Academic journal article Academy of Entrepreneurship Journal

Challenges to Intra-Family Succession in South African Townships

Academic journal article Academy of Entrepreneurship Journal

Challenges to Intra-Family Succession in South African Townships

Article excerpt

INTRODUCTION AND BACKGROUND

The businesses and institutions which last do not generally result from the narrow pursuit of popularity or personal advancement, but rather of devotion to a greater purpose, namely, the desire to leave a worthwhile achievement for the next generation, the commitment to give back to the community in which a business enterprise has prospered and a determination to boost the economy (PricewaterhouseCoopers, 2008).

The relevant available literature concerning FOBs is frequently characterised by accounts of problems and pitfalls, with their lack of longevity being a principal cause for concern (Glu, Kula & Glaist, 2008). The smaller FOBs are particularly vulnerable, with many surviving for between five to ten years and their average life span being a mere 24 years (Stavrou & Swiercz, 1998; Venter & Boshoff, 2005). According to several researchers and writers, one of the main reasons, if not the single most significant reason, for the failure of FOBs to survive is intergenerational succession with respect to management (Hjorth, 2016; Venter, Van der Merwe & Farrington, 2012; Venter, Boshoff & Maas, 2005; Visser & Chiloane-Tsoka, 2014).

While the importance of FOBs cannot be underestimated, the contribution which they make to socio-economic growth has not been adequately understood in South Africa, nor has the conditions which are necessary for successful operation of FOBs are not well established (Maas, 2014). Typical areas of concern for FOBs include succession, insularity, interpersonal conflicts and conflicts of interest within the families concerned and governance (Visser & ChiloaneTsoka, 2014). Further problem areas include the family connections, intergenerational changes and the sustainability of family-owned businesses (Visser & Chiloane-Tsoka, 2014; Nordqvist & Melin, 2010). In fact, FOBs typically struggle with succession planning, conflicting value systems and inter-generational tensions (Hjorth, 2016).

Owing to the role which they play in both the economy and the socio-economic development of South Africa, the survival of FOBs from one generation to the next is of crucial importance to the economic growth of the country. An assessment of the literature revealed a significant body of scholarly work that has been done on family business in South Africa (Venter, 2005; Desai, 2008; Taruwinga, 2011; Thage, 2017) even though not so much consideration has been given to township businesses. This comes against the growing interest in township businesses, given the particularities of these townships, the enormous attention drawn by xenophobic attacks on immigrants who operate there and government's efforts to provide broad-base economic growth. Using township businesses as the lens, this paper sought to understand the challenges that family-owned businesses in South Africa face when planning for succession.

LITERATURE REVIEW

Access to most of the literature which is reviewed in this section was obtained by consulting academic journals, books and other sources. In order to align the review with the objective of the study, namely, to determine the challenges which are encountered during the process of planning for succession, the relevant literature will be presented under the headings of the sections which follow.

Definition and Unique Characteristics of Family-Owned Businesses

Ibrahim and Ellis (2004) define a family-owned business as one that is managed by at least two members of a family or a single family owns at least 51% of the business. In addition, family-owned businesses are administered with the intention of pursuing and shaping the vision of the business in favour of future generations of the family (Chrisman, Chua & Sharma, 1999).

Maas et al. (2014) explain that family businesses are distinctive in a sense that the interests of the families supersede those of the business in most cases. Although a business which is not owned by a family will be run solely as a business, when members of families work together, disputes in their businesses usually have a ripple effect on relationships within their families and vice versa. …

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