How SARS is helping companies to be conscious capitalists

Businesses that have purposefully moved from a shareholder-only focus to a corporate philosophy known as conscious capitalism have performed 10 times better than those that have not made the transition, according to Harvard Business Review. Such companies and brands are particularly sought out by socially conscious millennials – with a significant 40% more likely to base purchasing decisions on their ability to help certain causes. A recent report by Deloitte found that a corporate focus on social impact not only aids in attracting and retaining millennial talent, it can also boost both corporate growth and the bottom line.

“A conscious approach to business sets in motion a self-perpetuating cycle that aims to benefit everyone along the value chain,” says Neill Hobbs, co-founder and director for Anuva Investments, a section 12J Venture Capital Company (VCC) that invests in South African small and medium-sized enterprises (SMMEs).

Conscious capitalism and SMEs

As a critical component of the SA economy, SMMEs provide employment to about 60% of the labour force. Total economic output from SMMEs accounts for roughly 34% of GDP so the value in nurturing sustainable businesses that are conscious about creating value for all stakeholders can have a remarkable knock-on effect.

Historically however, this hasn’t been a focus. In a world where consumerism trumps altruism, Hobbs believes that individuals are trapped in a vacuum of self-interest and a lack of mindfulness. “People are subconsciously plugged into the rat race and have lost the curiosity to investigate why they do certain actions in both business and leisure. If we could add purpose, create a conscious culture and mindful leadership, we would be living a life with more meaning and purpose.” Conscious capitalism is puncturing the vacuum and allowing the valiant spirit of business to break free, he says.

African citizens on the right track

From an individual perspective, the African continent appears to be more socially oriented than the rest of the world. According to the World Giving Index 2017 released in September, despite a global downward trend in terms of generosity and the capacity to give back to civil society, Africa appears to be bucking this trend and is the only continent in the index to show an increase in helping strangers, donating money to a charity and volunteering time to an organisation.

So, what about business? Is social impact increasingly becoming part of a company’s growth strategy and are executives intentional about their choices?

From an investment perspective, The South African Revenue Service (SARS) has helped steer taxpayers in a ‘conscious’ direction in terms of Section 12J of the Tax Act, says Hobbs. Section 12J gives taxpayers a 100% tax deduction in the year of investment if they invest in SMMEs. This is done by way of subscription of shares in a Section 12J Venture Capital Company (VCC).

Hobbs explains, ”Anuva Investments contributes to the SMME by way of equity funding and in addition strategically guides the company in business principles that are absent in their day-to-day operations.” As a key growth engine within the local economy, giving SMMEs this boost has far-reaching effects.

Section 12J of Tax Act is a ‘conscious’ provision

What SMMEs have in energy and appetite for success they lack in working capital and possibly key skills and network. With Section 12J, these businesses are able to use tax-deductible equity funding to realise goals and fund growth. In this way, Section 12J has created an extraordinary opportunity to aid SMMEs while simultaneously creating Rand value for the individual investor due to the tax saving on entry into the investment, in addition to dividends and capital growth.

“Section 12J advocates investment into manufacturing, which acts as a catalyst to a positive shift in the economy. SMMEs provide a platform of job opportunities for a large range of individuals in the base of the pyramid in addition to those individuals with more specialized skills and qualifications,” says Hobbs.

For many, conscious decisions are guided by how an individual or corporate can generate value for society. “The gist of Anuva is to be financially successful by making a constructive difference in society through investments in manufacturing and SMMEs,” Hobbs says.

Looking ahead, consciousness should be top of mind for businesses looking to drive innovation, growth, and social good, Hobbs adds.

Sources:

https://www2.deloitte.com/us/en/pages/operations/articles/driving-corporate-growth-through-social-impact.html

https://hbr.org/2013/04/companies-that-practice-conscious-capitalism-perform

https://www.cafonline.org/about-us/publications/2017-publications/caf-world-giving-index-2017

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