides valuable insights into the perceptions and challenges faced by family business leaders in the African market. The survey, conducted in collaboration with the Family Business Network (FBN), involved 172 interviews across 12 African territories, spanning from October 20, 2022, to January 22, 2023.