OPINION | How a new philanthropy model could help small businesses survive

Recent philanthropic gestures have the potential for significant support to small business, but only if such philanthropy is strategic in nature.

The Rupert and Oppenheimer families have each contributed R1 billion to assist small businesses and their employees affected by the coronavirus pandemic. Shortly afterwards, the Motsepe family and associated companies pledged R1 billion to assist a wider range of Corona-related challenges that are confronting South Africa and the African Continent.

It is also global company news that Bill Gates has stepped down from the board of Microsoft to focus on philanthropy, while Naspers has recently announced that the group will donate R1.5 billion in emergency aid to the government’s response to the Covid-19 crisis.

In a period of global crisis, developing a deep understanding of philanthropy is, perhaps paradoxically, essential for continued business success.

In addressing the global shift in consciousness to business beyond profit, the Institute for Futures Research (IFR) at University of Stellenbosch Business School has collaborated with African think tank, Philanthropy Indaba, to produce a new framework for corporate philanthropy known as the Philanthropy Indaba (PI) Model.

According to Gerrit Schmidt III of Schmidt Family Office (SFO), who initiated the research, the new model is differentiated from traditional philanthropy in a number of critical ways. The first important differentiator is to connect. He believes philanthropy should find a link between the expertise and focus of the benefactors and the need perceived in their social context. Such need is made all the more poignant in the current crisis, he explains.

In conventional philanthropy, giving is treated an add-on, usually in the marketing department. This new research places the science of Philanthropy at the heart of business strategy, and this approach is particularly relevant when businesses are in distress. All businesses and wealth exist in a social context.

Smart philanthropy understands that context from the vantage point of their own expertise, and proceeds to serve critical subsystems in their network.

As an example, the Rupert and Oppenheimer families both have brands characterised by entrepreneurial flair. As a result, their contributions are earmarked for entrepreneurial small businesses.

Similarly, beneficiation from Motsepe Family and associate companies, which include Sanlam, African Rainbow Capital (ARC), African Rainbow Minerals (ARM) and others - all brands with a very wide social reach - will extend benefit to very wide range of beneficiaries and sectors, including education, water, medicine and others.

According to their statement, they will engage, just as their product range does, with kings, queens, communities, religious and faith-based organisations, government entities and many more.

When the work of Gates is examined, it reveals a similar singularity of purpose, although broadly interpreted: the Bill and Melinda Gates Foundation (reported to be the largest private foundation in the world) uses technology and scientific discoveries to reduce inequality, in the same way that Gates had once imagined a personal computer on every desk.

At a recent conference co-hosted by the IFR, leading international think tank the Club of Rome signed a significant Memorandum of Understanding (MoU) with the East-West Philanthropy Forum (EWPF), an international network of action-oriented philanthropists and their families from East and West dedicated to developing partnerships that impact today’s most urgent environmental and social challenges.

In this way the Club of Rome, for whom the climate emergency is a key focus area, has developed a systemic network to expand its organisational objectives and serve society at the same time.

The PI Model further uses a reinterpretation of Design Thinking to support organisational, individual and family philanthropy. When viewed in the context of small business beneficiation during COVID-19, the implications are significant, as the steps below illustrate:

Define: needs created by the epidemic for small businesses are researched as the basis for philanthropy. Blind and random giving (often the staple of traditional philanthropy) is avoided.

Empathise: the real-world of small business beneficiaries is carefully scrutinised. This may include appreciating business-critical issues of cash flow, making payroll, access to credit, rapid digitisation and others.

Ideate: here innovation is generated in a co-design process with a sample of small businesses. It is important that real and viable small businesses are used, rather than relying on representative bodies, which may lack real-world experience beyond drafting idealistic business plans.

Prototype: an early example of a small business is used in order to visualise how such a small business may benefit from the multi-billion Rand pledges. In practical terms, this could mean drawing up a cashflow projection to see exactly when the crisis-based benefit will kick in.

Test: prototypes are applied to more businesses in field conditions to learn about the real benefits.

During times of crisis, when mental distress rises, higher order decision-making is often threatened by emotional over or under-reactions. The temptation for knee-jerk reaction in philanthropy may have counterintuitive results that could retard rather than enhance the real world of the beneficiaries. The PI Model could to conceptualise strategic philanthropy in order to ensure longer term viability for small businesses.

Dr Morne Mostert is Director of the Institute for Futures Research (IFR) and a member of the Club of Rome. Gerrit Schmidt III of Schmidt Family Office Stellenbosch is head of R&D at the Carecube Organisation and co-founder of Philanthropy Indaba.

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