By Juliet Etefe

Copyright thebftonline

… says strong governance, family constitutions non-negotiable

By Ebenezer Chike Adjei NJOKU

Family-owned businesses, which dominate Ghana’s private sector, face a precarious future unless they adopt structured succession plans and formal governance frameworks, the International Finance Corporation (IFC) has cautioned.

At the second Family Business Governance Workshop held the theme ‘Family Governance and Legacy: The Family Constitution Blueprint’, IFC officials stressed that the absence of clear succession strategies remains one of the most significant threats to the continuity of enterprises built by first-generation founders.

According to the institution, many businesses risk collapse within a generation if these gaps are not addressed.

“Succession is the biggest challenge, how to pass the business from one generation to the next while keeping family unity intact. Too many businesses are thriving today but lack a roadmap for tomorrow.

“Without proper structures, leadership transitions often result in conflict, fragmentation, and the eventual decline of the enterprise,” Moez Miaoui, IFC, Acting ESG Advisory Lead, Africa and facilitator for the sessions said.

Family businesses—typically defined by the level of ownership, control of voting rights, and the intention to transfer to the next generation, play a significant role in economies worldwide, the IFC noted.

Together, they account for more than 50 percent of IFC’s portfolio, contribute around 70 percent of global GDP, generate about US$5.5 trillion in value, provide 50–80 percent of jobs worldwide, and represent roughly 25 percent of global market capitalisation.

In-country, they account for almost two-thirds of private enterprises in the country and employ a significant portion of the workforce, particularly in retail, agriculture, real estate, and services. Yet while they are central to job creation and wealth generation, few are adequately prepared for intergenerational transfer of leadership.

The IFC noted that the majority of Ghanaian family-owned firms remain highly founder-dependent, with limited delegation of authority. As founders age, the lack of clarity around succession creates risks not only for the survival of individual companies but also for the stability of the broader private sector.

“The founder’s vision may drive growth, but long-term survival requires a system that outlives one individual,” Mr. Miaoui added.

The warning comes at a time when family enterprises are grappling with increasing competition, technological disruption, and macroeconomic headwinds. Increasingly, disputes over inheritance, management control, and ownership rights often erupt in the absence of formal governance structures, leading to stalled decision-making or costly legal battles.

The IFC urged family firms to adopt tools to strengthen governance. Chief among them is family constitutions – documents that set out principles for decision-making, ownership, and succession, which the IFC said can help reduce conflicts, preserve wealth, and protect jobs. Others include independent advisory boards, and shareholder agreements.

These instruments, the Corporation said, can help establish clear rules on leadership transition, ownership rights, and dispute resolution, thereby reducing uncertainty and building investor confidence.

Evidence from other emerging markets suggests that family businesses with well-defined succession plans are more likely to survive beyond the second generation.

A study by PwC has shown that globally, only about 30 percent of family businesses make it to the second generation, and less than 10 percent continue to the third. The pattern is no different in Ghana, where most businesses struggle to remain viable after the founder’s exit.

The facilitator noted that succession planning is also becoming increasingly critical for access to finance, as banks and investors are placing greater emphasis on governance practices when evaluating creditworthiness or equity partnerships. Firms without clear continuity plans may therefore find it more difficult to attract the capital required for expansion.

The IFC, which has invested “over US$2 billion in the Ghanaian economy over the last decade,” has also been implementing the Integrated Environmental, Social and Governance (IESG) Programme across the nation’s financial and corporate sectors, said it will continue to support training and advisory services for family enterprises.

This Programme is supported by Switzerland through the Swiss State Secretariat for Economic Affairs, SECO. “As part of the World Bank Group, IFC works to promote private sector development in emerging markets. We do that not only through investment but also through advisory services. With family businesses, our focus is on strengthening governance, improving sustainability, and enabling access to capital.

That is why we are holding conferences like this one to raise awareness, share best practices, and create a platform for family business leaders to learn from each other. If family businesses in Ghana can strengthen governance and sustainability, they will secure their legacy and also drive economic growth for the country,” Kyle Kelhofer, IFC, Senior Country Manager for Ghana, said.

“This is only the beginning. By sharing lessons from global family businesses and adapting them to Ghana’s context, we hope to build stronger, more resilient family enterprises here. That, in turn, means more jobs, more innovation, and greater prosperity,” he added.