CSI is Voluntary, but Feel Encouraged

By Paul Pereira

We sometimes think about “business” as a thing, when it’s really just a term for people who freely get together to create and sell and buy stuff and so better their lives. For all sorts of reasons, some do this more effectively than others, with resulting disparities in what people own being one result, as we discussed here.

For the common good, all employed people contribute part of their earnings to society as a whole through taxes, which in free countries is just about all that is taken from them by force. But many choose to go beyond this contribution and make additional voluntary ones to causes or projects they admire. As with individuals, so with collections of them in the form of companies.

In SA, this started at least as far back as the setting up of the Cape of Good Hope Trust by the bank of that name in the 1830s as a vehicle for charitable giving. Nowadays this voluntary support to the less well-off partly finds expression through CSI. Yet although parliament can dictate tax rates, there are limits to what government can insist on being done by private people using their own money.

In other words, CSI is essentially a voluntary thing, although it’s encouraged by the goodwill and generosity of company owners and employees, pressure from special interest groups such as trade unions and churches, voluntary agreements between businesses in different industrial sectors, reporting requirements proposed by professional business bodies, along with government pressures used in how state contracts are awarded, among other things.

In some ways, corporate giving to good causes is a zeitgeist of our times, here and elsewhere in especially the developed world.

That doesn’t mean that it isn’t also being actively encouraged. Here are some of the more formalised “push” factors in this country’s CSI the last few years:

• Starting with the Mining Charter and soon followed by the Financial Services Sector Charter in 2002, most industrial sectors have negotiated “sector charters” that commit each industry to demographic transformation in ownership, management and employment, along with agreements to invest socially in various ways. These are sometimes confined to things like training for greater employment access in the particular industry for disadvantaged people.

• The one industry that has a forced CSI compliance is mining, a result of government confiscating mining rights in the 1990s and then making all mines to apply for new temporary operating licences instead. These permits come with requirements for mines to invest in communities from which they draw labour, using Social and Labour Plans agreed with government, and Integrated Development Plans agreed with local authorities. That’s why mining companies spend an average three times more in profit percentages on their CSI than other businesses.

• All industry charters that set goals lesser than those set out by the Department of Trade Industry’s broad-based Black economic empowerment “codes of conduct” will soon have to apply the rules of the latter instead. The DTI codes have been changing through various drafts since they were first gazetted in 2007.

• The “final” proposed changes to the DTI’s codes (which award points needed to win state work) will allow companies to continue the current practice of receiving up to five of their 100 possible points for doing CSI. But this will no longer simply be where at least 75% of beneficiaries are black and where a company has spent at least 1% of its net profit after-tax on voluntary social investment as is now the case. Rather, the new codes will only recognise CSI contributions that are made “with the specific objective of facilitating income-generating activities for targeted beneficiaries”. This emphasis on job-creation, skills development and entrepreneurship projects doesn’t preclude companies from supporting other causes, although they’ll receive no DTI points in reward.

• Company CSI is also encouraged by the reporting guidelines issued by the Integrated Reporting Committee of SA, a function of the voluntary Institute of Directors, and commonly known as the “King committee”. Similarly, some companies commit themselves to various CSI goals if they sign up to or associate themselves with the JSE’s Social Responsibility Index, the UN Millennium Development Goals, the G4 Global Compact , the guidelines of the Global Reporting Institute, or the International IR Framework.

• Some companies tie their CSI strategies closely to the goals of the SA government’s National Development Plan to 2030, a plan endorsed by all national business associations.

• In addition, four “pacts” were signed between some South African businesses and government in late 2011. Known as “the accords”, these commit the signatories to CSI and related developmental partnerships with state institutions to further the goals of government’s New Growth Path plan. The four pacts are the:

o Basic Education and Partnerships with Schools Accord

o Local Procurement Accord

o National Skills Accord; and

o Green Economy Accord.

It should be noted that, with the exception of the new order mining licence requirements for that industry, all of the above things are, at this stage, voluntary.

• First published by Nation Builder, 28 January 2015.

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