BEE Partner, South Africa Economy Watch

Qualifying socio-economic development contributions

Socio-economic development contributions consist of monetary or non-monetary contributions actually initiated and implemented in favour of beneficiaries by a measured entity with the specific objective of facilitating sustainable access to the economy for those beneficiaries.

The contributions may be monetary based or non-monetary, such as providing training or sacrificing their employees‘ time in favour of beneficiary groups, as opposed to incurring a direct expense. The contribution must be “actually initiated and implemented“, meaning it must be exercised and paid for. Future initiatives do not count.

The litmus test for recognition is for the contribution to facilitate sustainable access to the economy.A fairly broad interpretation of this is possible. However, it must be shown that the contribution facilitates access to the economy.

In contrast to the enterprise development element, recoverable contributions are not acceptable for measurement in this element. Loans, whether they are at reduced rates or not, are not recognisable as socio-economic development contributions. The contributions to this element are only recognisable when they are grant based.

Statement 700 provides a non-exhaustive list of qualifying contributions. The following list is applicable to both generic and QSE businesses.

• grants to qualifying beneficiaries

• a guarantee or security provided in favour of such beneficiaries
• direct costs incurred in assisting beneficiaries
• overhead costs directly attributable to the social development contributions
• development capital advanced to beneficiaries
• preferential credit or procurement terms given to the beneficiaries
• providing training or mentoring to beneficiary communities that will assist in increasing their financial capacity (The costs of the employees‘ time and directly related costs may be included in measuring the contribution, whereas employees‘ travelling time will not form part of the measurement.) An example is employees going to paint the walls of the local Black school on a Friday afternoon. The employees‘ time painting the walls is measurable. However, their travelling time to the location may not count towards the socio-economic development contribution. There was an example of senior company directors from Johannesburg providing training in Cape Town over a weekend. The directors took a two-day road trip to reach Cape Town and a day back. The total training time they actually provided was a couple of hours, but they claimed four days of training. This example originates from skills development, but the principle of travelling time not being allowed holds true for social development as well.
• maintaining a social development unit (Costs would include salaries and other direct expenses of operating that unit, whereas time spent on activities unrelated to the requirements of the Statement are not measurable as a contribution.)
• payments to third parties to handle the social development on behalf of the entity.

With reference to training initiatives, training costs that are neither for the benefit of employees nor enterprise development are measurable according to the provisions of socio-economic development. Training costs in favour of employees are measurable under the skills development element.

The Codes contain a definition of socio-economic development programmes. The relevance of the definition is unclear as it is not referred to in any of the Statements. However, it appears to provide further guidance on the objectives of the contributions. Whether these contributions are recognisable is unclear.

Socio-economic development programmes commonly take the following form:

• development programmes for women, youth, people in rural areas and people with disabilities
• support of health care and HIV/Aids programmes
• support for education programmes, resources and materials at primary, secondary and tertiary education level, as well as bursaries and scholarships: community training, skills development for unemployed people and adult basic education and training
• support for arts, cultural or sports development programmes.

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