The Wise Company’s View on Social Investment

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Monday, 11 April, 2011 - 09:58

Companies have a responsibility to invest in communities, develop them and also introduce sustainable corporate social investment programmes that aim to tackle social challenges faced by these communities

The wise company doesn’t regard its social role and the challenges of broader society as a thing to be paid lip service. It understands its opportunity to use innovation in landscaping a successful South Africa decade by decade, and knows how this will affect its own prosperity.

Let’s look at what that company would see now. The 2010/11 global competitiveness index lists bureaucracy, education, crime, productivity, corruption and poor work ethic as some of the most problematic areas for doing business in South Africa. Just as concerning is our score in relation to 138 other countries in terms of the 12 global competitiveness indicators.

It is pleasing that our financial markets scored high, four out of 139. But it’s very worrying that our health and primary education environment scores 129 out of 139 and higher education and training is ranked 75th. Our labour market efficiency is also ranked 97th, which is indicative of our productivity and work ethic.

What this translates into is high unemployment. Depending on which unemployment definition you work off, this figure ranges between 25 percent and 32 percent. These are all people between the ages of 15 and 65 years old, who are classified in South Africa as the “participating labour force”. This means that about 19 million people in SA are without a job.

Then we have close to 14 million people who receive monthly social grants. Many may applaud government for providing this support for the most vulnerable and destitute, but you also have to question how economically sustainable this is and its impact on entrenching a culture of dependency.

When it comes to health care, we have serious gaps that will be more difficult to address with the impending National Health Insurance scheme. We have a serious shortage of general practitioners, let alone nurses and specialists. And at least 25 percent of our graduating doctors leave South Africa. So we only graduate 1 400 doctors a year and if we ever want to get close to Brazil’s ratio of 185 doctors per 100 000 people, we would immediately require an extra 65 000 doctors. You just need to do the maths to see how far off the mark we are and how this directly impacts on the provision of health care across all sectors.

Then there is education, an area that many consider to be our Achilles’ heel. Although our Matric or National Senior Certificate pass rate is up from the 2009 figures, and we produced more students with university exemptions than in the past, the real worry is that we now have fewer students passing maths and the quality of passes is declining.

You now only need 30 percent to pass at school, which raises serious questions about the prospects of producing sufficient doctors, teachers, engineers, accountants and scientists in future. This directly impacts on the provision of scarce skills in the market, our research outputs, and ultimately our ability to innovate. Our literacy and numeracy skills are also a concern which means that at a very basic level we are not even able to create basic or simple jobs. And although we need doctors and accountants, we also require artisans to meet government’s job growth targets.

This is not a pretty picture despite the huge advances made since the advent of democracy which has seen millions gain access to basic services such as sanitation, clean water, housing and education.

Indeed, government has invested huge resources into our socio-economic development but so too has business. Last year alone corporate SA invested some R5 billion into corporate social investment (CSI) development programmes, primarily in education, health and social development. Corporate SA also continues to commit to the broader policy debates and think tanks through initiatives such as Business Leadership SA, the National Business Initiative, the Business Trust and Business Against Crime.

Companies worldwide now generally understand that they can’t operate in isolation from greater societal challenge. Great companies buy into this understanding and make it part of their business strategy and brand positioning.

They recognise that they have a moral as well as self-interested obligation to invest in the communities in which they operate. No mining company today can extract minerals from the underground without considering the people on the surface.

The principle of ‘sustainability’ is another key driver for engaging and investing in communities. When I talk about sustainability, I am referring to implementing processes and strategies today that will ensure growth and prosperity in the future. Examples of this can be found in how formal business sees its future use of energy and water. But it also relates to investing in institutions and people who will ensure that we have the skills required in the future.

In our current business environment, investing in communities has also become part of the general license to operate. Just think about the Broad Based Black Economic Empowerment (BBBEE) Codes of Good Practice and the Sector Charters that require not only an investment in communities through socio-economic development (SED) provisions, but also in creating enterprises through enterprise development codes. Both, if done properly and not as simple compliance exercises, can have a significantly positive impact on the country.

The effect works both ways. Good business practices together with demonstrable engagement with communities can bolster a company’s reputation, strengthen staff morale, and enhance relationships with other more broadly-based stakeholders.

But any investment made by business should show a healthy return. The same applies in the community work I have mentioned. But if a company chooses to invest in such things as helping overcome backlogs in basic healthcare provision or in improving the standards of education, then it needs to understand that it should be in for the long haul.

In doing this, the wise company will place social issues squarely on the board agenda and not relegate these to the whims of HR or public affairs departments. It would think carefully about its positioning in a decade’s time and about what it needs to be doing now to ensure a healthier and wealthier workforce and society then. This company would pay close attention to the social landscape, and its role in this arena.

- Tracey Henry is chief executive officer at Tshikululu Social Investments (TSI). This article first appeared on the TSI website. It is republished here with the permission of TSI (www.tsi.org.za).

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