Saturday, March 10, 2012

Tracing Corporate Social Investment (CSI) Milestones in South Africa

By Greer Blizzard

2012 marks the eighteenth year of democracy for the ‘new’ South Africa – a country still navigating its way through the unique political, economic and social turmoil of its birth, while accepting the shortcomings inherent in its colonial and apartheid past.

Corporate Social Investment (CSI), a far more widely used and accepted term in the South African context, has been around for many years. As a broad concept it was introduced in 1972, when Meyer Feldberg called on local business leaders to support the communities that surrounded their operations and from where they drew the majority of their workforce.

Since then, this dynamic landscape has seen many challenges, yet continues to grow as cooperation between government, NGOs, the private-sector and individuals moves from confrontation to collaboration and responsibility – albeit a slow and far from perfect process.

In 1992, in an effort to support corporate South Africa, the Institute of Directors approached Professor Mervyn E. King to create a corporate governance solution for business. This resulted in the establishment of the King Committee on Corporate Governance, which in 1994 launched the first King Report that marked the institutionalisation of corporate governance in South Africa.

In 2002 the King II Report was published, which included a far-reaching section on integrated sustainability reporting, setting out specific reporting, accounting and auditing guidelines for non-financial matters. Although voluntary at the time, the Johannesburg Securities Exchange requested that listed companies comply with the King II Report recommendations, or explain their level of non-compliance. This subtle pressure was seen as a turning point in the formal life of CSI.

These shifts in the corporate world paralleled changes in the newly elected democratic government, with the intention of bridging the traditional economic gap between black and white South Africans. The first move saw the launch of the Reconstruction and Development Programme (RDP) in 1994, followed by many transformations in an evolving effort to create a supportive, stable and economically profitable environment.

In 1996 the RDP was replaced with the Growth, Employment and Redistribution (GEAR) macro-economic policy and further in 2000 by the Black Economic Empowerment (BEE) commission, chaired by former politician and new leading black businessman Cyril Ramaphosa, which released a report highlighting the need to establish guidelines to ensure greater black participation in the economic future of the country.

This in turn led to a revised Broad-Based Black Economic Empowerment (B-BBEE) Strategy, a precursor to the B-BBEE Act 53 of 2003. The period November 2005 to February 2007, saw three sets of B-BBEE Codes of Good Practice published, each setting various frameworks for the practical implementation of the B-BBEE Act, including a score-card system which supports the implementation of the following seven pillars:

  1. Equity Ownership
  2. Management
  3. Employment Equity
  4. Skills Development
  5. Preferential Procurement
  6. Enterprise Development
  7. Residual Element/Corporate Social Investment

As a result of these two key legislative frameworks, the concept and application of Corporate Social Investment in South Africa, has become very closely aligned to the advancement of ‘black’ (African, Coloured and Indian) people and their more formal participation in the economy.

In 2014 when South Africa celebrates its 20th year of democracy, it will undoubtedly acknowledge the huge undertakings achieved and will most certainly highlight the steps going forward, as many more (listed) companies engage with Corporate Social Investment - not just as a ‘marketing add-on’, but as a fully integrated business strategy, giving it respected time on Board agendas.