Aid is not enough

Mon, 6 October 2008

While companies and consumers are becoming more aware of their social responsibilities, South Africa still faces huge, un-met challenges. The growing availability of capital for social development is not always finding an effective home. And although philanthropy plays a vital role in the development of communities, is not enough to lift people out of poverty. We need to look at new and innovative ways of giving people and their communities access to the capital they need to lift themselves out of poverty.

South Africa is 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 Merrill 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 among the most unequal in the world with an estimated 51% of South Africans living below the poverty income line.

Imbalances

A great deal of money has gone into development in South Africa since the fall of apartheid. A recent Human Sciences Research Council national 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 year. 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 that have their own specific development agendas. Individual donors are faced with sometimes 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 has limits too: research 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. It seems that the areas with the greatest needs, and with the least access to resources, are not receiving the bulk of corporate investment.

Innovative solutions

What is becoming clear is that innovative solutions are needed to address the huge imbalances that exist between South Africa’s rich and poor. “Our belief is that results-oriented business processes and technology tools can do much to redress these imbalances,” says SASIX founder, Tamzin Ractliffe. “Technology networks can transform the traditional map of development, expand community horizons and allow the kind of progress in a single decade that was once only possible after generations.”

SASIX aims to move both corporate and individual donors from a compliance mentality of ‘tick-box’ or ‘feel-good’ giving to a more strategic and measured approach to tackling poverty in South Africa. It also insists on measurable returns, either social – in terms of lives changed – or financial and social. This philosophy helps raise the bar for public and corporate participation in social development in South Africa as well as build a culture of accountability for social performance amongst beneficiary organisations.

Investing responsibly

Another major growth area for the South African development sector is socially responsible investments. The South African financial services sector manages a national endowment of approximately R3 trillion in life and pension fund savings. Only a very small proportion of this - around R10 billion or just 0.33% - is directed towards investing in a socially responsible manner. At the same time, South Africa is struggling with an infrastructure backlog that needs to be urgently addressed.

Over the last three decades there has been an explosion of innovation as a growing international community has experimented with a variety of approaches to tackling some of the world’s most intractable social problems. By creating and adopting a rich diversity of strategies, all of which are now coming together within the field of socially responsible investment, markets and business, capital and commerce can be harnessed not simply for the creation of individual wealth but also for the creation of wealth, prosperity and value in its fullest sense.

Although South Africa lags behind many developed countries in terms of both strategic philanthropic giving and socially responsible investing, a new social enterprise movement is forging new development strategies that will change the face of social investment in the country and beyond.

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