Why are Nigerian businesses not transcending generations

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by Keyser Soze

June 19, 2021

“The 100 Club” is a 90-second clip shown on Cable News Network (CNN) as an interlude between regular programming.

It showcases companies that have been in existence for a hundred years or more and how the founders’ dreams have been preserved through the years.

These companies which were privately owned (most are now publicly quoted companies) were established and run effectively as family businesses and were handed down over generations.

Some of these companies include General Electric (1892), Coca-Cola (1892), JC Penny (1892), Ford (1903) and Target (1902).

Every time I am in front of the TV and the short clip comes on, I begin to ponder on family-owned businesses in Nigeria and how many of them are still in existence many years after.

Some of the oldest surviving companies in Africa are in Southern Africa and include Boschendal (1865), Woodheads (1867), Cape Argus (1857) and Standard Bank (1862).

In Nigeria, there are a few companies that are part of the Centenary Group and include FirstBank (1894), Union Bank (1917), and Royal Exchange Plc (1921).

According to publicly available information, Kongo Gumi, established in 578 AD, is the oldest continually operating company in the world with its headquarters in Osaka, Japan.

It is a construction company founded by an immigrant who was commissioned by Prince Shotuku to build the Shitenno-Ji Buddhist Temple.

Many businesses that were family-owned tend not to be able to withstand the vagaries of the operating environment, especially after the death of the founder.

A study of family-owned businesses reveals a pattern of declining revenues and eventual demise once the founder passes on.

Some of them changed their ownership structure from private to public in tune with the times, as a business strategy, and some, basically to wrest control from recalcitrant descendants who were running the company aground.

In Nigeria, some well-known family businesses established after Nigeria’s independence (including the 70s and 80s) are no longer in existence either as family-owned or publicly quoted companies.

As of today, only companies owned by non-Nigerian families that have tethered their roots in Nigeria have been able to successfully outlive 3 generations; while the wholly Nigerian owned firms have either gone under or become a shadow of their old selves.

The question becomes, why is it so hard for Nigerian family-owned businesses to transcend the generational gap?

The answer might lie in an old Sicilian saying about the concept of wealth transfer.

The saying goes like this: “The first generation establishes the family business; the second generation consolidates it; while the third generation throws it all away.”

According to the saying, the first generation are mostly immigrants and have nothing so they work very hard to make a living and establish the family business.

As they work and toil, they expose their children to the realities of what they do and inculcate the culture of hard work and diligence in them.

The children make up the second generation and they grow the family’s wealth.

These children watched their parents toil and some might have even been coopted to help out from a young age.

They have learnt to appreciate labour and diligence and now, they are wealthy.

This is when the disconnect begins.

The second-generation starts the decline process when they decide that their own kids would not suffer the same things they went through and in so doing, isolate them from the effort required to make and keep wealth.

The children are so insulated from the realities of hard work and diligence that they only see the rewards and perks of wealth.

By the time the third generation takes over the business, they have no idea how it was built and they easily fast-track the downfall of the business until it is either liquidated or taken over by outside forces.

I feel this Sicilian saying aptly captures one of the issues of generational wealth transfer in relation to Nigerian-owned family.

We are all witnesses to how some children of the rich in Nigeria just seem to be all about spending their family wealth.

They are overindulged and spend every passing day trying to outdo each other in a brazen display of opulence.

Apart from a few who have leveraged their family name and networks to create businesses and careers for themselves, most are representative of the ‘third generation’ as described in the saying.

Sometimes you visit a non – Nigerian owned family business and you meet the scion of the family working in the factory or warehouse with the other workers and getting a feel of the day-to-day operations of the business.

His contemporary in a Nigerian-owned family business would not be seen on the shopfloor and if he is seen there, it’s mostly for PR purposes and not as an attempt to understand the process.

Invariably, a strong work ethic is something that has helped long-surviving companies bridge the generational gap when it comes to wealth transfer.