By Sarah Simson | Consultant Attorney

Family-owned businesses form a vital part of South Africa’s economic fabric. These enterprises have created employment, driven innovation, and built enduring wealth across generations, often from modest beginnings. Many of these businesses now face a critical inflection point: either ceasing upon the founder’s death or evolving into viable, multigenerational enterprises.

Trillions of rands in assets are expected to pass to the next generation, yet many families are unprepared for this transition. Without a clear strategy for wealth preservation, family businesses face serious operational, tax, and liquidity risks that can threaten continuity and long-term viability.

The tax risks of poor succession planning

Transferring wealth, whether through inheritance, donation or sale, triggers estate duty, capital gains tax and donations tax. These tax liabilities can cause liquidity constraints within the estate or business. Without sufficient planning, families may be forced to sell key assets, liquidate business interests or face avoidable disputes.

Many family enterprises are also deeply reliant on the founder’s relationships and leadership. Without identified successors or formalised governance structures, the business may struggle to survive beyond the founder’s involvement. Identifying and preparing the next generation of leaders is essential to long-term continuity.

Structuring for continuity, resilience and tax efficiency

Estate planning for family businesses is not only about tax minimisation; it is a strategic imperative for business continuity and resilience. A robust succession structure ensures that assets are held in stable, well-regulated environments and can transition seamlessly between generations.

Typical succession structures may include discretionary or family trusts, local or offshore holding companies, foundations or hybrid special purpose vehicles, depending on the nature and location of the business and its expansion ambitions.

Families must also consider political and regulatory risks in both their home and investment jurisdictions. Shifts in tax law, expropriation risk and capital flow restrictions can undermine generational wealth planning. A clear offshoring or internationalisation strategy helps safeguard future liquidity and control, while also ensuring regulatory compliance.

Governance and preparing the next generation

While regulatory and tax structuring is important, the human element of succession planning is often overlooked. Cultural norms or family dynamics may discourage open dialogue around death or inheritance. Founders may hesitate to relinquish control, while successors may be unprepared or unwilling to lead.

Avoiding these difficult conversations often leads to fragmentation and misalignment during intergenerational business transitions.

Successful families invest in governance structures that formalise succession rules, decision-making processes and values through charters or constitutions. Establishing family councils or advisory boards helps separate business logic from personal emotion, especially where sibling or intergenerational dynamics are at play.

Mentorship and financial literacy also play a central role. Preparing successors through structured involvement, business exposure and leadership training is critical to ensuring generational resilience.

The founder’s estate plan is the business’s blueprint

Succession planning must begin while the founder remains actively involved in the business. The founder’s estate plan should account for all business and personal assets, liabilities, financing structures and ownership layers. It must also address any financial obligations or risks that could emerge posthumously.

In many cases, the business’s income and viability are closely tied to the founder. Without that continuity, covering finance costs, salaries or operational expenses may become unsustainable. Engaging the next generation early through education, mentorship and phased involvement helps bridge this gap and preserve institutional value.

Conclusion: Build, don’t inherit, the legacy

Building a legacy requires more than inheritance. It demands intention, discipline and structure. In South Africa’s dynamic landscape, where volatility and opportunity go hand in hand, proactive structuring is not optional. It is essential.

Simson is a Consultant Attorney at Thomson Wilks Attorneys

sarahs@thomsonwilks.co.za