“Philanthorpy – A part of financial planning” – Inyathelo


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“Philanthorpy – A part of financial planning” – Inyathelo

  1. 1. INYATHELO THE SOUTH AFRICAN INSTITUTE FOR ADVANCEMENT PRESENTATION TO SENATE CONFERENCE : CAPE TOWN 15 MARCH 2013 SHELAGH GASTROWWHY PHILANTHROPY?My area of interest is the term “philanthropy”. We in South Africa take the thousands oforganisations that contribute towards our democracy for granted. They provide services,relief and welfare, they educate, they create jobs, they build, they research, they publish,they contribute towards policy, they advocate, they contest, they litigate and they help toensure that the country’s democracy is vibrant. What do we do to ensure that this powerfuland necessary sector, our civil society, continues to thrive?In South Africa the term “philanthropy” has a history and it does not necessarily find favourwith the majority of its people. This history goes back to the missionaries of the nineteenthcentury who were philanthropic on their own terms : they looked after the “poor natives”,saved their souls and pushed the borders of the empire. The paternalistic attitudes of theday still resonate in South Africa. However, missionary philanthropy developed furthertowards providing health and educational facilities for local populations. Some of the besthistoric schools in South Africa emerged from this missionary philanthropy movement. Theeducation provided to black pupils by these schools until the advent of apartheid and theirclosure was some of the best available and accounted for key leadership in the blackcommunity. Even more important and not to be forgotten is the role philanthropy played inthe nineteenth century to abolish slavery.A key component of the notion of philanthropy is altruism. If you check a thesaurus, itbrings up words such as self-sacrifice, humanity, selflessness, unselfishness andphilanthropy. For some, this kind of behaviour is counter-intuitive as it involves assistingpeople who are not your own family or community; trusting people who you do not knowwell and giving your own resources to others who may or may not use them effectively.Hence philanthropy involves some risk.Charity and PhilanthropyBefore moving on to the issue of risk, I would like to address the difference betweenphilanthropy and charity, as most of us function within the charitable paradigm. Charityalso emerges from various faiths and provides for those with resources to give to those whoare poor. This is seen as a charitable obligation. Charity is a key part of our communal lifeand we need to act charitably when people are in need, but philanthropy is somewhatdifferent. Charity is usually an immediate (and often emotional) response to an immediate 1
  2. 2. crisis – short term alleviation of a specific problem such as starvation, homelessness ordisease. Charity entails an unequal relationship between those who have and those whodon’t. It involves pity. In some ways it creates a dependency and an obligation to appearneedy. This manifests in the vision of a beggar on the side of the road, but also extends tosome non-profit organisations and the culture in which they operate. There areexpectations on the part of the giver that organisations should not pay their staff well orthat work conditions should be unpleasant to show the self-sacrifice required to work withthe poor. Yet, we do not see the giver reducing him/herself to the same standards.Unfortunately, the charitable impulse is also short term and immediate. It providesimmediate relief in times of crisis and this is critical and appreciated, but it does not providefor long term solutions to social problems. In effect, it makes poverty bearable, but itdoesn’t create any systemic change. We also tend to view our civil society organisations ascharities, but most are not simply providing services to the poor. A university is not acharity, yet it relies on philanthropic funding to ensure globally competitive research, staffand scholarships.When we talk about philanthropy, we are looking at strategic investment in social changethat is long term. It is about supporting institutions and organisations that are makingfundamental change in the world for the common good. We are looking at purpose,intended direction and a particular vision of society.What are the key benefits of creating a healthy philanthropic sector in South Africa? Whenwe explore where philanthropic money can go, it opens up new vistas. Going back to theissue of risk – philanthropists can take risks. They are not answerable to the voter or theshareholder. They can invest in revolutionary initiatives only found on the edge or they cansupport those new discoveries that push the boundaries of knowledge. New ideas generallydevelop on the fringe such as the women’s movement and the environmental movement.These were not supported by governments or the corporate sector – to the contrary, itwould not have been in their interest to do so. The funds came from people, rich and poor,who were passionate about these issues. This was philanthropic money. Organisationsinvolved in environment and gender issues are not charities. This funding is strategic, it isabout changing society for the good, it is about social justice. Universities are also recipientsof philanthropic money (and they are not charities either). Government and the corporatesector are unlikely to fund issues that are not voter friendly. For example, initial researchinto the contraceptive pill could not attract government funding because it was politicallycontroversial. Universities are often the anchor institutions that sow the seeds that changeour world. In addition, philanthropy need not demand the immediate results that businessexpect, but can take its time to measure impact. For example, the green movement beganin the 1960s, but we are really only seeing the impact now. It has been the philanthropistswho have doggedly continued to support this movement that have made this contribution.Philanthro-capitalism2010 was a momentous year in the development of the global philanthropic movement. InJune two American billionaires, Warren Buffett and Bill Gates, launched The Giving Pledge, 2
  3. 3. a philanthropic campaign that invited the wealthiest individuals in the USA to commit togiving the majority of their wealth to philanthropy. As of last month about 100 billionairesaround the world have joined this campaign, including two African families : Patrice andPrecious Motsepe and Mo Ibrahim. As this growing class of philanthro-capitalists use theirwealth for various causes, the challenges of mutual accountability, legitimacy andeffectiveness become increasingly more important. We have to ask ourselves, while thispledge campaign gains momentum, even reaching South Africa, will the nature ofphilanthropy change? Will this movement be led by corporate concerns that focus onfinancial efficiency rather than risk and altruism; will the individual foundations concernedby-pass local civil society to run their own operations without partnerships on the ground,without consultation and engagement? Will this remain essentially philanthropic in natureor will it become a power game to create a world that mirrors the values of the marketrather than focusing on the strengthening of civil society that provides the social fabric andthe social cohesion that we require for stability and democracy?The debate around philanthropy opens up a myriad of other issues. Philanthropy is notnecessarily democratic for example, but then it is people’s own money. Tax is democratic (ifeveryone pays it), but then it is not always distributed fairly or effectively. The South Africangovernment has not been keen to open the floodgates with tax benefits related tophilanthropy as it would, understandably, rather collect money to fulfil its own mandate(although in the recent budget, there are indications that government will review some ofits conditions relating to tax benefits for philanthropy). However, the consequence is, asmentioned before, that there are areas that will never receive financial support as theywould not be a government priority in terms of re-election.Personal PhilanthropyOn a personal level, what impact does philanthropy have on those who participate? Firstly,it provides a powerful mechanism for individuals to express their personal values andcommitments. Secondly, even with the distortion that transfers of money can involve,philanthropists are exposed to new perspectives and new ways of seeing the world. Theirgiving brings them into contact with people whom they might never have met. Whilstphilanthropy clearly supports the important work done by others, there is an element thattransforms the giver. In our experience, the most revealing element was the level ofpersonal satisfaction, the potent sense of meaning and true happiness that arises fromsupporting social initiatives bigger than ourselves, the feeling of community with others whohave the same values and ideals.What is required to participate in philanthropy? Firstly, we see philanthropy as part offinancial planning. If we operate on a random, charitable basis, our engagement with theworld is generally not sustained as we only respond to need. Philanthropic activity isplanned and purposeful. It is about identifying institutions and organisations that havecommon ideals and that offer opportunities to build long term fulfilling partnerships. Thisdepends very much on the individual’s personal passions, whether they are in the field ofconservation, education, health, human rights etc. South Africa, in particular, offersamazing opportunities to pioneer new ideas within the social, economic or political spheres. 3
  4. 4. The innovation that is evident in our society is attractive to people who are interested insystemic change. Identifying organisations is the first piece of research required, thenmeeting leaders, visiting projects etc will provide a holistic view of your potential partner. Adonation can then be made (a grant) and it will be important to assess how this is managedby the organisation. What is important is to know where your job stops and where theorganisation’s starts. It is poor practice to become involved in the organisation, no matterhow tempting. They are the founders and activists on the ground and they know their work.There has to be a level of trust and the donor needs to be able to let go. It is reasonable torequest reports, but not when the requirement is so onerous that servicing the donationbecomes an invasion of time and effort.The second step in philanthropy is the creation of a philanthropic trust or foundation. Thisis often the choice of people with significant wealth who find that pressure from society canbe overwhelming. They receive frequent requests for funding and this can becomestressful. They therefore choose to formalise their philanthropy by creating a philanthropicentity through which their social giving is carried out. This enables them to makecontributions to society, but in a concentrated way to ensure real impact. Theestablishment of philanthropic foundations is a key way of building effective giving and, asmentioned before, philanthropy then becomes part of financial planning.The establishment of a foundation can be done on the basis of an endowment – a capitalsum investment, the bulk of the income from which is used towards the foundation’sphilanthropic aims. Some of the income is reinvested to ensure that the principal amountremains current with inflation. In many successful foundations, additional funds are addedover time. The issue of personal legacy is important to many people and the benefit of sucha foundation is that it keeps on giving and the founder’s generosity continues as long as thefoundation exists. This has a greater impact than a single donation.A key benefit of a foundation is that it enables people to take risk, as mentioned previously.Whilst many existing foundations focus on welfare and charity in the old paradigm,increasing numbers are exploring a focus on systemic issues in a particular interest area.This can be in the music or the arts, in medical research, in policy relating to theenvironment and currently global warming and thousands of other areas. The foundation’scapacity to be innovative means that they can provide the seed funding that enablesinnovative ideas to be tested.In addition, there are a number of family foundations in South Africa. Some families havefound it to be a unique mechanism through which they bring the family together once ortwice a year, and that it has stimulated the next generation to engage fully in society.Lastly, some of the country’s most influential foundations were established through abequest. Often individuals are not in a position to donate funds or establish a foundationduring their lifetime. However, they can become involved in “planned giving” and establishthe foundation as a legacy in their will. 4
  5. 5. ConclusionPhilanthropy has a clear place in our lives – a movement in South Africa to give back, toreinvest in those aspects of our lives that have meaning and for which we have a passion,whilst maintaining an altruistic view on what we do. Trevor Manuel, at his key note speechat one of the Inyathelo Philanthropy Awards, reminded the audience of the need to givegenerously without being patronising. Hopefully South Africans will begin to explore theirphilanthropic role and to start seriously thinking of what they have versus what they need.The balance can definitely be used elsewhere for the social good.Shelagh GastrowExecutive DirectorInyathelo : The South African Institute for Advancement15 March 2013 5