JOHANNESBURG - A recent study of the 25 trusts created by the 100 largest companies on the JSE found that the trusts held R37 billion in endowments.
The Understanding Empowerment Endowments report, which was funded by Tshikululu Social Investments and conducted by Intellidex, showed that these trusts have to date splashed out R3.3bn in public benefit projects.
Tracey Henry, the chief executive of Tshikululu Social Investments, said the trusts had evolved over time and had become more responsive to the changing needs of the country’s development challenges.
“These trusts are by no means the silver bullet to rid us of all social ills, but their track record shows that if they are strategic in their intent and well managed that they have, and can continue to make, an important contribution to the social impact investing landscape,” Henry said.
The study found that more than half of the foundations were registered between 2003 and 2005, with more than a third being registered in 2005 alone.
The report also found that 76 percent of the trusts would continue operating as long as they are able to generate income from their assets, while six out of the 25 trusts had a fixed lifespan. Of the surveyed trusts, miner Assore’s Fricker Road Trust and Bokamoso Trust had net assets of R9bn, while FirstRand’s Empowerment Foundation had a bounty of R7.7bn.
Netcare’s Physician’s Partnership Trust had endowments of just more than R2bn, while Kumba Iron Ore’s Community Development Trust has an arsenal of R5bn.
The Kumba trust was also found to have spent the most to date, funding projects to the tune of R1.7bn, followed by the FirstRand at R231 million and Nedbank’s Eyethu Community Trust at R211m.
The report said 67 percent of the spending was directed at a variety of education initiatives, while 10.6 percent was spent on community initiatives and 8.4 percent on entrepreneurship.
The report, however, found that only four trusts had developed an investment policy statement and had an investment or finance committee that oversees risk management, governance and compliance.
Only two trusts indicated that they were in the process of developing one.
Another Achilles heel identified by the report is the lack of diversification.
The report noted that most of the foundations held investment portfolios that consisted only of the sponsoring company’s shares and that dividends were the life blood of all perpetual foundations.
Graunt Kruger, the global head of strategy research at Intellidex, said a trust’s operating model shaped its performance.
“There is certainly a need for greater co-operation and knowledge-sharing between these trusts and others as they examine the challenges highlighted in this report,” Kruger said.