To the extent that he ever thinks about it, Patrice Motsepe must be grateful that he failed to be included in the unwieldy black empowerment consortium that acquired Johnnic from Anglo American back in 1995.
Not only did the Johnnic entity fail to deliver on the consortium’s ambitious and controversial plans but New Africa Investments Limited or Nail, which dominated the consortium, failed to deliver on anything.
By contrast Motsepe went from one successful transaction to another, gaining wealth and supporters along the way. Last week’s remarkable initiative won him even more supporters.
Alfred Thutloa, the philanthropy co-ordinator of Inyathelo, which is committed to developing a strong local philanthropic movement, said on Friday Motsepe’s initiative represented a major breakthrough for personal philanthropy in South Africa.
“Motsepe’s very public gesture will encourage others to commit their personal resources towards broader social development.”
Philanthropist Amanda Bloch described Motsepe’s move as “absolutely wonderful” adding: “It should stand as an example for all South Africans.”
While much has been written about Motsepe’s wealth, with estimates that it is as much as R25 billion, the reality is that few people other than Motsepe, his family and his advisers know how much his annual donation is likely to be.
“The Giving Pledge”, which he has signed up to, carries a non-binding promise to give away at least half of one’s fortune while alive, or in a will. Motsepe has said that each year he will donate half of the income generated by his assets to the Motsepe Foundation.
South Africa’s tax regime is not as geared to philanthropy as the US, where philanthropy is a thriving industry thanks largely to wide-ranging tax breaks.
Ismail Momoniat, the deputy director-general at the Treasury, says that in looking at any tax breaks, the Treasury has to determine how generous it can afford to be as tax breaks mean reduced revenue. “It is also important to ensure (when considering tax breaks) that the type of spending is towards the common good.”
Certainly, while many individuals might be encouraged by more generous tax breaks, given the extent of his commitment tax is not an issue in Motsepe’s initiative. As Leon Rood, a partner at Werksmans said: “I can’t see any tax benefits in this for Motsepe.”
Rood explained that the tax implications of the initiative would depend on the tax status of the Motsepe Foundation and the type of activities it is involved in. In terms of the existing law, if the Motsepe Foundation is a registered Public Benefit Organisation (PBO) and is involved in activities specified by the SA Revenue Services (Sars), then Motsepe will get a Section 18A donations receipt for the money donated to the foundation. The list of 18A activities focuses on health, education and welfare.
If Motsepe submits this receipt with his tax returns he will be able to get a tax deduction. However, and this is the crucial part for Motsepe, the deduction is limited to just 10 percent of his gross income. This means he will be giving far more than his tax deductions.
The Budget Review figures for 2009/10 show that donations accounted for R111 million of tax deductions in that year. This is in line with Inyathelo director Gabrielle Ritchie’s comment about the low level of philanthropic activity in South Africa.
“Despite being Africa’s richest nation, no South African made it on to last year’s Forbes ‘Biggest Givers’ List,” said Ritchie, who called for more philanthropic activity and more transparency around philanthropy.
“In the US it is a heavily regulated industry and there is much more transparency, but in South Africa it is much more difficult to get a sense of how many philanthropists there are.”
Given the R11m figure for 2010 it is likely that whatever Motsepe’s contribution, it will make a noticeable impact on the level of tax deductions granted by Sars in financial 2013/14 – assuming the Motsepe Foundation is a PBO.
While Motsepe is the first South African to join the ”Giving Pledge”, which was set up by US billionaires Bill Gates and Warren Buffett in 2010, the programme has notched up 92 US-based signatories.
In an interview with the Wall Street Journal last year Bill Gates said the pledge was causing billionaires to give in smarter ways and to give while they are younger.
“I know that people are collaborating together quite a bit more than they would have otherwise,” Gates said.
Billionaire critics say they are waiting for proof the Giving Pledge is bringing additional money to causes, especially those benefiting the neediest people, rather than tax havens and trusts for children.
A major benefit of signing up to the pledge is the exchange of ideas and experiences in an ‘industry’ that appears to have limited proof about what actually works.
At the launch of the programme, Buffett commented that it was his experience that making money was much easier than spending it effectively in the philanthropic arena.