THE Nigerian government is busy with legislation which, if passed, will make it mandatory for companies to pay 3,5% of their gross profit to corporate social responsibility (CSR) initiatives. The proposed Corporate Social Responsibility Bill allows for a great deal of state meddling in companies’ affairs and suggests onerous punishments for noncompliance, including hefty fines. The move has not been well received by business — unsurprisingly.
This is not only because of the potential for such an initiative to become just another graft opportunity, nor because companies do not support better CSR, but because they already operate in one of the highest cost environments in the world as a result of state inefficiency.
In addition to tax and other obligations, companies also have to act as mini municipalities, providing their own power and water and services provided by the state in other countries.
The bill, which focuses on the community investment aspect of CSR, has generated a lively debate in Nigeria about what obligations should be brought to bear on the private sector. It is generally accepted that companies operating in poor countries, particularly foreign multinationals, do have a responsibility to help the communities they operate in. But their efforts, which are often derailed by competing local interests and arguments about who represents communities, have come under fire from citizens for not going far enough.
Community CSR is generally viewed as the building of schools, clinics and soccer pitches. These ad hoc interventions just feed the view that such spending is window dressing for exploitative business behaviour that produces outrageous profits. But many CSR budgets are significant and could be harnessed more meaningfully for development and growth in a collaborative engagement between government and companies.
The idea that CSR investment would be more effective if such spending was included in a country’s development priorities was raised at a CSR workshop I attended in Liberia recently, with participants from the US, China and countries in Africa.
Dovetailing corporate activities with “sovereign CSR” — an obligation by governments also to improve the lot of the poor in their countries — would not preclude local community programmes, which are important, particularly for resource and telecommunications companies that operate in remote areas. But it would allow companies to invest in broader development that may, in the longer term, improve their operating environment and help the bottom line. This could include measures to increase skills and reduce business costs.
This will, of course, only work in countries where governments have the vision and will to look for creative solutions to development challenges. And working closely with governments in a noncore area also raises the question for firms about where the line is drawn. Large companies operating in Africa complain that they are already easy targets for governments looking for new funding sources. In most countries, a handful of companies comprise almost the entire tax base and governments focus more on wringing money out of them than increasing the number of taxpayers. Companies also contribute by generating jobs and increased economic activity — though critics focus narrowly on their profits.
The expectations of foreign companies are very high in Africa, particularly in the resources sector where they often replace the state in terms of infrastructure delivery and social services. The Democratic Republic of Congo has taken this one step further, with the government of mineral-rich Katanga province threatening to ban mining companies’ exports if they do not grow crops for local consumption.
These pressures do not remove the obligation to invest in community projects as part of a formal CSR strategy. Multinational companies at the Liberia event believed that making CSR investment mandatory would be counter- productive, particularly for smaller companies, although they agreed it would be useful for states to produce a set of published guidelines that would apply to foreign and local companies.
The Brenthurst Foundation, a partner in the Liberia event, has drawn up the Monrovia Principles, designed to kick-start African debate on CSR driven by Africans and which imposes obligations on government and business.
Companies operate best in an environment of enlightened self-interest and governments need to focus on growth. Combining these is not an unworkable plan; it just makes sense.