South African companies spent an estimated R10.3 billion on corporate social investment (CSI) in the 2021 financial year, a 7 percent decrease in real terms from R10.7 billion last year, according to CSI consultancy Trialogue, which released its findings in the newly published 24th edition of the annual Trialogue Business in Society Handbook.
This is a report based on South African companies been socially responsible for some of the investment portfolios of their small scale businesses and entrepreneurs’ growth which does have ripple effect on the economic growth of the country.
The Nigerian government needs to put forward a legislation that would compel companies doing business within this country to tow this route in bringing out entrepreneurial abilities within the youths and also create a support platform for small and medium scale enterprises which would further enhance commerce within the country and grant positive economic projections.
Entrepreneurs and small business were supported by 30 percent of corporates and received an average of 6 percent of CSI expenditure this year. As in previous years, most of the funding for entrepreneurs and small businesses was directed to skills development at 62 percent. Significantly less at 13 percent was used to provide finance to small businesses.
On average, less than half of small businesses at 44 percent supported through CSI were part of the company value chain, with the proportion ranging from 2 percent to 100 percent. Some 97 percent of CSI entrepreneur and small business support spend went into skills development for entrepreneurs/business owners, providing infrastructure, facilities and equipment and providing finance and non-specific general donations.
Trialogue has been tracking CSI spend for almost a quarter of a century and for the first time ever and over half of companies reported decreased CSI expenditure, according to director Cathy Duff. She said that the Covid-19 pandemic and a decrease in corporate profits have contributed to this decrease.
This contrasted with the US where total community investments showed unprecedented growth as companies attempted to alleviate the negative effects of the pandemic.
More companies reported making non-cash contributions (of products, services and time) during the current financial year as almost a third of the 69 companies included in the analysis reported this, up from 19 percent in 2011.
Just like in the previous years, education was the most popular cause, accounting for an average of 39 percent of CSI spend. This was significantly less than the average of 50 percent spend received last year, due to increased support for food security and agriculture (10 percent, up from 7 percent last year) and disaster relief (9 percent, up from 4 percent last year). Social and community development was the second-most supported sector at 17 percent of CSI spent and, for the first time, food security and agriculture was the third-most supported sector.
“The vast majority of companies made changes to their sector allocations in the past year, with most entering the food security and agriculture and disaster relief sectors. This demonstrates the direct impact the pandemic has had on sector expenditure,” Duff said.
The cross-cutting issues of environmental sustainability, psychosocial support and gender equity were said to be the most commonly incorporated into some CSI projects or considered at a programme level, with few companies having specific CSI projects dedicated to these issues. Where company leadership chose to take a stand on major issues, 61 percent spoke out against gender discrimination, followed by inequality at 58 percent and climate change at 57 percent. However and unsurprisingly, few company leaders took a public stand on the minimum wage at 21 percent or excessive executive pay at 7 percent.
Less than half of CSI spend at 47 percent was allocated to projects with a national footprint. Gauteng was the most supported province this year as 57 percent of companies directed funding to projects in the province, as it received an average 21 percent of companies’ CSI expenditure. This was followed by KwaZulu-Natal supported by 45 percent of companies and the Western Cape and supported by 39 percent of companies.
Despite the obvious benefits of unrestricted funding (where recipients can choose how to spend the funds), which have become clear during the Covid-19 pandemic, most companies at 90 percent did not offer unrestricted funding and 86 percent were not willing to consider it. Some 38 percent of companies made funding contingent on project outcomes, with 39 percent considering doing so in future. Similarly, more than a third of companies have provided funding to help non-profit organisations to self-generate funding at 35 percent, with 33 percent considering doing so in future.
According to Duff, Trialogue was an advocate of unrestricted funding because it allowed recipients to invest money where it was most needed, particularly in areas that other funders may not support, such as overhead costs, leadership development, or fund-raising, where investment could lead to greater effectiveness and more funding.
In line with previous years, NPOs were the most popular recipients of company CSI funds, with 87 percent of companies directing an average of 53 percent of their spend to NPOs this year, slightly less than last year. An average of 28 percent of NPO income came from South African companies this year. Schools, universities, hospitals and other government institutions were supported by 71 percent of companies with 24 percent of CSI spend directed to them.