Four separate developments this year will set the course of corporate social investment in the year to come, if not after.
Firstly, the biggest philanthropic event this year was undoubtedly the startling giveaway by the world’s second-richest man of 85% of his fortune. At the time of the mid-year announcement Warren Buffet, Berkshire Hathaway head, was worth well over $40-billion, so this could be about $34-billion, or R238-billion.
Most of this money will go to the organisation founded by the world’s richest man, the Bill and Melinda Gates Foundation. The foundation focuses, in developing countries, on improving health, reducing extreme poverty and increasing access to technology in public libraries. In the United States, the focus is simply on education and technology in public libraries.
The Gates foundation itself has an endowment of about $30-billion. To put that into perspective, Buffet’s gift, added to the Gates’s endowment, is more than the 2005/06 South African Budget.
The Gates foundation follow in the path of early US magnates such as Andrew Carnegie, who went on charitable spending sprees after amassing fortunes.
In South Africa our philanthropy is less lofty and our foundations rely on corporate rather than personal money. Though we may be the most unequal country in the world, measured by income, we don’t have the kind of billionaires to fund those huge foundations.
Yet the gaze should now be drawn to those in public life who have climbed to the very top of the South African corporate world to see if they have a thought to give back to society in some form or another.
Tokyo Sexwale, often mentioned as one of ‘the usual suspects†who benefits from empowerment deals, has played up his philanthropic side in an article in the Financial Mail. Reportedly he has been building his Sexwale Family Foundation. No figures were mentioned, but the foundation was said to pay the fees of a number of postgraduate students and buy wheelchairs for the disabled, as far afield as Angola.
Individuals lucky enough to benefit from BEE deals, and BEE companies themselves, are often expected to spend more on CSI than other companies. But what about the white beneficiaries of the steady progress of the post-apartheid economy? Surely they should put their hands in their own capacious pockets for worthy causes, of which there are plenty in South Africa?
Secondly, the most important development for South African CSI was the steady trudge towards completion of government’s black empowerment codes of good practice.
Not only does the balanced scorecard that the codes use to evaluate BEE set aside a 10% residual for what looks like social investment, other aspects of the scorecard have more than a dash of CSI.
Only 30 out of 100 points are set aside for the ownership and management aspects of BEE. A full 70 points are awarded for what could be considered simply ‘doing the right thingâ€. Employment equity, skills development, preferential procurement and enterprise development could all be deemed CSI. Before the Employment Equity Act and the broad-based BEE strategy they were thought of in this way.
Will CSI budgets be skewed by the BEE scorecard, as businesses use these budgets to score points on the scorecard?
Thirdly, new whims for old?: Corporate giving in South Africa, was published without much fanfare by the Centre for Civil Society. This report, gives valuable insights into what CSI should, and what it cannot, be.
The report [by Steven Friedman, Judi Hudson and Shaun Mackay] finds that a fashionable emphasis on CSI ‘professionalisation†is, in an important sense, inappropriate. What they object to is that this trend straitjackets vital innovation in CSI.
‘CSI is, therefore, most likely to fulfil its social role if it is seen as the vehicle not of a spurious ‘professionalism’, nor as a ready source of government development funds outside the tax system, but as a source of innovation and as a means of providing for those social needs which are essential to society but which are inappropriate destinations for government funding.â€
Fourthly, this year saw growing acceptance of the idea that the poor should not always be thought of as the subjects of charity, but as potential customers and suppliers. The problem is that the poor are often excluded from formal markets.
In South Africa the making markets work for the poor approach has been pioneered in South Africa by the Finmark and ComMark Trusts, both funded by the United Kingdom’s Department for International Development.
Briefly, the idea is that bringing poor people into formal markets, or creating new markets for poor people, empowers them and makes them customers. Multinational corporations can help by linking residents of poorer countries into their value chains.
An article by SABMiller CE Graham Mackay (Aid is not the only answer, Mail & Guardian August 4 2006) pointed out that the company was doing this in African countries. One example was the low-cost sorghum-based clear beer Eagle Lager SABMiller introduced into Uganda and Zambia.
Both governments gave SABMiller excise exemptions because it is using locally grown sorghum, and this has enabled the company to bring into its supply chain nearly 10 000 small-scale farmers — and offer a new low-cost beer. Unilever is doing much the same, while in South Africa, Wiphold and Old Mutual group have been experimenting with providing financial services to the poor through a new business model.
To return to the philanthropists. The amounts involved in the Gates foundation may seem a lot, but compared, for instance, to the amount the US, not a welfare state, spends on its citizens, it is modest. Richard Tomkins, writing in the Financial Times magazine on philanthropy, notes the US will spend this year about $539-billion in social security; that is old age pensions, and benefits for the widowed and disabled. Tomkins points out that Bill Gates’s entire wealth of $50-billion, the largest private fortune in the world, would contribute just more than a month’s worth of that social security budget.
The truth is that philanthropy, corporate or personal, pales by comparison with what, on the one hand, governments can do for the poor through social welfare, and, on the other, what business can do through providing employment, business linkages, and providing the tax revenues that pay for social welfare.
This does not make CSI meaningless, but it does highlight the need for the focus to be on filling in the gaps neither business, acting in enlightened self-interest, nor government, acting on behalf of the voters, can fill.