In our view

Change tax laws to make it easier to give - 12 Feb 2013 - Business Day

AMANDA BLOCH

THE extraordinary philanthropic gesture by mining magnate Patrice Motsepe and his family has provoked a flurry of positive and negative commentary. His announcement that he will give half of the money generated by his family's assets to the Motsepe Foundation to fund education, health and other initiatives to assist poor South Africans has prompted many to ask: "What's in it for them?"

The answer is simple. The Motsepes have nothing to gain financially by giving their money away. There are no tax breaks or incentives and, once donated, they can't take the money back and their children or grandchildren cannot access the funds for personal use. So, what remains is a bit of good media coverage and a responsibility to ensure that their trust lives up to its mandate. Whether or not it delivers on the mandate will be in the hands of the trustees and their advisers.

The reality is that our tax legislation does not encourage giving beyond charitable giving. With international Ending quickly drying up, civil society has become increasingly dependent on local donors to survive. Charities and other nonprofit organisations are closing their doors at a rate of knots and valuable programmes are being discontinued, jobs are lost and our most marginalised and vulnerable citizens are abandoned. The government cannot possibly plug the funding hole left by the withdrawal of big international donors, which includes foreign governments. And, there is no government in the world that can meet all the challenges faced by all sectors of society.

I believe one of the ways of increasing giving in our country is to shine a spotlight on those who have done so and encourage others to follow suit. The Motsepes are the first people in Africa to join The Giving Pledge — an extraordinary example and challenge to other wealthy South Africans. Most philanthropists want to fly under the radar but I believe these local givers should be acknowledged.

Another thing that needs to be encouraged is the institutionalisation of philanthropy. While it is laudable and necessary to give as individuals to meet shortterm charitable needs, this giving will not lead to systemic change or help sustain and grow civil society organisations.

The consequence of institutionalising philanthropy by establishing a trust or foundation is that the investment will grow and the gift will keep giving in perpetuity. The money no longer belongs to the giver or the founder of the trust or foundation and so it cannot be taken back. While the giver or his descendants may well play a role in determining who benefits from the grants, everything that is given will need to be carried out in accordance with the mandate and objectives set out in the founding documents.

The giving would continue after the founder is no longer at the helm and the sectors receiving support would continue to do so.

A change of heart or a lack of interest would not affect the flow of money. This is a reality that the government and the South African Revenue Service (SARS) need to recognise when they consider our tax legislation.

By creating an enabling environment that would encourage wealthy philanthropists to set up trusts and foundations, they would have greater potential to support sustainable social and economic development. The issue is complex as there would be an initial loss of taxes. Maybe the government feels it can spend the money more appropriately in the short term than institutionalised philanthropy? Or maybe there is a lack of engagement with, understanding of and trust around the objectives of philanthropy?

Inyathelo: The South African Institute for Advancement acts as the secretariat for the Private Philanthropy Circle, which is a membership-based network of private philanthropic trusts and foundations with an annual grant-making expenditure of about R500m.

This group was established a few years ago and has been engaging with SARS and the National Treasury on the tax issues affecting philanthropists who want to institutionalise their giving.

One of the key issues on the table is the fact that our tax legislation discourages the formation of endowments, which would help institutionalise giving. I wonder sometimes if my children or their children will be as interested in giving as I am. Perhaps, but perhaps not. By giving his money to a foundation, Motsepe no longer needs to worry about that.

Bloch is a philanthropist, an associate at Inyathelo: The South African Institute for Advancement, and a patron of the Children's Hospital Trust.