Dr Neissan Besharati
Director of Sustainability & Impact Advisory at Pan-African Investment and Research Services
South Africa has some of the most advanced corporate standards, policies and guidelines on Environment, Social and Governance (ESG). This is largely due to the emphasis on socio-economic justice and post-Apartheid reparation. The initiatives introduced during democracy include the King Codes, the Code of Responsible Investing, the social and labor plans required by the Mining and Petroleum Development Act. What further encouraged a culture shift was the introduction by the JSE in 2015 of the Socially Responsible Investment (SRI) Index, later replaced by the FTSE/JSE Responsible Investment Index, which gave investors a new guide.
In South Africa, Corporate Social Investments (CSI) have grown due to the rising interest globally in the sustainability agenda, but driven domestically mostly by compliance with BEE requirements and the social compact imperatives of the National Development Plan. From R 2 billion in 2001, CSI has grown to over R10 billion according to the 2020 Trialogue Business in Society Report.
Many companies go well beyond the minimum requirements, recognizing that compliance with regulation and securing of social licenses from communities in which they operate, is the baseline. Further investment in society is in their long-term interest. A healthy, educated, capable and prosperous society produces better clients, workers and contractors, and in sum, a better economy.
By contrast, for a significant number of companies’ compliance is a reluctant, box-ticking exercise. Their sustainability reports are marketing documents, with little or no, credible and rigorous assessment of impact. For these companies ESG impact is a lower priority than financial returns, CSI monitoring systems tend to be weak and ad-hoc, and there is little appetite to commission high quality (but costly) professional evaluations of philanthropic spending. This is in stark contrast to the technical expertise and resources invested to assess and plan core business operations.
However, there are a few laudable exceptions.
Zenex Foundation spends roughly 20% of their annual R 70 million budget on monitoring and evaluating their investments in language and maths education. Evaluation activities are conducted in parallel from the beginning of the projects and not only at the end of the process. A prominent example is the Early Grade Reading Study. Over the past 25 years, Zenex has become an evidence-based private philanthropy using rigorous methods to evaluate their social investment. They get closely involved with the studies they commission, accept both success and failure and adapt their investments accordingly. This approach allows constant learning by both Zenex as well as the national and provincial education authorities they partner with.
Another interesting case occurred in 2013-2014 when Anglo Platinum commissioned an independent scientific impact evaluation of their R 100 million education programme in Limpopo and North West Province. The research produced some surprising findings on the negative effects on learning outcomes stemming from the psycho-social factors present in mining communities. Notwithstanding the well-intended and considerable investment the mines were making in schools, the actual impact left much to be desired. The outcome of the study enabled the company to fine tune its approach, and Anglo was widely applauded for going beyond a superficial self-serving evaluation, by financing a study which usefully informed education policy and future investments of both public and private actors in South Africa.
There are at least 20 JSE-listed companies that spend between R 100 million and R 2 billion a year on CSI. The efficacy of these social investments could be significantly improved with more evidence-based and rigorous monitoring and evaluation integrated in the design of these programmes. This would have a powerful positive impact on society in general, the image of the private sector and its relationship with government.
Of course, the contribution that business makes to development goes well beyond CSI. It includes skills development, job creation, SME promotion, transfer of technologies to the poor, access to finance, youth and women empowerment, contribution to public infrastructure, service delivery and to tax and government revenue. A number of empirical studies from South Africa, DR Congo, and Mozambique have highlighted the impact that many listed companies have been making to socio-economic development throughout the continent.
Innovative tools, standardised frameworks, metrices and specialised skills are now available to quantitatively and qualitatively measure the contribution the private sector makes to sustainable development. What is critical at this juncture is for corporations to integrate robust monitoring and evaluations systems that ensure that their investments not only result in efficient financial performance but also a measurable ESG impact in the developing economies they operate in.
 Dr. Neissan Besharati is the Director of Sustainability & Impact Advisory at Pan-African Investment and Research Services (PAIRS). He is an international thought leader in the area of monitoring and evaluation, development finance, public-private partnerships, corporate social responsibility and impact investing.