Csi and ed uwc colloquium 15 september 2

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.

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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.

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BBBEE/Sector Codes key drivers of CSI

Source: CSI Handbook 16th Edition N = 103 (up to 3 responses each)

0 20 40 60 80 100

Stakeholder…

Licence-to-operate

Industry sector…

Strategic reasons

BBBEE Codes

Reputation

Moral imperative

% corporate respondents

4

CSI expenditure continues to grow and amounted to R7.8 billion in 2013

0

1

2

3

4

5

6

7

8

9

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

CSI

exp

en

dit

ure

(R

bill

ion

) Nominal (7.8 bn)

Real (adjusted for inflation)

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

100 80 60 40 20 0 20 40 60

Other

Non-sector specific donations & grants

Housing & living conditions

Safety & security

Sports development

Arts & culture

Environment

Enterprise development

Food security & agriculture

Health

Social & community development

Education

% corporate support % CSI expenditure Source: CSI Handbook 16th Edition N = 103

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

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Source: CSI Handbook 16th Edition

CSI entrepreneur spend by type of intervention

9 Source: CSI Handbook 16th Edition N = 36

56

20

14

3 6 Skills development

Providing infrastructure

Providing finance

Non-specific general donations

Other interventions

% CSI entrepreneur and small business support spend

Examples: Corporate-funded entrepreneur support

10

Source: CSI Handbook 16th Edition

• SAB Foundation: Tholoana Enterprise Fund, small-scale seed-capital 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

Entrepreneurial NPOs (‘social enterprises’)

New players in the small business landscape?

CSI funding channels

12 Source: CSI Handbook 16th Edition N = 103, corporate support N = 99, CSI expenditure

100 80 60 40 20 0 20 40 60 80

Other

To government departments

To other for-profit organisations

To industry initiatives

To government institutions

To non-profit organisations

% corporate support % CSI expenditure

NPO income by source

13

Source: CSI Handbook 16th Edition N = 170

0% 5% 10% 15% 20% 25%

SA corporates

SA government

Private individuals

Foreign private donors/organisations

Self-generated

SA trusts/foundations

National lottery

Foreign government

Intermediary NGOs

Other

% NPO funding Unweighted

Weighted by size of income

Self-generated funding a source of growth

14

Source: CSI Handbook 16th Edition N = 157 (multiple responses)

30 20 10 0 10 20 30 40 50

Other

Intermediary NPOs

Foreign state donors

National lottery

Foreign independent donors/organisations

SA government

SA trusts/foundations

Private individuals

Self-generated

SA corporates

Source of decline

Source of growth % NPO response

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

17

Source: CSI Handbook 16th Edition

3 4

7

6 7 5

13

7

6

5 5 5

6

6

7

6 5 6

11 19

17

15 12 11

16 10

13

15

15 15

31 38

32 37

43 43

0

10

20

30

40

50

60

70

80

90

100

2008 2009 2010 2011 2012 2013

% C

SI e

xpen

dit

ure

Education

Social and community development

Health

Environment

Entrepreneur and small business support

Food security and agriculture

Sports development

Arts and culture

Non-sector specific donations

Housing and living conditions

Safety and security

Training and skills development

Other

SED and ESD – the revised codes

Element Points Priority Element Compliance Target

Enterprise & Supplier

Development (ESD)

40 √ Preferential procurement – 80%

Supplier development – 2% NPAT

Enterprise development – 1% NPAT

Socio-Economic

Development (SED)

5 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)

19 Source: CSI Handbook 16th Edition N = 35, multiple responses

0 10 20 30 40 50

Other

Use similar/same service providers

Managed by the same personnel

No linkage

CSI projects feed into an ED programme

What role for CSI?

Source: The CSI Handbook (15th edition)

Trialogue’s CSI positioning matrix

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Thank you

Michelle Matthews

Content Manager

021 671 1640

[email protected]