Johannesburg - The R4bn corporate social investment (CSI) industry in South Africa is a pool of untapped opportunities to create sustainable enterprises, and shouldn't just be about writing charitable donation cheques.
So says award-winning social entrepreneur Peter Shrimpton of Heart Social Investment. "The market we are challenging is the charitable donation market," says Shrimpton, who has launched a series of funds aimed at developing sustainable enterprises.
These - which include a wine trading business in the Western Cape and greenhouse manufacturer - not only have a positive impact on South African communities, but in many cases are operated on a "for profit" basis.
The funds are different to traditional social responsibility funds, which would for instance invest in JSE-listed businesses rated on certain investment levels in social responsibility initiatives.
Shrimpton, a former stockbroker, is using his corporate experience and knowledge of markets to change the way businesses approach donations to transform them into investments. He said that Heart's model has caught the attention of international business colleges, including Harvard and Stanford.
"We're in the process of building a brokerage that markets these social investment opportunities," he said, adding that institutions and high net worth individuals can participate.
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Retail investors can also participate, with a minimum investment of R20 000. According to Shrimpton, many South Africans in the middle- to upper-income earning bracket contribute between 1% and 10% of their earnings to charitable causes, expecting no return.
This is driven by two factors, goodwill or guilt, both of which result in a financial loss to the person making the donation, he said.
Shrimpton predicted investors could see a 10% annual return after three years.
"What has surprised us is that many of the investors who are already on board have indicated they will reinvest the profits at the end of the three years," he said.
Asked whether businesses and investment managers take CSI seriously enough, Shrimpton said: "My honest answer to that is 'no', but its development is an emerging trend in South Africa."
There are no figures tracking the number of social enterprises in South Africa, but elsewhere ther market is mushrooming. The UK has about 55 000 social enterprises. In the US, with about 1.2 million non-profit corporations, the market generated $672bn in 2008.
By Marc Ashton - Fin24.com