case studies
LG – Black Economic Empowerment and CSI
South Africa’s “localisation” laws bind companies to the country’s “transformation” agenda. They aim to increase the role of black South Africans at all levels of the economy, thereby reducing poverty and inequality. Under the government’s Broad-Based Black Economic Empowerment Act 2003, companies doing business with public bodies have to show how they are sharing their wealth with South Africa’s poorest. Firms have to report on seven areas: company ownership, management control, employment equity, skills development, preferential procurement, enterprise development and socio-economic development. Although the code does not use the term “corporate social investment” (CSI), the notes accompanying it specify that companies should spend at least 1 per cent of annual net profit on socio-economic development activities that “discourage dependence on handouts”. This contribution and how it is managed varies by sector.
africapractice was retained by LG Electronics in 2006 to advise on localisation and CSI in the context of BEE. We conducted preparatory research and facilitated a workshop with senior LG South Africa management on how to contribute to socio-economic development, exploring its mutually beneficial relationship to business growth. It was concluded that LG would establish a foundation to manage corporate philanthropy, and tie CSI initiatives to employee engagement and broader marketing initiatives.