The culture of Africans are varied depending on the region from which you one hails from. I won’t go into the details.The interest in my writing today is primarily to discuss the financial culture of Africans.
Today, African families in many cases industries choose not to leave any inheritance for the next generation. The older generations say that children have to also look for their own way in the world. And to make matters worse, it’s very difficult to find two or more people from the same family/ clan working together towards a common goal. So we don’t work together and we don’t leave anything for our children to inherit. Some will say that inheritance spoils children. But have you ever asked yourself what poverty does to those children?
For the past five decades, the level of suffering in Africa has increased so much that Africa has almost all its countries ranking least on the World Poverty Index.
Everyone who claims to be a leader or philanthropist is running left and right trying to solve the problem of poverty in Africa. But I believe that Africa’s problem is not poverty itself, but rather the cycle of it. We commonly know it as the cycle of poverty.
After all, just a few decades ago, powerful countries today like China, Taiwan, South Korea, and Singapore were just as poor as Africa is. But how did they manage to break free from their poverty? What can Africa learn from the success story of the Asian Tigers? I believe the path to a solution lies in first solving the micro problem which lies within families/ clans before fronting a national solution. If each family can pull itself out of hell, then the entire nation and continent will be easier to liberate poverty. This is because the best solutions start from the grassroots, and the tree tops.
In economics, the cycle of poverty is the “set of factors or events by which poverty, once started, is likely to continue unless there is outside intervention”. … This occurs when poor people do not have the resources necessary to get out of poverty, such as financial capital, education, or connections. This is according to Wikipedia.
Africa has so many NGOs that are being well funded, the largest of which is USAID. But even after more than three decades of these NGOs chasing after their goal, they have barely scratched the surface. I believe this is because these NGOs are targeting the wrong area of the cycle of poverty.
But before we examine the cycle of poverty, we have to first examine the cycle of wealth by looking at some of the wealthiest families on planet earth. According to CNBC reporter Robert Frank in a publication on June 17 2018, 25 of the world’s richest families own more than a trillion dollars in assets.
The list excluded first-generation fortunes (like Jeff Bezos’ or Bill Gates’) and those fortunes controlled by a single heir. So the list above is really a measure of families who have inherited and grown their wealth over generations; something that Africans used to do before we lost our way!
Now we have looked at the wealthy and their practice of generational wealth. Now let’s get back to Africa. Why is it that more than 99% of Africans pass on poverty, even when they have worked so hard to acquire assets in their lifetime? The answer is simple; families stopped working together and towards started believing that leaving one’s child an inheritance would “spoil” them.
Growing wealth is a bit like building a house. If one engineer has already finished the foundation, the next will work on the walls, the one after that will on the roof, and the last one will do the final touches and polishing.
Now let’s apply the same thinking to wealth. A father sends his son to school to school. After graduation, the son is told that since he is educated, he should go and look for his own properties. The father started from scratch and built a foundation.
Now he is sending his own son to start building another foundation. The father’s argument is that what he made is for him to retire on. So you find that two generations of the same family are condemned to starting from the bottom. But if the father allows the son to continue from where he stopped, the cycle of poverty in that family will be broken in a few generations.
This is the mindset that I consider as the primary cause of this cycle of poverty. This is of course in addition to other factors such as population explosion, being too proud to seek proper investment advice, and external factors; all of which are just enablers to this cycle of poverty. But if we work with our children to carry our work forward into the future, then the financial stability of each family will improve significantly. And we can do this by re-embracing the culture of inheritance, with certain safeguards shown below:
1. Do not keep the children away from the business. There are very many children who when asked what daddy or mummy do for a living, they would not know even when they’re over 14 years. This is because many parents, especially those in business hide their business operations away from their children. This makes children to grow without any idea on how to make that business thrive. This can lead to a collapse of that business in future.
2. Let your successors take over while you’re still alive if possible. Whilst you are alive, you have the advantage to guide them on how to continue making the money they have been enjoying since birth. Wealthy people let their children work with them so they can learn. This is how organizations such as Mukwano, Walmart, and the Japanese Yakuza have managed to be around for generations.
3. For family wealth, make sure the family members get along well before giving them a to me money to take care of. This because if the family doesn’t get along well, then the money will do more harm than good to them.
4. Assets are not to be divided by those who inherit it. The common practice is that when wealth is being distributed to those who inherit and the current portfolio is divided. This division, though not completely bad, still has a negative effect on the wealth that is being inherited. A prominent company in Uganda that was divided with negative consequences is Swift Safaris, a bus company that used to service travellers of western Uganda.
They are still many other safeguards to consider here, but the bottom line is that as father/ mother, you have to facilitate your children’s success if your family to break its own cycle of poverty. And remember the key is proper inheritance for generational wealth building.