Corporate social investment and the non-profit sector

By Cathy Duff, Director, Trialogue 

Originally published in the 2017 Inyathelo Annual Report.

Click to view complete infographic of CSI Expenditure in South Africa

Despite uncertainty and tougher trading conditions in almost every sector of the economy, corporate South Africa continues to demonstrate its commitment to corporate social investment (CSI). Total CSI expenditure in South Africa was estimated to be R8.6 billion in 2016, significantly up from R2.9 billion in 2006.

Over this ten-year period, Trialogue has observed that CSI has become more strategic. Companies have become more focused and proactive in their giving and have also aligned their CSI more closely to the business. This has benefitted the education sector, which continues to receive the most support. Over 90% of companies supported the sector in 2016, and its share of CSI spend increased from 33% in 2006 to 48% in 2016. It is followed by support for community development (15% of CSI spend in 2016) and health (which has received a declining share of spend – from 16% in 2006 to 9% in 2016).

Importantly for the non-profit sector, although non-profit organisations (NPOs) remained the favourite channel through which corporates directed their CSI expenditure, the proportion of corporates giving to NPOs declined from a high of 100% in 2014 to 82% in 2016. Also, for the first time, the proportion of CSI funding going to NPOs was below half of total CSI spend (45%), equating to roughly R3.9 billion of spend. The next biggest recipients of funding were government institutions (including schools, universities, hospitals and clinics), which have seen a significant increase in corporate funding over the same period.

csi in sa cropTogether, these trends paint a picture of declining corporate funding of NPOs, especially those in sectors that are not aligned to business needs. Trialogue’s survey of NPOs reflects this, with the proportion of NPO income from corporates declining from 18% in 2011 to 15% in 2016. The largest funding source of the NPOs in the sample was foreign donors – both independent and state – which have overtaken South African government and corporates, and accounted for 23% of income in 2016.

NPOs have had to become more resilient and over half of those in Trialogue’s sample reported an increase in the amount of funds that they generate themselves, largely through the sale of goods and services. Social enterprise – organisations that have a social mission and generate profits to sustain the business and invest in addressing a social cause – has become a buzzword and an increasing number of NPOs are considering how to transition to this model.

Going forward, Trialogue expects CSI to become even more focused, which will benefit those NPOs that have strongly aligned themselves with corporate partners, but which may come at the expense of smaller community and social welfare organisations. We also expect that volunteering and cause-related marketing initiatives will continue to increase as companies look to involve their staff and consumers in their social initiatives. NPOs can benefit from this trend to the extent that they offer meaningful employee and consumer engagement opportunities.

Finally, Trialogue predicts that corporate support will expand beyond grant funding to new types of funding mechanisms. Social impact bonds, debt and equity will all become financing options. This presents an opportunity to those NPOs that can measure and demonstrate their impact, such that funding can be tied to specific outcomes.

Those NPOs that can take advantage of these trends by seeking innovative ways to partner with corporates through financial, product and volunteering arrangements, aligning themselves to businesses, and measuring and demonstrating their impact, will benefit in the coming years.

[Trialogue is one of only a few consultancies in South Africa that focus exclusively on corporate responsibility issues. The company has offices in Cape Town and Johannesburg and shares its knowledge through publications (the Trialogue 2016 CSI Handbook was the 19th edition), its annual conference, training programmes and forums, consulting and reporting services. See www.trialogue.co.za.]

This article is extracted from the 2017 Inyathelo Annual Report