The 21st Century company is increasingly integral to the social order ¹. Economic freedoms and globalisation have seen the company increase in strength and influence compared to governments and other institutions in recent years. But this power brings with it a greater responsibility and it is now imperative for business to demonstrate social participation and create value: by uplifting poor communities today, companies are safeguarding their markets tomorrow; by investing in sustainable practices, they are ensuring the future survival of the communities they operate in.

 

But the growing availability of capital has not necessarily resulted in social investment funds finding a truly effective home. Money generally flows to the big, best-known and celebrity-endorsed development programmes or is directed through governments or aid agencies with their own development agendas. This reinforces a more pervasive problem of access to capital markets experienced by under-developed and under-resourced initiatives that provide critical and effective interventions on the ground.

 

Beyond the miracle
In South Africa, the situation is even more complex. We are an upper-middle-income country in per capita terms. The number of South African dollar-millionaires increased by almost 14% between 2006 and 2007, according to the latest Capgemini Merril Lynch World Wealth Report, and a rapidly growing black middle class is boosting the country’s house, car and retail sales. But despite this relative wealth, the distribution of income is amongst the most unequal in the world with an estimated 57% of South Africans living below the poverty income line .

 

Although much is being done on the ground and by government to address this imbalance, the culture of giving formally and regularly to causes is not particularly well-established and people often feel powerless in the face of what they perceive as overwhelming need. And while corporate philanthropy in South Africa has grown exponentially over the last two decades, it has often been constrained by an un-strategic, ‘tick-box’ approach to social development created, to some degree, by affirmative action legislation and industry charters.

 

At the end of apartheid in 1994, South African non profits had to adapt quickly to a changing donor landscape. Once supported directly by international aid organisations, non profits found their funding streams drying up. With a legitimate government in place, there was no need to provide aid directly to non profits. So these organisations had to turn their attention to South African companies and individual donors, as well as becoming adept at navigating government-distributed aid.

 

Finding what works
A great deal of money has gone into development in South Africa since the fall of apartheid. A Human Sciences Research Council survey on social giving in South Africa found that regular citizens give roughly R12 billion a year from their own pockets to help others and corporate philanthropy stands at an estimated R5 billion per year². South Africa has a thriving civil society, large amounts of aid funding and a government committed to social upliftment and poverty alleviation. Yet things do not seem to be getting substantially better for the very poor in the country. And our major challenges – HIV/AIDS, housing, education, food security – show few signs of being adequately addressed.

In South Africa, and across the continent, donor funds are mainly channeled through governments or large grant-making foundations and individual donors are faced with often confusing and competing choices and a lack of adequate giving channels. So the small, grassroots organisations – often doing the most vital work at the coalface of poverty – lose out.

 

Corporate philanthropy, while making an unarguable contribution to our development, has its limits. Research conducted in 2003 indicates that 15% of corporate social investment funds in South Africa focus on company employees with a further 49% going to the communities in which companies operate. Two-thirds of this spending was targeted towards urban and peri-urban areas, with only 34% going to rural communities.³ It seems that the areas with the greatest needs and with the least access to resources, are not receiving the bulk of corporate investment.

 

So philanthropy alone, while noble and very much needed, is not enough to lift people out of poverty and address South Africa’s historic imbalances. We need to find new ways of empowering poor communities – and the organizations who work within them – to uplift themselves. This means giving people access to the available social capital and providing the tools to help them manage it effectively.

 

The South African Social Investment Exchange
When GreaterGood South Africa created the SA Social Investment Exchange (SASIX) in June 2006, we hoped to move corporate and individual donors from a compliance mentality of ‘tick-box’ or ‘feel-good’ giving to a more strategic and measured approach to tackling the challenges we face in South Africa.

 

SASIX is a social ‘stock exchange’ which lists evaluated projects in priority development sectors for corporate and individual donors to invest in. The return on their investment is social, rather than financial, but is nonetheless vital for South Africa’s future. SASIX applies the same sort of assessment and due diligence consideration to projects as would be applied to financial investments. Projects range from helping communities to care for AIDS orphans in KwaZulu-Natal to business skills training for crafters on the fringes of the Kruger National Park – covering every major area of social development in the country.

 

With the help of considered corporate and individual givers, SASIX is taking on South African development issues and having a great deal of success: over R19m has been invested in 49 social development projects in just over two years.

 

SASIX also works to level the playing field by giving small, pioneering non profit organisations the same access to funds and capacity development as the better-known causes. And while most non profits today are typically funded by a single instrument – the charitable donation – there are, in fact, a range of alternative financial instruments available that could provide investors with a social and a financial return; and non profits with a sustainable alternative income stream.

 

Breaking new ground
South Africa has a largely untapped ability to fund sustainable socio-economic development and growth through commercially viable socially responsible investment (SRI). Because SRI is the pairing of financial and social performance objectives, it has the potential to galvanise large and sustainable investments into worthwhile social ventures. Poorer communities also represent significant commercial opportunities for investment: these communities have large, unmet needs for infrastructure development, entrepreneurial opportunities, employment and consumption.

 

There is an enormous savings pool in South Africa – around R3 trillion in largely life and pension funds – but only an estimated R10 billion is dedicated to socially responsible investing. At the same time, South Africa is struggling with an infrastructure backlog that needs to be urgently addressed. The global precedent shows South Africa lagging seriously behind international trends in the use of commercially viable responsible investments for pension fund portfolios. This led to the evolution of SASIX so that it provides investments on a continuum from SASIX Social investments (grants) to SASIX Financial investments (offering market-related financial returns achieved through investing in socially responsible initiatives). Together with our fund-manager partner, the Cadiz Group, we are creating a socially responsible investment product that will combine investment return imperatives with sustainable development – environmental, social and corporate.

 

A forum for change
Because of our experience developing the SASIX concept, GreaterGood SA is establishing the South Africa Social Investment Forum (SASIF) in partnership with other Social Investment Forums around the world. The forum is a national membership association dedicated to advancing the concept, practice, and growth of socially responsible investment (SRI) by:

Although South Africa lags behind many developed countries in terms of both strategic philanthropic giving and socially responsible investing, it also has the opportunity to learn from what works elsewhere and forge its own, uniquely South African, development path.