South African philanthropists say they like to support education, but their known contributions are a tiny percentage of what American private donors are spending here. Wealthy Americans spend far more on what, to them, is a distant and exotic country than our own benefactors do.
One difference comes down to tax — that, and the obvious fact that there are more wealthy Americans than there are wealthy South Africans. In the United States, significant tax incentives exist for philanthropic causes, while locally the allowable deduction is relatively small.
“It’s not that they are nicer or kinder people than South Africans. They live under a tax regime that makes it efficient for them to give,” said Hylton Appelbaum of the Donald Gordon Foundation, adding that most US philanthropic foundations were probably established for tax purposes. In South Africa, however, tax has a minimal effect on philanthropy.
Locally, under section 18A of the Income Tax Act, individuals are allowed to donate up to 5% of their gross income to certain types of public benefit organisations (which must be registered as such with the Revenue Service) to claim a deduction. Deloitte tax director Billy Joubert says it is important to note that not all donations would be tax-deductible, because of this restriction.
Donors are usually liable for tax of 20% of the value of any donations made during the tax year, but donations to all public benefit organisations are exempt. There is also a blanket exemption of up to R50Â 000 a year, so donations tax would only kick in after this limit had been reached.
In the US, tax incentives and loopholes actively encourage the wealthy to channel their money to charitable causes. The tax consequences depend on the type of contribution — cash or property. Services are not tax-deductible, but expenses incurred in providing the service are.
We also know a lot more about the finances of American private foundations, as they are required to give away a fixed proportion of income and publish detailed annual reports. Under South African law, however, foundations are not required to make their finances public.
There is a definite desire to give quietly. A spokesperson for E Oppenheimer and Sons, the Oppenheimer family business, confirmed that the family gave substantial amounts privately but, apart from the Oppenheimer Memorial Trust, shied away from publicity. “It’s a long-standing family policy.”
The Ruperts, also, would not give details of how much they give and to whom. Anton Rupert was a founder member of the Peace Parks Foundation and the family has a strong tradition of backing conservation, arts, culture and music.
“Publicity is a double-edged sword,” said the Donald Gordon Foundation’s Appelbaum. “It’s like putting an advert in the paper saying: ‘Free money, phone us now!’ And 99% of the people who apply for that free money don’t get it, because we don’t respond to unsolicited proposals.”
There’s also a feeling that with such vast income disparities, philanthropists need to be sensitive about splurging.
But Appelbaum said he believed strongly that philanthropy was important. “So many unique, interesting, different initiatives wouldn’t have come to light otherwise. You can’t expect the state to take risks in the developmental arena. Private money is riskier money.”
But if private giving is directed towards charities that ease poverty symptoms in the short term, rather than addressing the causes of poverty for long-term solutions, the effect of generosity will be short-lived. Giving to charity, some argue, merely eases the short-term guilt over rolling in it.
Barry Smith, a director of the Synergos Institute, which provides training and support for grant makers, said that despite strong-rooted traditions of mutual help and social giving, local philanthropy remains fragmented because of deep social divisions.
“There’s no strong tradition of working together, of meeting for talk or collaboration,” he said, adding that local organisations often work in isolation. But collaboration between different players — government, private foundations, international donors and corporates — could enhance the impact of existing programmes.
“There’s nothing easier than to give away funds,” said Smith. “Giving responsibly is the demanding part. It’s a huge challenge to structure giving — monitoring and evaluating systems so as to influence public policy — to create an environment where a successful project can be reproduced elsewhere.”
Effective philanthropy is only possible if the giver understands the area of interest and then creates sustainable long-term change, said Appelbaum, who is also a director of Synergos. But this approach is more demanding. Social problems need to be analysed and monitoring and evaluation processes put in place.
The targeting of funds towards poverty alleviation becomes critical in the light of historic disparities under apartheid, which effectively created a welfare state for white people while maximising the deprivations suffered by other groups. The apartheid government was happy to spend money on development, education and arts and culture, as long as the beneficiaries were white. This meant that wealthy South Africans did not feel as pressured to give. In contrast, the ANC has positioned itself as a government that stands for the upliftment of all South Africans, but the need is greater than its capacity.
HIV/Aids is one of the causes that have mobilised civil society — businesses, NGOs, donors and ordinary citizens — as the overwhelming scale of the epidemic becomes clear. But it seems wealthy private donors still prefer the comparative safe haven that education offers, where bursaries and donations have known, measurable outcomes. Perhaps it is easier than charting a relatively unknown course against a disease that too often induces despair.
The dollar donor
American billionaire Bill Gates has turned out to be South Africa’s most open-handed private benefactor. Funding research into diseases including malaria, tuberculosis, cervical cancer and HIV/Aids and promoting public health, the Bill and Melinda Gates Foundation has showered $178,9-million on local organisations since 1998, according to a foundation representative.
Last year, the United States-based Ford Foundation’s Jo’burg regional office dished out $15,9-million on a range of fields, including education, human rights, governance and civil society, economic development, media and the arts. And the New York-based Carnegie Corporation approved $14-million for universities, scholarships and libraries last year, though this figure includes some multi-year grants.
The annual Gates bonsella cannot be accurately calculated, as some of the grants are multi-year. But these organisations fed about $52-million (R374-million) into the local economy last year alone.
Rand round-up
The Mail & Guardian has unearthed donations of just R89,5-million from three of the biggest and best-known local foundations, as well as a R128-million share donation. Several philanthropists refused to reveal the extent of their generosity. Education was by far the most popular cause.
Two oft-maligned former trade unionists, John Copelyn and Marcel Golding, executive directors of Hosken Consolidated Investments, weighed in with the lion’s share of donations to charitable trusts supporting educational and community causes. In July last year Copelyn gave four million HCI shares, then worth about R114-million, to the HCI Foundation, and Golding donated 500Â 000 shares, then worth about R14,25-million, to the Wheatfield Trust.
South Africa’s largest private Santa Claus is former Liberty Life magnate Donny Gordon, whose Donald Gordon Foundation spends R50 million a year, according to executive trustee Hylton Appelbaum. Set up in 1971, the foundation gave R110-million to establish Wits University’s Donald Gordon Medical Centre, as well as funding cultural and environmental causes, Jewish charities and business education, including the Gordon Institute of Business Science.
The Shuttleworth Foundation, set up by celebrity billionaire Mark Shuttleworth in 2000, has already outstripped many of its peers. In the 2005 financial year, it spent R22,5-million on educational projects promoting maths and science, and about the same this year.
Another fund focusing on education is the Oppenheimer Memorial Trust. Founded by Harry Oppenheimer in memory of his father, Ernest, the trust paid out R17-million last year and has budgeted R18-million for 2006, says spokesperson Claire Digby. Most of this goes to scholarships for black school pupils, and undergraduate and postgraduate bursaries. Nicky Oppenheimer has now taken over from his father, Harry, and is a member of the trust’s advisory council.
The Ackerman family supports a range of separate foundations, through equity in Pikwik. The Ackerman Family Educational Trust, launched 35 years ago, concentrates on bursaries “giving, on average, 100 a year”, says foundation consultant Anne Emmett.
The Raymond Ackerman Foundation supports the Raymond Ackerman Academy at the University of Cape Town’s Graduate School of Business for wannabe entrepreneurs who may not have matric.
An amount of R12-million was pledged to this end this last year, as well as a “substantial sum” to the Red Cross Children’s Hospital. The Ackerman Family Foundation is supported by Ackerman’s children and their families, with areas of interest dependent on family passions. Emmett could not specify the various foundations’ budgets.