’Do-gooder’ companies strike gold in South Africa

Wednesday, July 27, 2005

Companies the world over face pressure to pump profits back into the community, but in South Africa — blighted by AIDS and the legacy of apartheid — doing good has become a crucial component of success.

Eleven years after the end of white rule, South Africa is battling the heaviest caseload of people with HIV, some of the world’s biggest wealth disparities and a patchy education system that still fails most poor students.

At the same time, the government is pushing companies to right the wrongs of white rule by meeting strict quotas on black employment and ownership, and by contributing to development.

Experts say that while “social investment” in more developed countries is aimed mostly at sprucing up a company’s image, it has become a key strategic issue for firms operating in South Africa with direct implications for profit.

“I think the days of dropping a few pennies in the beggar’s bowl are finished here,” said Reg Rumney, director at think-tank BusinessMap. “The need is so great and companies have accepted that contributing to society … is a business imperative.”

Take health: South African companies risk seeing their workforces decimated by HIV/AIDS if they do not provide staff with testing, life-prolonging drugs and counselling.

Education: Where will employers find smart black accountants, engineers and nurses to meet affirmative action quotas and curry political favour if they do not educate young people in the townships?

Poverty alleviation: While cell phone operators have launched many laudable projects aimed at getting better communications to previously isolated rural areas, executives admit these are also a nifty way of beating competitors to untapped markets. “

(Social investment) spending is not a guilt-driven thing anymore, it’s a bottom-line tactical issue,” Andre Fourie, chief executive of South Africa’s National Business Initiative, recently told weekly Financial Mail.


South African companies increased spending on social investment to 2.4 billion rand ($359 million) last year from 1.63 billion in 1999, partly in line with inflation, according to the country’s Corporate Social Investment Handbook.

Experts say social investment is embedded in South African corporate culture since foreign companies tried to justify their presence under apartheid by throwing money at photogenic but politically neutral causes like orphans or pensioners.

More recently, political pressure for more corporate philanthropy has sharpened given persistent wealth disparities and the historical role of the ruling African National Congress party as the champion of the poor and oppressed.

Companies that do not meet quotas on black employment, ownership and procurement are less likely to win government contracts and experts say that also applies to firms that fail to do their bit for education, health and poverty alleviation.

“The government has made it clear that business must come to the party as far as development is concerned,” said Stephen Friedman, political analyst at the Centre for Policy Studies.

“Companies have started to see that makes sense, whether it’s just to be nice to the government … or to build a skilled workforce through education.”

Mining companies in particular have been keen to distance themselves from the perception that the industry was built on exploitation.

The CSI handbook rates giant Anglo American as South Africa’s most socially responsible company, and gold producers announced this week a new group aimed at helping poor communities near mines and easing the impact of mine closures.

“Until recently, business grew out of the mines, which were based on colonial legislation and exploitation,” said Rumney. “The role of business as an exploiter is very fresh in the political memory and companies are aware that must change.”

Source: Reuters (link opens in a new window)