Spotlight on business in South Africa – Good corporate citizens setting a continental example

Despite many achievements since coming to power in 1994, the ANC-led Government of South Africa still faces serious challenges: one of the highest rates of HIV/AIDS in the world, a deepening inequality between rich and poor, and unemployment of around 27 per cent. It is widely recognized that government alone cannot tackle these problems and South African businesses have played their part, embracing their role as corporate citizens. It is, however, worth briefly examining their role from a historical perspective.

Whatever the role of business in supporting apartheid, it is certain that many businesses benefited greatly from its policies. For example, the mining industry, long central to South Africa’s economic dominance, was responsible for the introduction of the migrant labour system. The first sign of change was the introduction of the Sullivan Principles, driven by US multinationals in the mid-1970s, which advocated better conditions and human rights for black employees. Despite the fact that few companies signed up, it paved the way for negotiation on labour rights for black workers.

Around the same time, two of South Africa’s leading businessmen set up the Urban Foundation to address urban development issues. Following this lead, and responding to growing national and international pressure, more companies began to set up trusts and foundations to support community development.

Initially, much corporate giving went to the education sector, assisted by tax breaks, but now a much wider range of social causes benefit. According to the 2004 CSI Handbook, in 2003 100 of South Africa’s largest companies spent on average 1 per cent of pre-tax profits on social investment. South Africa, like many other countries, has seen a change in how social giving is conducted. It is no longer purely at the ‘chairman’s whim’ or with little consideration for the beneficiary. It now involves a far greater degree of strategic thinking, stakeholder engagement and consideration of how it complements a company’s core business and bottom line. Again according to the CSI Handbook, in 2003 two-thirds of CSI spend was being ‘channelled directly to communities in which the company has a vested interest’.

Unique South African initiatives

This change results partly from the international trend towards CSR, evidenced by charters such as the UN Global Compact and the Global Reporting Initiative. South African companies are, in varying degrees, embracing the concepts these advocate.

There are, however, some unique South African initiatives that have been key to driving change. The recommendations made in the Second King Report on good corporate governance in 2002 have been widely acknowledged and concerted efforts are being made to adopt its principles. The Johannesburg Securities Exchange Social Responsibility Index, based on the FTSE4Good index and now in its second year, has 51 approved companies.

Black economic empowerment (BEE) is a uniquely South African concept and a central pillar in redressing the wrongs of the past. Its purpose is to change the ownership structure of  companies by ensuring that black people have access to assets, employment equity and skills development. Affirmative procurement is one such principle and has resulted in many companies placing particular focus upon small business development.

However, many feel that BEE is not broad based enough and government is pressing for the implementation and adoption of industry-based transformation charters, which will further drive employment equity and skills development in business. The charters have a direct and indirect impact on CSR. The financial services charter, for example, advocates that 0.5 per cent of pre-tax profits be allocated to social investment spending and the mining charter (the only one that is currently legislated for) encourages support for communities both in the areas where mines are located and in the rural areas from where labour is drawn.

South Africa is seen by many as the leader on the African continent and it is hoped that its bold stance on CSR will be adopted more widely. South African companies operating outside of its borders have a responsibility to take their well-honed CSR principles with them and not to let lack of regulation and positive enforcement allow them to slip back into bad habits.

Laura Maxwell Stuart is Acting Director of Charities Aid Foundation Southern Africa. Email

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