CSR in South Africa

In light of South Africa’s history, is there a specific South African view on corporate social responsibility (CSR)?

The historical context has provided a paradox regarding CSR in South Africa. On the one hand, corporations are implicated in the design of the apartheid economy and migrant labor system, specifically, as well as associated human rights abuses. As argued by the Truth and Reconciliation Commission, “grand apartheid was not an Afrikaner state invention, but was created by the mines” (paraphrased). This historical legacy still lingers in the pervasive distrust between big (white) business and the post-1994 government. For those distrustful of business, CSR will remain a fig leaf. On the other hand, large companies recognized – at least in the 1970s – that the increasingly severe policies of the apartheid government were leading to social unrest that would have negative consequences for business. As a prominent example, Anglo American and others established in 1978 (after the Soweto riots) the Urban Foundation, which played an important role in building schools and houses in Soweto and elsewhere, and also in advocating policy changes (less strict pass laws). The Urban Foundation is a precursor to the National Business Initiative.
The apartheid legacy obviously creates particular social challenges, which have become priorities for companies’ corporate social investment (CSI) programs. These investments focus on education, health, and small enterprise development. Unfortunately, many companies still think that CSR is primarily about CSI. My criticism is that companies focus on giving away a small proportion of their profits without really understanding and responding to the social implications of their core business practices. I hardly use the term CSR anymore, partly due to this confusion. We rather emphasize the need to understand the broader social-ecological context in companies’ strategy design and implementation.

With the fall of Apartheid in 1994, did South African companies implement CSR programs voluntarily or did they rather feel the pressure of democratization and the need to comply with international labor standards?

After 1994, many companies were keen to build their legitimacy and create a good impression with the new government. Much of this was done through CSI, as mentioned above. Many companies built schools, for instance. In parallel, the new government embarked on an ambitious policy and law review, based on the 1996 Constitution. These included progressive labor relations, occupational health and safety, anti-discrimination, environmental and natural resource laws (most of which were published in the latter half of the 1990s). These have had an important impact on the regulatory pressures on business, though the state’s enforcement capacity has been limited. I have argued that there is thus a quasi-voluntary character to legal compliance, especially if companies attempt to comply with the spirit of this new legislation, rather than merely the letter.
Then, of course, there was the black economic empowerment policy, which was also promulgated as an act, as well as subject of numerous sector-specific “charters.” This sought to address the racially skewed ownership and management structures in the economy. One of the most prominent charters was the one in the mining industry (2002), and a bit later in the finance sector. Many of these charters were the result of corporatist (business-government-stakeholder) negotiations, and they identified sector-specific targets for ensuring: ownership of companies would be transferred to black people; management positions would be held by black people; and employment equity / affirmative action. There were also sector-specific targets – for example, conversion of hostels in the mining sector, increased access to banking in the finance sector. Generally, there was an expectation that about 1 percent of profit would go toward socio-economic development, that is, CSI.

What are the drivers of CSR in South Africa? Is it merely voluntary? Or is it the government, for example for example by regulating the Johannesburg Stock Exchange (JSE) or labor laws?

There is a confluence of drivers, and their influence also varies, depending on the sector and size of the company, as well as the specific social or environmental issue that is at stake. I think state regulations have been very important, especially in areas such as labor relations and environmental protection. The state’s enforcement capacity has been a problem, especially in small, dispersed operations. Public regulations have also been important. This includes the JSE’s listing requirements, which rely on the King codes of corporate governance. The latter has been very influential in driving sustainability reporting and, more recently, integrated reporting. There have also been international pressures, including regulations of the London and New York stock exchanges, which have influenced some of the big South African companies that have listed there, and which have provided some “best practice” leadership in South Africa.

In a report, you said that UN attempts to formally apply international human rights laws in the private sector in 1990 and 2003 were unsuccessful. What does the link look like in sub-Saharan Africa today?

Well, those earlier attempts subsequently led to the appointment of John Ruggie as UN Special Representative on business and human rights. His “three pillars” framework has been very helpful and influential, in that it clarifies and codifies what is expected of business. The second – and final – report by Ruggie was published in 2011, and since then there have been numerous initiatives to provide companies with more detailed guidance. There is more scope, however, for companies to recognize human rights as the overarching framework that guides their CSR activities. At the same time, the human rights framing emphasizes “do no harm,” and it leaves out the opportunities for business to make positive contributions through processes, products, business models, or systems innovations.

In conflict zones, such as in parts of the Democratic Republic of Congo (DRC) and Rwanda, we experience the problem of “limited statehood” and hence a lack of human rights and responsibility toward communities. Can and should companies’ CSR fill this gap?

This is a significant challenge. On the one hand, some companies are beginning to fill this gap because they recognize that some minimum provision of public goods and rule enforcement is necessary for their business, and also desired by local stakeholders. On the other hand, this is problematic because it may create a dependency on companies. This is not just a phenomenon in places such as the DRC; it is also happening in South Africa, where some municipalities are just unable to provide public services. I think the big challenge is for companies to contribute to developing state capacity, without co-opting the state to suit their interests.

Woolworths’ managers in South Africa set out to develop a program of direct engagement with the farmers in their supply chain to enhance their productivity, focusing in part on irrigation techniques. Is this a rare example of “green economy,” or is this sector on the rise in South Africa? What is its status today when compared to industrialized countries?

I think the Woolworths “Farming for the Future” (FfF) program is quite unusual. You have a company with significant public sustainability commitments made by the CEO, and you also have a sophisticated middle management that was capable of sensing the problems encountered by farmers. Also pertinent is this company’s emphasis on high-quality, fresh produce and emphasis on long-term relationships with key farmers … these factors provided the motives and the capabilities for the FfF program.Though I have said that initiatives such as FfF are unusual, I think more companies are recognizing their reliance on a sustainable value chain, and they are thinking about more systemic approaches to addressing these problems. Another prominent example is SAB’s work on water.

In the run-up to Rio20, you said there will be much discussion on the transfer of environmental technologies to developing countries. Has the 2012 conference resulted in any real progress for African companies’ CSR?

None that I am aware of.

For which reasons do mining companies take a special role in the South African and sub-Saharan African private sector when it comes to CSR?

Mining is the foundation for the development of the southern African economy, as well as the development of the state and colonial and apartheid economic systems. The migrant labor system had significant implications for the development of towns, as well as the (under)development of rural areas. Mining still has significant economic significance and employs large numbers of unionized workers. In areas such as Rustenburg, mining accounts for an overwhelming proportion of employment and economic development. Over and above significant social impacts, mines, of course, also have far-reaching environmental impacts, which, in turn, have social implications.

Has the “Marikana incident”* led to a rethinking among mining companies about the way in which they tackle social wrongs around mining sites?

There has been much debate and some important suggestions have been made, for example changing the migrant labor arrangements so that migrants return home more often. But I have not heard of any actual changes being implemented.

There is a discussion about the “de facto government” of mining companies in the informal settlements around mining sites, in addition to some social investments that are territorial. Is there a real risk of mining communities being at the sole mercy of those “mining governments,” instead of a local government?

Yes, some communities are becoming very dependent on mining companies. This is a problem because the companies are not formally accountable to the communities. Of course the problem is amplified when the mine scales-down or closes.

Corruption is a significant problem in South African society. Local Global Compact Network advised the sectors of healthcare and construction, and the awarding of mining licenses should be more closely scrutinized. What are your recommendations?

UN Global Compact companies should collectively emphasize the transparency movement, including a call for all party funding to be made public. The fact that this is being resisted by the African National Congress and opposition parties is deeply problematic. It would be great for companies to make a committed stand on this. It would have far-reaching effects.

* In August 2012 more than 40 people died in a wildcat strike at Lonmin’s Marikana mine.