By Bothwell Nyajeka
THE family-owned business is at the heart of every thriving economy.
Across the world, particularly in emerging markets, these enterprises form the backbone of economic activity, job creation and wealth creation.
Zimbabwe is no exception. We have a rich history of family-owned enterprises, many of which were built through the resilience and sacrifice of the founders. These businesses have not only sustained livelihoods but have also played a meaningful role in national development.
In the past five years, particularly in the post-Covid-19 period, Zimbabwe has witnessed a notable rise in thriving family-owned enterprises. Many have benefited from opportunities in infrastructure development, especially road construction, as well as growth in the agriculture and mining sectors. These developments have created new avenues for wealth creation and ushered in a new generation of successful family businesses.
Interestingly, a significant number of these businesses are being led by young entrepreneurs, many of whom have built their enterprises from the ground up without prior exposure to large corporate environments.
In conversations with many of these entrepreneurs, one recurring concern stands out: Will the wealth I have created today pass on to my children and endure across generations?
This concern is well-founded. History has shown that many family businesses struggle to transition successfully from one generation to the next. This is often attributed to weak governance structures and blurred lines between ownership and management, which often result in informal decision-making processes. Internal family conflicts are also another reason.
These weaknesses can erode value over time, sometimes leading to the fragmentation or collapse of the business.
It would be deeply unfortunate if the wealth currently being created in Zimbabwe’s family business sector were to dissipate rather than being preserved and passed on to future generations.
In my opinion, one of the most effective ways to address this challenge is through the corporatisation of family-owned businesses. Corporatisation is often misunderstood. It does not mean relinquishing control or abandoning family values. Rather, it involves introducing formal governance structures, systems and accountability mechanisms that allow the business to grow beyond the founding generation.
At the centre of corporatisation is the establishment of an effective board of directors. The board plays a pivotal role in transforming family businesses from personality-driven enterprises into structured, resilient institutions.
A well-functioning board helps to separate ownership from management and ensures that decisions are made in the best interests of the business. The board also provides strategic direction, holds management accountable and safeguards the business from operational and financial risks.
However, in many family businesses, boards exist more in form than in substance. They are often dominated by family members and lack independence, limiting their effectiveness. Introducing independent non-executive directors brings objectivity, experience and discipline into the decision-making process. These qualities are essential for long-term sustainability.
In working with family-owned businesses, I have noted a key detrimental feature: the blending of family and business affairs. This may include the use of company resources for personal purposes, informal or undocumented financial arrangements, lack of clarity in roles and responsibilities. Unstructured extraction of cash from the business by shareholders is another practice that I have observed.
While such practices may be manageable in the early stages, they become increasingly risky as the business grows. Corporatisation introduces discipline through clearly defined roles for shareholders, directors and management.
Another critical role of the board is to ensure financial sustainability. Many growing family businesses encounter cash flow challenges, particularly when expansion is not supported by sound financial planning. Boards ensure that the business maintains adequate working capital and that supplier and banking relationships are well managed.
As businesses grow, there is also a need to transition from a founder-led model to a professionally managed organisation. This requires hiring and retaining skilled management teams and implementing performance management systems. The board must lead this evolution by ensuring that management is both empowered and accountable.
Beyond structures and systems, the success of corporatisation ultimately depends on organisational culture. The board, led by the chairperson, must foster a culture where decisions are implemented timeously, transparency is valued and the long-term business interests take precedence over short-term personal consideration.
Zimbabwe’s current wave of entrepreneurial growth presents a unique opportunity to build enduring family enterprises. The challenge is to preserve and grow wealth across generations. Family-owned businesses that embrace corporatisation and strengthen their governance structures will be better positioned to attract funding, navigate economic uncertainty and continue contributing meaningfully to the economy.
Family businesses are the foundation of economic development. Their growth in Zimbabwe is encouraging. By embracing corporatisation and empowering boards to play their rightful role, family-owned businesses can evolve from founder-led enterprises into enduring institutions, ensuring that the wealth being created today becomes a lasting legacy for generations to come.
Nyajeka is a Chartered Accountant and business leader. He has vast experience as a corporate executive and has sat on various boards in Zimbabwe, Botswana, South Africa and Uganda. He is currently chairman of ACR Solutions and is also a seasoned trainer and facilitator for the Institute of Directors Zimbabwe (IoDZ). For board advisory, executive coaching, leadership development and business turnaround consulting. Email him at: bnyajeka@acr4solutions.com