Companies play ball with NPOs

Insight-CSI_webIn this season of giving, it is perhaps encouraging to note that the private sector is investing more in social upliftment than it ever has, and that there’s some good news about the financial state that South Africa’s critical non-profit organisations (NPOs) find themselves in.

The corporate social investment (CSI) support that companies give to NPOs in their various projects is important, and not only in areas where the state is unable to provide a full range of services. Indeed, it is the biggest single source of NPO income. But this support can only be of limited long-term societal effect.

Rather, the very fact of people coming together to run businesses, provide choices in products, compete in services and cost, and so to increase wealth, is the single biggest contribution that the private sector can make to progress. Paying tax and then additional things like CSI are necessarily also-rans, albeit important.

This country’s formal CSI activity can be traced to the formation in the early Fifties of Anglo American’s chairman’s fund, an institution still in existence, although accounting for only a small part of that company’s CSI. Most companies would only take up formal CSI programmes after 1994 but now the practice is almost ubiquitous.

This week saw the release of results of annual research into what is being done in CSI, at what financial level, and with what effect on NGOs; by corporate social responsibility consultancy Trialogue, in the 16th edition of its CSI Handbook.

Perhaps the most remarkable trend identified is of how our business community has increased social investment spending beyond mere inflation-linked adjustments since the economic hiccups starting in 2008. This past year’s spend, for example, is estimated by Trialogue at R7.8 billion, a growth of 8% on the previous year in real terms.

Most goes to education, followed by social and community development, then by health. Almost 80% of companies with CSI programmes also run employee community development volunteer programmes. While 82% of surveyed corporates also work in other countries, only a third of them undertake CSI abroad, but all of them do so here.

Of course, there are big variances in who spends what, with financial services and mining spending the most (and mining houses tending to spend at a rate three times more than others, partly because of their licencing obligations). The top 100 spenders account for 70% of all CSI and, on average, companies put 1.4% of their net profit after tax into CSI.

While brand and company reputation are important considerations for why companies undertake CSI, as are the encouragements of the dti’s Broad-based Black Economic Empowerment scorecard, the biggest single reason cited by companies for their CSI is that of a “moral imperative”.

Whether CSI goes to the right places is less easy to know. Most companies spend near their operations and there are resulting urban, and Gauteng, Western Cape and KwaZulu-Natal biases to this. Moreover, while most companies monitor the activities that they fund through things like site visits and their own reporting requirements, few try evaluating the effectiveness of projects supported.

These projects are mainly run by NPOs, 46% of which report increased funding in 2013; while 48% increased their staff numbers; and a further 35% held staff constant.

– Paul Pereira. First published in The Citizen, 5 December 2013.