The generation that squanders

I was having a conversation with my lawyer the other day. He had travelled abroad to attend his son’s graduation. His son was graduating with a degree in Economics. I wished him all the pleasantries, but proceeded to give my unsolicited opinion which he thankfully confirmed was his wish.

I suggested that his son needed to go back to school to study law, come back and intern at his practice, with a long-range view of taking over the practice. His son would be a great commercial lawyer. There are many judges adjudicating on things economics and yet they have no clue on simple Economics 101.

This has had far reaching implications.

Afterall, it is great succession planning, when the first generation to enter the world of business succeeds and the second generation learns from the first generation, building on the goodwill and social capital developed by the first generation. When this does not happen and the second generation veers off on different tangents unrelated to the pathfinding sojourns of the first generation, often this means, the second generation is starting from ground zero.

It amounts to all for nothing, when every generation is starting from ground zero, in totally different sectors where they must cultivate fresh goodwill and new social capital. The social capital in any business is essentially the goose that lays the golden eggs, but it is built over the years but once it is lost, it is lost for good.

More than two decades ago, we were in a partnership of three, where the one partner came from a background where the parents had successfully run commercial properties, supermarkets, butcheries and fuel stations. This one partner underrated the parents' enterprises, which had fed, clothed, housed and educated all the children in that family to university level.

As a result, this partner often referred to these operations as “mom and pop” operations as the current level of thinking was to neglect the former and seek new more viable opportunities in new markets. The fundamental flow with this mental model is, as you start new ventures in other sectors, there is no need to destroy or starve off that which made you who you are, in the first place. Oft times, when you destroy that which gives you money, advantage and power, you are pulling yourself down.

This is not to say, second or third generations should not be encouraged to venture into the new entrepreneurial ventures. This is perfectly okay, if the intellectual property and other resources, tangible and intangible, at the disposal of the family, which were built by the first generation are not squandered, in the name of pathfinding, the latest and fashionable entrepreneurial ventures. It takes more than ten years to establish a sound business.

Many greenfield ventures perish along the way for the simple reason that they lack cashflow to sustain themselves as they chart and grow new paths. When one has got the advantage of piggybacking on an enterprise or several, that were started by the forefathers, that advantage should not be plundered.

Many offspring of first-generation achievers in business for example, are currently living lifestyles below that which was provided for by their parents. This phenomenon, that is well researched and documented worldwide, is referred to as the 3-generation curse. In Zimbabwe and many parts of the sub-regions of Africa, there is abundant anecdotal evidence of the 3-generation curse happening much earlier than is the case with other global communities.

What is the 3 Generation Curse?

Also known as the “rice paddy to rice paddy in three generations”, the 3 Generation Curse is a concept that suggests that, “wealth built up over one generation can often be lost by the third generation, due to a lack of financial education, mismanagement, or squandering. This has been observed on a global scale, with societies across the globe displaying this trend. The effects of this curse are far-reaching and have led many people down a path of poverty after their ancestors had achieved success before.”

If we are honest to ourselves and dare look around, many from amongst us, could very well be the generation that has squandered or ignored to grow, what their ancestors built. In my family, we have evidence of carcasses of wealth ignored because it is not suitably located in spaces convenient to generation 3.

In fact, generation 2 were educated away from the wealth created by the forward-thinking generation 1 parents. I am talking here about the many African Purchase Farm areas that lie idling with relatives' caretaking them and very little commercial activity taking place, whilst during generation 1, those farms were hives of commercial and profitable activity that educated an entire generation 2.

While in many countries across the globe, the trend is rife within the third generation, in Zimbabwe, this trend happens much earlier with the generation 2. Many successful black entrepreneurs, of pre-independence Zimbabwe, had their businesses post-independence collapse.

There are varied reasons why this corporate failure was rife post 1980. For starters, the businesses were never corporatized. The founding parents moved around with all the intellectual knowledge in their hearts and minds, not sharing much, even with their kith and kin.

Then there was government interference, where the incoming government was suspicious of anything that was not in synch with its socialist leanings. This government is still the same 43 years later. That is why generally speaking, there is no conscious and deliberate enabling environment for business in Zimbabwe.

This government fears that when black people succeed overwhelmingly in business, they will form the fourth column. It is not a surprise then, why our most successful entrepreneurs prefer to have multiple homes, most of which are offshore. It is essential for them to manage the insurmountable political risk prevalent in the country.

But the most important reason in Zimbabwe, why generation 2 born to the building-minded generation 1, is a pattern of mismanagement through conspicuous consumption, primitive accumulation and an I- ant-it-now mentality, that was not discouraged by the parents that were busy toiling creating the wealth. It might not have been openly encouraged, but it was not discouraged either.

Nothing has changed. The pre-independence scenarios are rife in post-independent Zimbabwe. The only difference is that the pre-independence black wealth creators took advantage of gaps and opportunities in the marketplace, that were left by the colonial establishment for them to operate in.

Whereas, in present day Zimbabwe, it is the fundamentally the political establishment, their ass-leakers and underlings, masquerading as entrepreneurs, when it is an open secret that many are thriving from proceeds of looting and corruption. Many other entrepreneurial folks are in the hard-to-regulate informal sector, taking advantage of spaces in the grey areas of the many sub-sectors of Zimbabwe.

As Zimbabweans are we even ready to have this uncomfortable conversation. Zimbabweans are a judgmental nation. They judge the success of a person based on the vehicle they are driving, not the intellectual property, land nor livestock that they own.

Mr Fadzai, my fellow gardener (by the way, I am an avid gardener too), who assists me around the house, owns a piece of land, 10 acres in size, in Manicaland, bequeathed to him by his father. He also owns 8 cows, over 50 goats, 20 sheep, 30 chickens, 20 turkey birds, etcetera. If I were to put the value of his land at a conservative estimate of US$5 000, his cows at US$2  400, goats at US$2 500, sheep US$1 600, chickens US$300 and turkeys at US$300.

The value of his known assets is currently at US$12 100. Mr Fadzai is not respected in Harare for he is labelled a “gardener” with nothing, because his assets are not visible. Mr Tapera, renting a one-bedroomed place, squatting there with his wife and three children and driving a Honda Fit valued at US$4 500 and having multiple girlfriends, is respected in Harare because of what people are seeing-the Honda Fit. Yet Mr Tapera does not own land, nor livestock. His bed, stove and TV at his lodgings are valued at less than US$1 000.

Many people have grown up with inherited financial habits and beliefs either learnt from their parents, or adopted from those whom they viewed as their role models growing up. If these people were to be put under scrutiny, through the litmus test, against those whose families have succeeded post three generations, their practices would be found to be wanting and at cross-purposes with sustaining the wealth they would have either inherited or created.

Let us take this conversation a notch up to the so-called High Net Worth Individuals (HNWI). In a conversation I was having with a sister who represents HNWI, this observation emerged from someone she was having a corresponding conversation with.

“The challenge is that many successful fathers in our culture operate and manage multiple households, some known to each other and some unknown. Consequently, there are multiple children streams, which often makes the wealth preservation model (the wealth inherited and created), complicated to implement. Which child/children from which home/homes is/are going to be groomed for succession  planning. That is why some go as far as not leaving wills (so that they do not leave out any children) and just deliberately decide to let those who remain, to fight it out.”

If this is not a poverty mentality being perpetuated and most likely to be passed from one generation to another, then I do not know what is.

Often when there are multiple households, consumption, not creation of wealth and keeping it, becomes the order of the day. All the families involved will be pulling in different directions.

Are we ready to face these challenges and many, that will form the basis of future instalments? Are we ready to face our own demons? Is it okay for every generation to start from ground zero? Why are we failing to copy successful stories from other communities, like the Meikles family where the grandchild from a girl child is at the helm of growing the company into leaps and bounds. Amongst black folk this is unheard of. Where sons were not born, the paternal family will come and take everything for their own consumption, not growth of the wealth they have grabbed.

What needs to be done?

There is so much that can be done in our communities to banish the 3-generation curse. This will be discussed in the next instalment.

• Mkombachoto is a former academic and banker. She has consulted widely in strategy, entrepre- neurship and private sector development for organisations that includes but not restricted to Seed Co Africa, Hwange Colliery, RBZ/CGC, Standard Bank of South Africa, Home Loans, IFC/World Bank, UNDP, USAid, Danida, Cida and Kellogg Foundation. — @HeartfeltwithGloria, WhatsApp +263 772 236 341.