Keeping the dream alive

André Diederichs, co-founder and CEO of the Family Business Association of South Africa, spoke to Jedrie Harmse about why family businesses tend to fall apart after the third generation, and why succession planning is essential to keep a farming operation alive.

- Jedrie Harmse

Fewer than 4% of family businesses worldwide survive intact beyond the third generation of ownership and only about 14% make it successfully from the second to the third generation.

So says André Diederichs, co-founder and CEO of the Family Business Association of South Africa (FABASA).

This is a sobering statistic, especially considering that around 80% of registered businesses in South Africa are family-owned and 96% of commercial farming operations are family-owned.

The picture is much the same globally. Of the roughly 570 million commercial farming operations worldwide, some 500 million are family-run.

Family farmers seem to survive better into the third generation. For example, one US Department of Agriculture (USDA) extension discussion cites roughly 16,5% surviving to a third generation under certain assumptions. In short, family farms do better on average, but the statistics are still sobering, according to Diederichs.

Despite their vital contribution to economies, family businesses face an uncertain future - not because of market pressures or external forces, but because of poor or non-existent succession planning.

While it is easy to romanticise the idea of a family farm passed down through generations, the statistics underline a crucial truth: succession planning is the cornerstone of legacy.

It is a long-term strategic process that ensures leadership continuity, protects family heritage, and sustains business performance.

THE CHALLENGE OF SUCCESSION Diederichs, a business expert and succession planning facilitator who has advised more than 650 family-owned and other enterprises since 2011, told Farmer's Weekly that what makes family-business succession uniquely complex is the dual transition of ownership and leadership.