Entrepreneurial development through CSI UWC Entrepreneurship Colloquium 15 September 2014
Presented by: Michelle Matthews
What is CSI? • CSI refers to a company’s contributions (cash and non-cash) to people, organisations or communities that are external to the company and conform to the following broad criteria: – excludes contributions to employees but may include input or giving to families of employees or local communities from which employees are drawn or where they live, – predominantly or entirely focused on disadvantaged individuals and communities, – excludes commercial sponsorship but may form a developmental arm of commercial sponsorship, – not marketing or public relations-orientated but could have a communications element.
2
Why do companies fund development? • It is difficult to operate a business profitably (at least in the long term), in a situation where there is civil unrest, crime, rampant health problems, a lack of an educated workforce and government legislators that repeatedly introduce regulations and policies that are counterproductive to business. • Business relies on markets that have the means to purchase their products and services. A country where only a very small portion of the population can afford to buy from business is far less attractive to one in which affordability is more widespread. 3
BBBEE/Sector Codes key drivers of CSI Moral imperative Reputation BBBEE Codes Strategic reasons Industry sector‌ Licence-to-operate Stakeholder‌ 0
20
40
60
80
100
% corporate respondents Source: CSI Handbook 16th Edition N = 103 (up to 3 responses each)
4
CSI expenditure continues to grow and amounted to R7.8 billion in 2013 9 CSI expenditure (R billion)
8
Nominal (7.8 bn)
7
6 5
Real (adjusted for inflation)
4 3 2 1 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Entrepreneur and small business support in CSI Insights from Trialogue’s 2012/13 research with 103 companies
Education receives the most support and largest share of CSI spend Education Social & community development Health Food security & agriculture Enterprise development Environment Arts & culture Sports development Safety & security Housing & living conditions Non-sector specific donations & grants Other 100
80
60
40
% corporate support Source: CSI Handbook N = 103
16th
20
0
20
40
60
% CSI expenditure
Edition
7
Why support entrepreneurs and micro/small businesses as part of development spend? • • •
• • • •
Unemployment stood at 25.2% in the first quarter of 2013 It was estimated that 48% of the country’s youth were unemployed in 2012 The economy created 646 000 jobs since the third quarter of 2010, representing an annual growth rate of 1.4%, which falls far short of the expected 5% annual growth required to meet NDP target of 11 million jobs by 2030 Formal sector employment increased by 77 000 jobs in the first quarter of 2013 compared to 86 000 jobs in the informal sector during the same period South Africa’s informal sector generates approximately R60 billion turnover a year, representing 10% of the country’s GDP Only 6% of working South African adults operate their own businesses, and of these just 14% are intentional entrepreneurs compared to an average of 27% for efficiency-driven countries DTI research indicates that more than 80% small businesses in SA fail within the first two years of establishment
8 Source: CSI Handbook 16th Edition
CSI entrepreneur spend by type of intervention
3
Skills development
6
14
Providing infrastructure Providing finance
56 20
Non-specific general donations
Other interventions % CSI entrepreneur and small business support spend
9 Source: CSI Handbook 16th Edition N = 36
Examples: Corporate-funded entrepreneur support • SAB Foundation: Tholoana Enterprise Fund, small-scale seedcapital grant to assist micro-enterprises run by youth and women, or employing people with disabilities • Engen Petroleum: Durban South Basin Incubator for capacity building for black-owned small businesses • Investec (with Raizcorp): ACUMEN enterprise expansion for black-owned small businesses to improve profitability • Fetola Foundation: Graduate Asset Programme for linking graduates to small businesses, particularly in small towns • Old Mutual: Legends business development programme 10 Source: CSI Handbook 16th Edition
Entrepreneurial NPOs (‘social enterprises’) New players in the small business landscape?
CSI funding channels To non-profit organisations To government institutions To industry initiatives To other for-profit organisations To government departments Other 100
80
60
% corporate support
Source: CSI Handbook 16th Edition N = 103, corporate support N = 99, CSI expenditure
40
20
0
20
40
60
80
% CSI expenditure
12
NPO income by source SA corporates SA government Private individuals Foreign private donors/organisations Self-generated SA trusts/foundations National lottery
Foreign government Intermediary NGOs Other 0% Unweighted
5%
10%
15%
20%
25%
% NPO funding
Weighted by size of income
13 Source: CSI Handbook 16th Edition N = 170
Self-generated funding a source of growth SA corporates
Self-generated Private individuals SA trusts/foundations
SA government Foreign independent donors/organisations National lottery Foreign state donors Intermediary NPOs Other Source of decline Source of growth
30
20
10
0
10
20
30
40
50
% NPO response
14 Source: CSI Handbook 16th Edition N = 157 (multiple responses)
What are the ‘social enterprises’ selling? • 2014 research indicates that NPOs are generating income through selling: – Training: 63% – Other services: 44% – Leveraging existing assets: 26% – Goods produced by beneficiaries: 23% (multiple responses)
SED and ESD What will the relationship between social investment and enterprise development be?
Distribution of CSI spend by development sector: 2008 — 2013 100
Education
90 31
38
80
32
37
Social and community development 43
43
% CSI expenditure
70 60 50 40
30 20
Health Environment
13
16
10
Entrepreneur and small business support 15
17
11 19
6 13
6
3
7 4
7 6 7
15 6 5 6
Food security and agriculture 15
15
12
11
5 5 7
6 5 5
Sports development Arts and culture Non-sector specific donations Housing and living conditions Safety and security Training and skills development
10
Other 0 2008
2009
2010
2011
2012
2013
17 Source: CSI Handbook 16th Edition
SED and ESD – the revised codes Element
Points
Priority Element
Enterprise & Supplier Development (ESD)
40
Socio-Economic Development (SED)
5
√
Compliance Target Preferential procurement – 80% Supplier development – 2% NPAT Enterprise development – 1% NPAT
1% NPAT
ESD sub-element Beneficiaries - +-50% black-owned SME’s with turnovers under R50 million Supplier Development – development of SMEs currently in the supply chain Enterprise Development – development of SMEs who are potential suppliers
CSI link to enterprise development (2013) CSI projects feed into an ED programme
No linkage
Managed by the same personnel
Use similar/same service providers
Other
0
10
20
30
40
50
19 Source: CSI Handbook 16th Edition N = 35, multiple responses
What role for CSI?
Source: The CSI Handbook (15th edition)
Trialogue’s CSI positioning matrix
21
Thank you
Michelle Matthews Content Manager 021 671 1640 michellem@trialogue.co.za