Family-Owned Businesses in South Africa: A Strategic Analysis
Family-owned businesses (FOBs) in South Africa, as in the rest of the world, are setting the benchmark for performance, resilience, and adaptability. Defined as companies in which founders or their descendants hold significant share capital or voting rights, FOBs have long played an outsize—and often underacknowledged—role in the global economy. With a knack for surviving and thriving over decades, FOBs account for more than 70 percent of global GDP and about 60 percent of global employment, and they play a critical role in supporting education, healthcare, and infrastructure development around the world. They also consistently outperform businesses that are not family-owned.
Recent McKinsey research compared the performance of 600 publicly listed FOBs with 600 listed non-FOBs between 2017 and 2022. The study found that, on average, FOBs delivered 17 percent higher ROIC, 14 percent higher TSR, and 33 percent higher economic profit, though the extent and drivers of this outperformance vary. Additionally, we interviewed leaders of more than 20 FOBs and surveyed another 600 primarily private FOBs worldwide, including in South Africa, to uncover what these businesses are doing differently and how they have created superior value over decades.
To read the full article, download the PDF here.
Industry Insights
Family-owned businesses have historically been the backbone of the global economy, contributing significantly to GDP and employment. In South Africa, these businesses have demonstrated a remarkable ability to adapt to changing market conditions and drive sustainable growth.
Market Trends
Market trends in South Africa indicate a growing preference for family-owned businesses due to their strong performance and long-term vision. These businesses are more likely to invest in innovation, sustainability, and community development, making them attractive partners for investors and stakeholders.
Structured Frameworks
When analyzing the success of family-owned businesses in South Africa, it is essential to consider the following frameworks:
- Ownership Structure: The concentration of share capital and voting rights among family members.
- Succession Planning: Strategies for managing leadership transitions within the family.
- Corporate Governance: Policies and practices that ensure transparency and accountability.
Executive-Level Recommendations
Based on our analysis, we recommend the following strategies for family-owned businesses in South Africa:
- Develop a robust succession plan to ensure continuity of leadership.
- Invest in digital transformation to stay competitive in the market.
- Focus on talent development and retention to drive innovation and growth.
FAQ
Q: What sets family-owned businesses apart from non-family-owned businesses?
A: Family-owned businesses tend to have a long-term perspective, strong values, and a commitment to legacy, which often translates into superior performance and resilience.
Q: How can family-owned businesses overcome challenges related to succession planning?
A: By engaging in proactive succession planning, involving family members in leadership development, and seeking external expertise, family-owned businesses can ensure a smooth transition of leadership.
Conclusion
In conclusion, family-owned businesses in South Africa have demonstrated exceptional performance and resilience, outperforming their non-family-owned counterparts. By leveraging their unique strengths, such as long-term vision and values-driven approach, these businesses can continue to drive sustainable growth and create value for stakeholders.
