Leading social investment managers

Report to society 2008

Leading social investment managers

Contents

To be the recognised leading social investment managers

in southern Africa

Tshikululu’s mission

Chairman’s statement 3

Chief executive officer’s report 5

Chief financial officer’s report 8

Human Resources 11

South Africa’s premier social investors 12

Enhancing client brands 14

Business Development 15

The reach of this work 17

Grant and Programme Services 19

Sectors 21

Health and HIV/Aids 21

Education 23

Social Development 25

Company structure 26

Board of directors 28

Executive committee 30

Corporate governance 32

Finance 34

Directors’ responsibility statement 35

Report of the independent auditors 36

Directors’ report 37

Risk management report 39

Income statement 42

Balance sheet 43

Statement of changes in reserves 44

Cash flow statement 45

Notes to the annual financial statements 46

Contact details 60

Page 1

Tshikululu is the Venda name for the African Rock Fig, a tree known for its rock-splitting qualities. In the same way that this fig grows in harsh environments, Tshikululu manages and supports development initiatives, bringing new life into challenging circumstances.

Leading social investment managersTshikululu Social Investments is South Africa’s leading social investment manager, providing a one-stop service for private sector entities to undertake comprehensive community grantmaking. Close on half a billion rand of CSI funds were under Tshikululu’s management during the period under review.

Practical knowledge is combined with strategic thinking and sound governance to create flexible, well-managed fund portfolios.

Tshikululu advises, implements and manages social investment solutions that meet business needs. This is done through:

• Full-service social investment grant management;

• Strategic consulting; and

• Specialised social investment training.

During 2008, Tshikululu was privileged to manage the CSI funds and trusts of the following clients:

Page 2

CotlandsA sanctuary for children and mothers since 1936, Cotlands established the first paediatric hospice in South Africa in the early 1990s. Today it also has several outreach initiatives, and operates in five regions, positively impacting on some 2 000 families.

Tshikululu has historically reported on the activities of the funds and trusts that it manages through annual client, corporate citizenship, transformation, sustainability, and corporate social investment (CSI) reports. We will continue to do this. The board has decided that, going forward, it is also important to prepare a comprehensive report to society for Tshikululu to reflect the activities of the company and its CSI fund management.

This report speaks to our declared goal of continuing knowledge-sharing in the social investment sector, and to Tshikululu’s sound governance. Welcome, therefore, to our first report to society. We dedicate it to our clients, to our NGO delivery partners, and to all the other change champions found across our country.

Information in this report is continually being updated by news on Tshikululu’s activities and opinions, which can be found on our website (www.tshikululu.org.za), and I encourage readers to visit this site often. We also welcome feedback on our work and on that done by our clients. Please use our contact details that appear at the back of this report to be in touch with us. We look forward to hearing from you.

– Godfrey Gomwe

Tshikululu report to society 2008

Chairman’s statement

A model for the worldTshikululu’s founding, by Margie Keeton and her colleagues in 1998, came when our society was truly “fledgling” in its freedom. The decade since has seen our liberties consolidate and a can-do spirit take hold in many areas, including that of CSI.

It has been a time of Tshikululu influencing development, and it has seen Tshikululu grow to become the country’s premier social investment manager. Lessons learned here can be applied across the globe.

Our achievement in a decade of growing to a point where we now have almost half a billion rands of CSI funds under annual management is owed to a team that has undertaken its duties to clients, to NGOs, to communities and to South Africa with innovation, dedication and care. I pay special tribute to Margie Keeton for her groundbreaking leadership role at Tshikululu, and I am delighted at the excellence and focus found in our new CEO Tracey Henry, her executive and all her colleagues. Tshikululu is also indebted to our board members for their involved guidance and clear vision of where we must position ourselves to be of greatest benefit to best practice social investment and to South Africa.

The board of directors, with the executive committee, has mapped out realisable growth plans that will see Tshikululu take its business to new sectors, develop and offer new social investment products, and double our grantmaking within five years. I am confident that the dynamic team at Tshikululu will continue to grow this organisation as a renowned social investment thought leader and actor. For Tshikululu’s approach and offering is unique.

Most often, companies regard corporate social investment as a triple bottom line discipline, to be carried in-house in a line function department, either on its own or as part of other initiatives. CSI carried out in this way can be very effective, and often is, but CSI of this type can also be vulnerable. Partly, this is because CSI done properly takes a long view of development and tackles challenges with nuance and in often-complex partnerships with other donors and private and public sector players. Its needs are informed by the realities of “community pace” and of subordinating the ideas of the CSI practitioner to those of the relevant community champions in a particular sector or place.

The specialisations that come through working in this way can be very different to those found in changeable company market positioning as the latter are always vulnerable to changes in business direction and, critically, in personnel. That’s why the decision of our clients to outsource the professional management part of their CSI is so farsighted. In Tshikululu, specialised development sector teams look to the interests of every fund managed, share learnings, emulate successes and avoid pitfalls across the funds. This work happens professionally, with realistic timeframes for maximum project success, in formal and informal partnerships with the state and other donors, and free from the passing fads of funding fashion. In CSI, this is the real thing.

This work goes hand-in-glove with careful governance controls of the funds and trusts being administered, careful attention to relevant tax and legal issues, project monitoring and evaluation and, importantly, at a far lower administration cost than the industry average. Hard-earned company moneys put aside for upliftment are not being creamed off to feed a type of developmental parasitism. Rather, real opportunity is expanded – not through simple handouts – but by providing the wherewithal for good ideas coupled with dedication and hard work to effect real and lasting positive change. This is happening in hundreds of separate locations every year, involving literally thousands of individuals, through Tshikululu and its partners.

This approach to corporate social investment works. It is unique to South Africa. Indeed, it is a model for the world.

Godfrey Gomwe


Page 3

Page 4


At a glance

• Managed R2 billion in social investments during the past decade

• Facilitated funding of 15 000 projects since 1998

• Managed grantmaking funds of R467 million during 2008

• Management fee averaged 10% of grantmaking

• Established Tshikululu Lecture Series in 2008, aimed at knowledge-sharing in the CSI sector

• Expanded client base to include UTi

Moving into Dance MophatongStarting out as a nonracial dance project in the 1970s, MIDM is the only organisation in South Africa that teaches edu-dance – a teaching methodology that uses creative dance to teach subjects such as language, maths and biology. It runs a diploma course and an outreach programme, and has produced a number of high-profile dancers and choreographers.

A unique approach

Chief executive officer’s report

This year we celebrated our 10th anniversary. Our work in fact goes back further, to include the institutional experience we gained from the Anglo American and De Beers Chairman’s Fund; a line function of those two companies that started this first formal CSI operation in South Africa in 1974. That work itself followed philosophically from Sir Ernest Oppenheimer’s seminal statement in 1954, that “... the purpose of the company is to make profits for its shareholders, but to do so in a way that makes a real and lasting contribution to the countries and communities in which it operates”. Tshikululu Social Investments was founded in 1998 and our subsequent decade has been an exciting one for us and for social investment in general.

In 2008 we bade farewell to Margie Keeton, founding CEO of Tshikululu. Margie has been instrumental in shaping the development landscape in South Africa and her contributions will be felt for years to come. We wish Margie and her family all of the best as they start a new chapter in their lives in Grahamstown.

As South Africa’s leading corporate social investment managers, we have been entrusted by our clients to facilitate the allocation of developmentally informed investments in excess of R2 billion during the past decade, supporting 15 000 projects and a myriad champions of change in our country. We continue to operate a cost-effective model of service delivery, with our annual management fee as a percentage of grants approved coming in at an average 10%, which is significantly lower than the typical management fees of other local donor agencies.

During 2008, we managed social investment funding of R467 million on behalf of our clients and facilitated the approval of close on 1 200 grants in various developmental fields. We have continued to add unique value and act as a bridge between the interests of corporate clients and the expectations and realities found at the heart of development.

We are all too aware that money in itself is not the answer to the complex developmental challenges we

face. As such, we seek to ensure that each investment has a social return, informed by tried and tested review processes. In doing this work, we are careful to look ahead to changes in the economic and associated developmental climate, fully aware that cyclical business challenges play themselves out in very real ways for people throughout society and, most especially, for those with least opportunity.

The purpose of CSI is to increase the chances for mobility among people caught in socially dysfunctional circumstances and whose reality includes poor health, inadequate education and skills, disabilities of varying kinds, and lack of basic resources. The dignity that comes through having opportunities to grab hold of is the stepping stone to emancipation from poverty, material and otherwise.

Innovating for growth

At the beginning of the year we set the following goals:• To change internally in order

to free us to innovate and to open new frontiers in CSI thinking and development;

• To maintain leadership in South African CSI grantmaking;

• To develop our consultancy services;

• To develop and offer new social investment products; and

• To diversify our client base and increase our grantmaking portfolio. This is in order to continue strengthening our reserves to increase our ability to weather economic storms comfortably without interruption to services being offered.


Page 5

CEO’s report (continued)

Page 6

On reflecting on these goals, I can report that we have changed our business model. It has not been an easy process to implement, but we now operate through dedicated client relationship managers and teams that specialise in education, health/HIV/Aids and social development.

This new model allows strengths to be duplicated and lessons applied across all funds, while maintaining the distinctive character and missions of each.

We remain the leading CSI consultancy in the country. Our research has shown that no similar organisation exists locally or internationally, and so it is, in some ways, difficult to benchmark our services. However, we rely on feedback provided in the annual CSI Handbook, which benchmarks our clients and so indirectly affirms our approach and standing in the sector. In this regard, I am delighted to report that Anglo American, De Beers, FirstRand and Discovery were again rated in the top three positions of their respective categories, in an overall field of more than 60 South African corporates.

In the sometimes difficult business of measuring the impact of our work on literally thousands of ordinary people, and that of our partners and community organisations, it is heartening to receive recognition from others in our sector.

In 2008, we also initiated our first independent client satisfaction survey, the results of which affirm our professional and highly regarded approach to social investment.

Nonetheless, we recognise that our current perceived standing in the sector must not lead to complacency and, especially given the current market, requires us to continuously assess our service offering and how we can ensure that we remain relevant and an essential partner to current and future clients.

The year ahead – key business objectives The outcome of our organisational strategic review, which commenced during the second quarter of 2008, has placed us in a healthy position to manage the current adverse economic climate and to take the business forward while remaining true to our core values of excellence, innovation, care and integrity.

During the coming months, our key foci will be on:• Investing in the training and retention of high-calibre

employees as a key deliverable to service excellence and Tshikululu’s competitive edge. Tshikululu’s knowledge of the development sector is highly regarded and remains our key asset. Investing in our people remains our key priority;

• Growing income through mainly new business and, in so doing, broaden our client base and thus strengthen Tshikululu’s own sustainability;

• Improving productivity, expressed as staff costs as a percentage of funds and grants managed, by 2.5% per annum;

• Growing Tshikululu’s market share of social investments by R150 million by the end of 2011;

• Strengthening our research and consultancy capability within 12 months; and

• Strengthening our outcomes measurements of CSI funds under management.

CSI – the year ahead

Given the current economic slump, we should anticipate an overall decline in South African CSI spend during the next 18 months. A cut in resources, along with the overall economic climate, will inevitably contribute to a rise in impoverished and socially vulnerable communities. Now is not the time to cut back on investments targeted at social upliftment, as these are now needed even more than before. A short-term cut will inevitably lead to a bigger crisis in years to come.

We can anticipate a decline in the number of NGOs in the short term. Larger NGOs that have historically been well-supported and have built up some reserves will likely continue to operate at the current levels, although plans for expansion may be curtailed. Very grassroots projects, which already operate on shoestring budgets, are also likely to weather the storm. The most vulnerable will be the middle layer of NGOs, those which have traditionally relied solely on corporate funding and which don’t receive any form of state subsidy, individual support or international funding.


In addition, recent reports have highlighted the impact of the economic climate on the funding of BEE initiatives. Until very recently, BEE community trusts were considered a windfall and a very welcome new source of funding for NGOs. Many of these ailing community trusts are now faced with the prospect of a significant decline in funding from the flow of company dividends. In most instances, these trusts do not have reserves, and this could lead to expectations of long-term funding partnerships being dashed.

But new opportunities are also present and so we are likely to see: • A further rise in voluntarism during the coming months,

either as companies try to supplement cutbacks in CSI spend or as people with skills who leave the corporate sector seek to make a difference in local communities. (Companies broadening their employee community voluntarism reach would do well to follow the outstanding example set by the FirstRand Group in this regard);

• More collaboration, partnership and knowledge-sharing among corporate funders and NGOs, in attempts to pool limited resources for greater impact; and

• Greater efficiencies in NGOs as operating costs are cut and it becomes even more essential to enhance productivity and demonstrate impact.

One of the key challenges our sector faces now is the move of many CSI programmes from a reactive and broad-based approach to a proactive programmatic approach. This carries potential for efficiency and learning advantages in grantmaking.

Even so, we must remain aware that times of economic challenge include temptations to be “seen” to be doing the right thing to the degree of neglecting the vital work of smaller organisations in favour of splashier interventions that can be easily noticed. We should remember that many great ideas start small, and that community champions with worthwhile projects of varying size are to be found the length and breadth of the country. They should not be forgotten.

Let’s move forward with confidence in our fellow men and women, reinforcing what works, and remembering lessons hard-earned in the development space.

The need for thoughtful CSI based on thoroughness, reality, diligence and care has never been greater.

Walking the talk

We are convinced of the hugely positive potential inherent in South Africans. Positive actors can be found throughout society, and Tshikululu staff members can count themselves among these. They show this not only through pursuing careers in development, but also in their voluntary endeavours. During the year, this was demonstrated in the hosting of pro bono presentations and workshops on fundraising, effective social investment communications and on strategy development for NGOs. Our staff also provided assistance to the victims of violence, undertook collections for crèches and hospices, mentored schoolchildren on working in the development sphere and assisted in repairing a hospice in Soweto. These activities were in addition to their many other involvements in working to a brighter future through voluntary community organisations and causes. Tshikululu salutes them and all of South Africa’s champions of change.

I salute our clients for their farsighted approach to profes-sional, long-term CSI management and implementation.

Lastly, I thank our chairman, Godfrey Gomwe, and the rest of our board members – Adrian Arnott, Nosipho Gxumisa and Pre Rungasamy – for their continuous guidance and participation; our longstanding and new clients for entrusting us with this important work; and the special team of staff at Tshikululu who continuously strive for excellence in their respective fields.

Tracey Henry


Page 8

A sound investment This report represents an overview of Tshikululu Social Investments’ financial results.

Chief financial officer’s report

Financial review

Separate teams manage client funds and company finances.

Funds from clients for grantmaking are managed through the vehicle of trusts, each one a separate legal entity.


Net surplus 2008R’000

2007R’000

IncomeExpenses

38 862(30 845)

32 055(26 860)

SurplusTax

8 017(2 132)

5 195(1509)

Net surplus 5 885 3 686

The breakdown of income is shown below:

Tshikululu review Tshikululu ended the year with a post-tax surplus of R5.9 million (2007: R3.7 million). Any surplus generated is reinvested to fund future growth and to maintain current working capital requirements.

The 60% increase in the surplus was partly due to fees received from three of the trusts being higher than anticipated due to their increased grantmaking needs; new business opportunities realised; and the addition of a new client.

Income (R’000)

1 014

150

30 89134 339

2008 2007

1 394

3 129

Core clients New business Other income


Tshikululu incomeIncome for the period consists of fees received for social investment fund and project management, strategic consulting fees for communications and other income which is mainly interest on cash balances.

The increase of R6.8 million in total income over the prior period was due mainly to an increase in fees for the management of higher client contributions for grantmaking (R6.4 million); and a resultant increase in interest income.

Tshikululu expensesExpenses for the year were R30.9 million (2007: R26.8 million), an increase of 15%.

A breakdown of expenses by major category is shown below:

The major contributors to the increase were:• Staffcosts–upR1.7million o the increase was due to annual increases in salaries

for staff and to costs incurred in Tshikululu’s strategy and executive transition

• Consultingfees–upR491k o the use of consultants increased as part of

Tshikululu 10 year strategic review• ITandITsupport–upR792k o a new system for customer relationship

management was purchased for strategic reasons; and

• Premises – up R618k o the increases in costs were due to the move of the

company to new premises.

Overall, other costs increased due to inflationary pressures that were experienced in the economy over the period under review.

Major expenses by value 2008 R’000 2007 R’000

Staff costs 20 583 18 905

Consulting fees 2 093 1 602

IT and IT support 1 986 1 194

Premises 1 837 1 219

Depreciation 1 035 865

Facilities management 521 410

Telecommunication 340 295

Other 1 945 2 299

Total 30 832 26 789

Client funds for grantmaking The management of funds contributed by clients for grantmaking purposes is managed separate from that of the company. Segregation of duties between the two sides is maintained.

The funds are held in individual trusts, each with separate bank accounts. These trusts are separate legal entities registered with the Master of the High Court and have Public Benefit Organisation status with the South African Revenue Service. Each client has a Section 18A trust and a non-Section 18A trust. Section 18A status entitles donors to use the contribution as a deduction from their taxable income.

Interest earned on these accounts is credited to each individual fund, thereby adding to the amount available to each fund.

The total of the client funds under management increased to R467 million from R364 million. Total grantmaking for the year was R324 million, an increase of R61 million on the previous year.

General financial proceduresTshikululu and each client trust is subject to an annual audit by independent external auditors and annual financial statements are produced for the company and for each trust – a total of 12 audits for 2008.

The payments from both Tshikululu and client accounts are via a secure payment system. The management of this as well as the 31 bank accounts (12 current and 18 call accounts) falls under the umbrella of Tshikululu’s rigorous financial controls.

ConclusionIn the current challenging conditions, financial prudence is required. Focus on cost containment, increasing sources of revenue and ensuring adequate reserves are maintained will be the focus for 2009.

Val Hellman

Page 9

Tshi

kulu

lu te

am-b

uild

ing

JP M

orga

n co

rpor

ate

rela

y

Sow

eto

hosp

ice

clea

n-up

Sow

eto

hosp

ice

clea

n-up

Mar

gie’

s st

aff f

arew

ell

Page 10

Staff at a glanceAt the close of 2008, we had 50 Tshikululu employees, of whom 82% were from designated groups and 8% were foreign nationals. Employees use skills and knowledge garnered from diverse educational qualifications:• 11 diplomas in the fields of business administration, marketing

management, bookkeeping, office management, business studies, law and sales management;

• Eight degrees in the fields of social science, journalism, social work, music, education, business administration, engineering and law;

• 13 honours degrees in the fields of social science, accounting, investment, history, law, industrial psychology, labour law, corporate communications and geography;

• Four masters degrees in social development, business administration, public development and geology; and

• One chartered accountant.

Tshi

kulu

lu’s

10t

h bi

rthd

ayG

irl c

hild

men

torin

g da

y

Girl

chi

ld m

ento

ring

day

Team Tshikululu

Human Resources

2008 HR-related developments

• Spend on staff learning and development rose to more than R500 000.

• Staff members attended 93 external courses and conferences and 76 internal workshops and training courses.

• The internal “Learning Lunches” series was introduced for staff to share lessons learnt from other training and courses attended.

• Tshikululu introduced its Lecture Series for staff and others in the development sector. Speakers in 2008 were Coleen Vogel, Vuyo Jack, Clem Sunter, Cathy Langerman, Richard Cock, Margie Keeton, Dr Jane Hofmeyr, Sizwe Nxasana, Andy Rice, Paul Pereira and Karin Ireton.

• Four employees were supported financially in their continued academic studies.

• The employee wellness programme provided confidential assistance to staff members in personal or work-related matters.

• An employment equity forum was constituted in 2008. All members received appropriate training and fulfilled their duties effectively.

• In 2008 the process of reviewing all HR policies began in order to ensure that Tshikululu remains a preferred employer.

• Tshikululu submitted a skills development report and plan to Fasset (the Seta for finance, accounting, management

consulting and other financial services), ensuring continued compliance with relevant legislation and resulting in the acquisition of skills levy grants.

• An internal survey was conducted among staff on the effectiveness of the executive committee and results were shared with all staff along with resultant action plans.

• Staff turnover dropped significantly during the year from 15.9% in the 1st quarter to 10.2% in the 2nd quarter, 6.3% in the 3rd quarter and 2.1% in the last quarter.

• The Performance Management Review process was re-designed and implemented, resulting in a significant

improvement on performance management and the effectiveness of this process.

• Tshikululu formally introduced a Learning and Development function in the HR department with the appointment of an L&D manager.

• Monthly staff functions were held on-site; regular staff briefings were held; five issues of an internal Tshikululu change management newsletter were issued; the daily electronic staff Business Brief newsletter was maintained; and a Tshikululu team flew the flag in the JP Morgan Corporate Challenge.

Lynn PretoriusExecutive: Human Resources

Our core values of excellence, integrity, care and innovation would count for little if proper attention was not paid to nurturing the intellectual capital and talents that are found in Team Tshikululu. Sustained staff development is a priority mandate for Human Resources, and staff member interests are also served through a formally constituted, elected Staff Forum.


Leading social investment managers

Documents

Transcript of Leading social investment managers