Jay Naidoo, Political Activist, author and founder of the J&J Group Development Trust speaks on civil society, poverty levels in South Africa and the role of NGO's.

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Do South African companies take corporate social investment seriously?

This week we feature an article from Political Analysis

In 2008, the New Companies Act 71 was ratified, and it radically modernised South Africa’s corporate legal landscape. The act aims to “reaffirm the concept of the company as a means of achieving economic and social benefits.” Many business models do not initially consider corporate social investment, yet it has become advantageous for companies to participate in future-orientated development of the community, not only idealistically, but also for financial advantages. In the end, a responsive social image also contributes attracting and maintaining high-customer relationships. In South Africa, which has been shaped by great injustices among the society over decades, there is especial need for initiatives which promote social growth.


The country’s corporate law does not explicitly oblige businesses to engage in social initiatives, however, it has internationally renowned measures implemented to ensure that businesses act socially responsive. To be able to be listed on South Africa’s largest bourse, the Johannesburg Stock Exchange, it is necessary for companies to comply with three reports, which form the King Report on Corporate Governance. It obliges the companies to report “at least annually on the nature and extent of [their] social, transformation, ethical, safety, health, and environmental management policies and practices.” Companies who do not invest in Corporate Social Responsibility initiatives need to explain why they do not do so. Businesses do not only need to give information about potential social initiatives; they also need to outline their future prospects of sustainability. Contrary to many other countries, which focus on financial aspects only, the South African corporate law focuses more on businesses positions and roles in society.

Naturally, companies usually try to depict themselves as sustainable and social responsible. Their own statements about the issue are thus insufficient evidence. First Principles, a sustainability research company, has specialised on surveying the South African population about their opinions towards Corporate Social Responsibility in South Africa. In April 2011, it published a study in which 1000 South Africans from urban and rural areas were questioned. It was found that the biggest share of the people see backlog demand in the education and training sector, not in human health, environment or poverty.


Among the country’s economic communities, which were divided into twelve sectors, the financial sector is regarded as being most socially responsible. Certain individual companies were praised more than the average, such as Coca Cola and telecommunications company MTN. South Africans think their government is the organization which fulfils its social responsibilities the least, followed by alcohol, tobacco, oil and mining companies.

Social initiatives in South Africa tend to focus externally, increasing awareness and social favour of the companies involved.

In addition to that, the majority attaches more value to the manner in which companies carry out their business than to additional external social initiatives. This might also explain the negative assessment of the country’s big mining sector. Many mining companies put much effort in Corporate Social Investment among communities, however the wildcat strikes over the last months have shown that the businesses’ employees are everything but satisfied with the administration of the business.

Generally, South Africa’s model of corporate law, in terms of corporate social responsibility, has induced several outstanding social initiatives by the private sector. Nevertheless, the high social dissatisfaction within the country shows that, in the perception of many South Africans, many companies do not act as responsible internally as they do outwardly. It may be commendable to support disadvantaged communities as a company, but the first focus should be on being socially responsible towards one’s own employees.

The problem is, paying adequate salaries and promoting social contributions for employees is more difficult to exploit on a marketing level than building a school in a rural village. South Africa’s continuing labour unrest and the high unionization emphasize the fact that many people feel the country’s companies do not act socially responsible. Improving certain issues is definitely desirable, but the first step for the private sector should be for it to use its resources to care for its own employees. If that situation is satisfactory, it can turn towards external initiatives. A sustainable private sector would help to prevent many social issues from arising in the first place, and would thus decrease the need for external social initiatives by companies.

Fabian Scherer
f.scherer@politicalanalysis.co.za