What is the future of Social Investment? asks Tshikululu CFO Mthandazo Ngwenya

02 April 2014 | Opinion

At Tshikululu, “practical knowledge is combined with strategic thinking and sound governance to create flexible, well-managed fund portfolios” for corporate social investment (Social Investment).

Mthandazo Ngwenya addresses the Social Investment Conference

This service differs from Social Investment efforts managed by companies’ marketing departments, where the focus invariably is on linking social investment with commercial activity.

So said Tshikululu’s chief financial officer, Mthandazo Ngwenya, in his introduction to the 5th Annual Social Investment Conference, sponsored by Tshikululu and taking place at the Gordon Institute of Business Science campus in Johannesburg on 2 and 3 April.

Ngwenya took delegates through a potted history of the South Africa of the past 20 years, pointing out highlights along the way such as:

  • The 1994 elections and Nelson Mandela’s installation as South Africa’s first democratically elected president
  • Winning the 1995 Rugby World Cup and the 1996 African Cup of Nations
  • The adoption 1996 of our Constitution – “one of the most progressive constitutions in the world, even today”; also, the start of the Truth and Reconciliation Commission
  • Thabo Mbeki becoming president in 1999
  • “That great South African”, Mark Shuttleworth, becoming the first African in space
  • The launch by government of the Expanded Public Works Programme, which is still in operation, in 2004
  • The legalising of same-sex unions in 2005, addressing an issue that remains “a prickly pear” on the African continent
  • South Africa hosting the FIFA 2010 World Cup South Africa in 2010, during which time “we developed a sophisticated public infrastructure”
  • In the same year, South Africa joined the BRICS economic grouping: “It’s a huge honour for South Africa to be a part of such a bloc of nations”
  • The adoption in 2013 of the National Development Plan: “The plan should be a galvanising point for South Africa, going forward,” said Ngwenya, which offers the country “one common strategy” for growth
  • In the same year, Mandela passed away: “it also unified the nation around his remembrance. South Africa is eternally grateful to Mandela, for the sacrifices he made”

Turning to economic growth, Ngwenya referred to a report produced by Goldman Sachs examining South Africa’s progress in the past two decades.

According to the Goldman Sachs investment banking division report, South Africa has in the two decades since 1994 made decisive structural advances in 10 key areas. These are:

  • Macro fiscal and monetary balances have improved
  • Government debt costs have trended lower and foreign reserves have risen
  • The overall cost of capital has declined
  • Corporate valuations have improved relative to global peers
  • Real asset rand returns have compared favourably
  • The China and African trade rise has largely offset the European trade decline
  • Disposable income in South Africa has risen
  • The rise of the black middle class has led to a structural boost in spending
  • Wage inflation and government have supported this trend
  • Per-unit productivity has improved

Unemployment, however, is “an urgent national priority”, and failing to address it would pose a security risk to South Africa. “This is an issue of concern,” Ngwenya noted.

Social Investment spend by corporate in 2013 was estimated to be R7.8-billion, he said. But this merely “measures the rand component”, and expenditure related to various industry charters was not included in this figure. A “close approximation” of Social Investment spend is 1% of companies’ net profit.

This is where an entity such as Tshikululu comes into its own. Unlike the Social Investment managed in-house by companies’ marketing departments, where interventions are linked to products sold, “at Tshikululu, practical knowledge is combined with strategic thinking and sound governance to create flexible, well-managed fund portfolios”, said Ngwenya.

Tshikululu also offers its clients advisory services also. For example, the latest broad-based black economic empowerment (B-BBEE) codes have been published, and “if you are looking for someone to advise on the Social Investment components (of the B-BBEE codes), Tshikululu is the place to go”.

Highlighting a few examples of the Social Investment work performed by Tshikululu on behalf of its corporate clients, such as the creation of community resources such as schools, Ngwenya stressed the importance of the intervention fitting the need.

“One of the challenges around creating buildings, is strategic fit … what does the community actually need? What is the sustainability plan? Do you have buy-in from government and other role-players?” he said.

In conclusion, Ngwenya asked: “What really is the future of Social Investment?”

He mentioned the example of Pick n Pay which, in 1977, made a substantial donation of R500 000 to the Urban Foundation, which was concerned with upgrading housing and creating amenities for black South Africans.

But the revenue service of the time refused to give Pick n Pay a tax rebate over the donation, rejecting the food retailer’s argument that the donation – “which was so large that it made banner headlines in the Cape Argus, and in 20 other newspapers around the country” – amounted to advertising.

How current businesses are motivated to do Social Investment would be revealed later in the conference, when the results of research conducted last year by Tshikululu among 40 top South African business leaders would be revealed, said Ngwenya.