20070221 pau poverty red nzekwu csi in education paradox of poverty alleviation

Delia Nzekwu ([email protected])

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CORPORATE SOCIAL INVESTMENT IN EDUCATION: THE PARADOX OF POVERTY ALLEVIATION IN SOUTH

AFRICA

A paper presented by Delia Nzekwu at the 2007 HSRC Colloquium on:

Education & Poverty Reduction Strategies: Issues of Policy Coherence

23rd February


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CORPORATE SOCIAL INVESTMENT IN EDUCATION: THE PARADOX OF POVERTY ALLEVIATION

INTRODUCTION: WHY CHOICE OF TOPIC?

The role of business as key partner in the country’s pre-94 political negotiations.

The continuous implicit expectations of business to play a prominent role in righting the wrongs of the past.

Business growing strategic interest in CSI.

The enormous potential of CSR/CSI to drive the country’s transformation agenda.

What is CSI? What does it mean in South Africa? How does the definition of the word impact on poverty alleviation through education?.


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WHAT IS CSI?

• Many academic attempts to find from where and how CSR began have been met with as much success as confusion over the meaningof the term.

• Generally agreed: CSI sprang from the broader concept of Corporate Social Responsibility (CSR).

• Choice of definition is often subject to economic or ethical prejudices.

• Moral concerns about bridging the inequality gaps within society may justify the exigency of CSR.

• Business responsibility to shareholders and immediate stakeholders would often explain the economic preferences for the term.


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CSR – THE BEGINNINGS

The evolution of the term is discernable in three different historical periods:

PRE-BUSINESS ERA

• Human Nature: spiced by virtue and vices – man is naturally philanthropic and greedy. Greed arises from the innate tendency for competition.

• In order to check such vice as greed, a superior value system is essential.

• Religion: Be the ‘Good Samaritan’ Lesson: in giving priority to the needs of the community over the individual’s, we engage in just another aspect of self-preservation and self-advancement.

• Tithes and alms-giving A charity culture that nurtured Alm houses which were a more permanent form of care for those who were in extreme poverty. A creation of the wealthy and aptly called ‘Company Town’, Alm houses were depots of labourers for the rich who could afford them.


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Pre-business era - ctd

• Code of Hummurabi: which is likened to the customary law, but more akin to the labour laws of today. The Code stipulated the wages due a field labourer per year.

• Thus, society sought refuge in theology for solution to the issues of poverty and inequality. Philanthropy was driven by institutions such as the church and the fraternity of the wealthy and by personal conviction.

• Underlying principle: benevolence to the poor and the collective benefit of helping one another. Societies, as corporate entities, owed their self-preservation to this responsibility.


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INDUSTRIALISATION

• The era of cheap labour and mass production, and the period of contesting capitalist and socialist ideologies: Adam Smith’s ‘laissez-faire’ theory, John Locke’s ‘natural property rights’, Max Weber’s ‘Protestant Ethic’, and Marx and Engels’ ‘bourgeois socialism’.

• Early proponents of CSR, in US and Europe were Protestants preaching capitalism with a human face or socialism.


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• CSR in feudal (pre-business) and industrial/post-capitalism periods can be translated in what I designed and called the HUREPICS PYRAMID.

A HISTORICAL PERSPECTIVE OF CSRON THE HUREPICS PYRAMID

HumanNature

Religion

Petty Business (Pre-Capitalism)

Industrialisation

Capitalism

Socialism Capitalism

Capitalism

Conservatism / Bourgeois Socialism

Industrialisation (IT)

SMMEs

Human Nature

Religion

At the beginning, human nature and religion were Primary influences on CSR, not the bottom line

In the 21st century, the emphasis is Economic growthAs a motivator of benevolence

H U

R E P I C

S S C A L E

H U

R E

P I

C S

S

C A

L E

Post

-Cap

italis

m

Fig. 1 Fig. 2

Pre-

Cap

italis

m


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POST-WORLD WAR II

• An increased harmonisation of the interests of government and business on the issues of the environment could be discerned.

• CSR encompassing responsibility to the community and ecological factors began to take strong hold with the devastating effects of the war on infrastructure and the lives of communities.

• Socialist ideals were re-animated as the public, industrialists, economists and critics alike demanded capitalism with a social conscience in the face of widening divide between the northern and southern hemispheres.

• Governments began to curtail human excesses through welfare programmes and many laws regulating business activities came into being.

• International NGOs such as the Red Cross, Red Crescent and UNICEF grew in relevance, mobilising the power of humanity in catering after vulnerable adults and children.

• The World Bank, International Monetary Fund (IMF) and the World Trade Organisation (WTO) re-emerged as watchdogs of international market standards and the CSR prescription.


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Post-World War II - ctd

• By the 70s CSR had many interpretations and gained a good measure of popularity in the lexicon of big international companies in Europe and America.

• CSR, today, encapsulates two broad parts: a) the globally recognised or accepted indices and b) the national or local elements. A and B obscurely converge in providing governments a working guideline in the amelioration of inequalities in the sub-system.


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WHAT IS CSR?

• Defined, among others, as ‘social investing’, ‘social responsible investing’, ‘ethical investing’, ‘values-based investing’ and ‘mission-based investing’.

• The word ‘investment’ stands out indicating that corporate giving irrespective of what form it takes, is expected to generate some return to its giver.

• In broad terms, CSR is essentially a preoccupation with wealth generation and distribution. It is a direct or covert involvement in the equitable distribution of resources to tackle ‘starvation an squalor’ while affording everyone a ‘chance of prosperity in a healthy environment.

• CSR is about the long-term prosperity of the business through the alignment of its corporate goals with those of society.

• It is about paying attention to the triple-bottom-line. That is, the economical, social , and environmental.


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What Is CSR? - ctd

• CSR can be described as the humanitarian in capitalism, as ‘capitalism with a social conscience against the consensus that ‘a free market and an efficient economy does not lead to happiness’ and that ‘poverty reduction and an improvement in the quality of life are not dependent on economic growth.

• Inequality drives capitalism even though democracy is predicted on the belief in equality.

• CSR is about maintaining the existing political and economic equilibrium, but, it cannot be equated to socialism. In Marx and Engels’s terms, CSR is a bourgeois-socialist ideal.

What does it mean in South Africa?


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THE SOUTH AFRICAN IMPERATIVE

• A relatively new concept in South Africa.

• Practical responses by South African business to the need for change came in the wake of ‘large scale urban riots of 1976’.

• As a formal principle, CSR has been given a boost by the 1977 Sullivan Principles which initially applied exclusively to the US companies to commit a percentage of payroll to philanthropic activities as ‘a means of justifying their continued presence in the country’.


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The South African Imperative - ctd

THE ROLE OF THE TRC

• The Truth and Reconciliation Commission (TRC) indictment of business in its 2003 official report exerted CSR pressure on business.

• From 1994, CSR in South Africa took the form of cheque-book donations to the Business Trust and from this period also the stage was set for the confusion between CSR as voluntary and as a compliance exercise.

• CSR carried the blame culture via the TRC report and business desire to distance itself from that blame culture partly explains to date the dislike for the word – CSR.


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The South African Imperative – ctd

• The 2000 King II Report and the 2002 World Summit on SustainableDevelopment held in Johannesburg, in unison, gave impetus to the South African conceptualisation of the word.

• CSR in South Africa as in the pre-capitalist era emanates from human nature, based on the premise of ‘ubuntu for business’ and ‘kaelo’ which dwells on the traditional notion of coming together to uplift one another.

• It can be perceived as both an atonement for past injustices and keeping shareholders happy.

• The county’s neo-liberal leaning and global competition has, in the past decade, engendered a more business-friendly concept. Today, South Africans prefer to use the term CSI to describe investments outside the immediate purview of the business.

• Differentiating CSR from CSI is difficult given that one speaks of a value system (CSR) while the other describes more concretely the practical (CSI).


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• CSI in South Africa is both an economic and political expediency.

• The idea finds expression in the DTI Code of Conduct for BEE and thus cannot operate in isolation from other corporate citizenship andtransformation initiatives.

• The conceptualisation of CSI at the moment, is flawed because it occupies a disposable position in the Broad-Based BEE scheme as a ‘residual element’ of the BB-BEE scorecard.

• The DTI Code can be understood as government’s strong friendly measure of coercion. Although the DTI Code is said to be a business guide, implicit punitive outcome of non-compliance belie arguments of ‘voluntariness’.


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CSR IN SOUTH AFRICA AS CURRENTLY DEFINED BY THE STATE AND BUSINESS

TRANSFORMATIONBEE

Sector Charters, Environment, Human Rights, etc

Procurement SMMEs Residual Elements

CSRCore Business Competence

Return to shareholdersProfit

Corporate Social Investment(CSI)


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• Under the BEE framework, it is the exertion of government’s developmental posture on market forces.

• It seeks to guarantee that corporate giving is recognised as an important component of the transformation mix.

• CSI in many respects represents the role of the state as the custodian of the ‘common good’.

• It reflects a paradox inherent in a capitalist system as legislation struggles to simultaneously protect the interests of business and those of the once disadvantaged majority – interests that are often in conflict.


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• ‘BEE is about radically increasing the numbers of South African’s with modern professional qualifications and productive skills’. (ThaboMbeki)

• BB-BEE as conceptualised today hardly gives credence to those words with CSI, and by extension, education, relegated to the background.

• The huge backlogs in skills deficiency arising form apartheid’s legacy means that business needs to spread its corporate tentacles intosome abnormal areas of education and skills development in order to achieve projected economic growth and reduce, significantly, poverty levels amongst the majority of the population.

• Why should business be interested in education?


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A CASE FOR CSI IN EDUCATION

• Education has been the catalyst for South Africa’s two worlds. The Bantu Education Act of 1953 legalised black ignorance and poverty.

• Skills shortages make it expedient.

• Ample research findings argue that education can ‘obliterate distinction between social groups’ just as it can amplify social inequalities.

• Equality in South Africa can be measured by the school system, by the status and earnings aspirations of the majority post-school. Employment potentials for many in this group are extremely low and poverty levels among them very high.

1995 2006Number of schools 20,750 28,000

Registered private schools

497 1,000

Number of learners 11,000,000 12,000,000

Number of teachers 344,083 366,000.00

SOUTH AFRICA’S 12-YEAR EDUCATION STATISTICS


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A Case for CSI in Education - ctd

• Public expenditure on education currently stands at ‘at least 20 percent of total budget’.

• Number of schools and pupil enrolment figures have steadily risen over the years. Yet, historical backlogs make the national budget insufficient to provide for all the needs of the 28,000 schools.

• The country’s illiteracy levels are high – currently put at around six to eight million functionally illiterate adults over 15 years of age.


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CSI IN EDUCATION BY SECTOR

• Education takes up the largest single portion of CSI funding; put at 37 percent as at 2005 and representing R980 million.

• The above amount is shared among the various sectors of education in the following priority: a) 51 Percent to Schooling (Foundation Phase, Primary, Secondary and Further Education and Training (FET). That is about R500 million, b) Tertiary or Higher Education (HE) gets about R300 million and c) Early Child Development (ECD) and Adult Basic Education and Training (ABET) gets R120 million.

51%

33%

13%

6%

0%

10%

20%

30%

40%

50%

60%

School Tertiary ECD ABET

School Tertiary ECD ABET

Chart 1


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CSI in Education by Sector - ctd

ECD• As ECD is not a favourite investment space for business or government,

catering after children from birth to 6 years of age continues to be a major purview of foreign donor, the non-profit organisation (NPO), churches, street communities and women organisations.

• One percent of national budget and 13 percent of corporate funding is inadequate to provide for South Africa’s 6.3 million children of pre-school age. Today, just over 1 million of these children have been catered for.

• National and International researches reveal the invaluable social and economic return to society investment in pre-schooling. A US-based educational research, for instance, reports that for every $1 spent on early education, savings to the economy and society amounts to $17.07.

• ECD strongly impacts on general education and poverty alleviation and the largest educational responsibility lies in this sector. Because its returns take a long time to come, it is the least resourced educational sector and sustainability is very difficult.

• Of the few companies that said ECD was a vital investment interest, none showed a genuine interest in investment follow-up.


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SCHOOLING

• Currently given the largest CSI spend in education for ‘its promise of broad developmental impact and societal change.

• Expenditure on Maths and Science has continued to rise and projections are that this would soar.

• Problem: the money goes into grades 9 and 12 when it should go into grades 2, 3 and 4 where it is really needed.

• Maths and Science is a glorious heading and can fetch some PR for companies, yet the shortage of qualified teachers and therefore effective schools mocks this funding priority.

• Graduation rate in Higher Grade Maths continues to be appalling.


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TERTIARY EDUCATION

• Currently in second place in the CSI spend after schooling. But a steady decline in CSI expenditure here has been recorded since 2000 and so has the national budget on higher education. As a portion of the education budget, it has fallen to 12.6 percent from 15.4 percent and as a portion of the national budget, it has declined from 3.03 percent to 2.58 percent.

• Business says that the reason behind these declines lies in the ‘mismatch between what corporates want to find in higher education and what universities need’. Priority is increasingly given to ‘short-term project-based funding in order to maximise return on investment (ROI).

• For business, higher education is business.

• Part of the problem with higher education graduates lies in the quality of school leavers from the feeder institutions.


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• Since the 70s, CSI responses in education have come with class connotations.

• E.g, the beneficiary criteria were restricted to the privileged few. Entrance into the Project for the Advancement of Community Education (PACE) in Soweto financed by Carnegie Council on BlackEducation and the American Chamber of Commerce, for example, hadfour criteria: 1) children must be committed to a commercial future, 2) must have good primary school records, 3) must be the right age for Standard 6, and 4) must pass entrance exams in English and Maths. In addition a fee of R1,400 per annum was required.

• Not very much has changed today.

• CSI in education predominantly serves selective areas that are more rewarding to the upper and upper middle classes - the strata comprising children privileged to attend well resourced schools, the majority of which are in the urban areas.



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Where is it going wrong?

• Private sector support is often dependent on the ‘functionality’ of the school and functionality is a product of multi-faceted factors: infrastructure, teaching facilities, governance and district government support systems.

• CSI support for educational aid materials is low.

• Funding to ECD, the foundation of good education, is very low. Funding to teacher development, a key success factor in education, has fallen from its number one position at the beginning of thisdecade.

• Funding to Adult Basic Education and Training (ABET) has also declined.

• In addition, public / private partnerships where CSI in education is concerned is hugely challenged by public policy disempowerment of the private sector to take education much more seriously.


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• Business social investment in education from ECD to Tertiary education is underwritten by the needs of the market.

• The emphasis on ROI severely limits access by the very poor to the many opportunities available on CSI ventures.

• Because the market thrives on inequality, CSI in education is currently helping to reproduce the intergenerational inequalities that have existed in South Africa pre-apartheid.

• CSI is also about GEAR. The state lives by it and public / private sector collaborations work to secure its objectives.

• ‘The private sector in the age of digital technology cannot expand jobs and incomes enough to create demand for its own output. Tocompete successfully, business must replace labour with technology, cut labour costs and attract global capital that expects high returns. (The South African NGO Coalition (SANGOCO)


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• The paradox of GEAR: having taken off, thousands of jobs were lost in the public sector as very stringent economic measures were put in place to achieve the desired economic growth.

• The private sector has been accused of not creating enough jobs as expected following the political negotiations of the early 1990s.

• Educational attainment can enable the alleviating poverty only if, among others, there are employment opportunities to absorb graduates being churned into the system. In the absence of jobs, education becomes a nominal element only and CSI is enormously handicapped to achieve more.

• CSI in education is constrained by the needs of capitalism and the prerequisite for economic growth.


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• Today official unemployment figures among the 15.778 million economically active population is put at 26.2 percent. Although real wages have increased, reports Statistics South Africa Labour Force Survey after adjusting for inflation, the country’s labour market is still characterised by huge wage inequalities along racial, gender, industry and education lines’.

• The most prominent paradox of CSI as a catalyst for poverty alleviation via education exists in the BB-BEE discourse as already highlighted.

• As a residual element, CSI shares 10 percent of the BEE scorecard with other items like empowering SMMEs, preferential procurement, community development, etc.

• In addition, the residual element is left to the whims and caprices of companies.


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• Legislation, through the DTI Codes, thus decrees a vital empowerment element – education, into near oblivion, and consequently, a crucial poverty alleviation driver in the nation’s transformation objectives.


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• Education impacts on all other elements in the BB-BEE mix, CSI, where it currently resides, should occupy a prominent place as an empowerment enabler in the transformation agenda. Its relationship with the other elements is thus cyclical.

CSR -THE SOUTH AFRICAN REDEFINED

ECONOMIC

Broad-Based Black Socio-Economic Empowerment

CSR CSR

CSR

Ownership/Management/Control

CSI

Environment

Skills

Procurement

SMMEs

Employment

Equity


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CSI IN EDUCATION & THE PARADOX OF POVERTY ALLEVIATION: WHAT CAN BE DONE?

• BB-BEE needs to be reconceptualised to reprioritised education as a long-term success factor.

• CSI weighting should come almost at par with the BEE key elements as its long-term benefits are more relevant and sustainable to the nation’s poverty alleviation objectives.

• All public policies should clearly be seen to be in consonance with the nation’s transformation objectives.

• The role of the state as facilitator needs to be improved upon. A conscientious effort needs to be made to significantly reduce, and in time, eliminate the historical backlogs in infrastructure, especially in the rural areas.

• Make haste slowly in order to improve educational concepts and implementation strategies. Policy over-load is demotivating CSI in education.

• CSI in education is about long-term cascading benefits.


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CSI IN EDUCATION & THE PARADOX OF POVERTY ALLEVIATION:

WHAT CAN BE DONE?

• Eliminate unnecessary state bureaucracies militating against accessibility of relevant government officials for interaction.

• The Department of Labour should get more involved in synergisingCSI endeavours in education.

• Private sector CSI initiatives are still highly fragmented, and largely half-heartedly done. This hinders effective inter-company collaborations.

• CSI may, arguably, corporatise education further. But realistic state policies can act as checks and balances.

• Not enough public/private sector synergy of ideas. Fear of state over-dependency on the private sector is palpable.

• Offer meaningful incentives for far-reaching CSI projects.


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CONCLUSION

• CSI in education is certainly not a panacea for poverty alleviation. It can be an effective enabler taking all other macro/micro elements into consideration.

• Whilst significantly contributing its quota to poverty alleviation, CSI, will, at the same time, and for a long time, continue to reproduce some of the intergenerational inequalities within the South African polity. South Africa, however, is better off with it than without.

20070221 pau poverty red nzekwu csi in education paradox of poverty alleviation

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