July 17, 2002
South African Community Growth Fund Celebrates Tenth Anniversary
by William Baue
The Community Growth Fund invests in South African companies committed to sustainable development
and triple bottom line reporting.
In the early 1990s, the U.S. socially responsible investment (SRI) community challenged apartheid
externally by encouraging divestment from companies doing business with apartheid South Africa. At
the same time, the Community Growth Fund (CGF) of South Africa sought to effect change from within
the country by applying SRI criteria to investments in domestic companies. Over the past decade,
the CGF has continued to promote corporate social responsibility (CSR) in South Africa. Today, the
CGF celebrates its ten-year anniversary with a gala celebration in Johannesburg.
The CGF was founded in 1992 by Unity Incorporation. The Community Growth Management
Company (COMANCO), which manages the CGF, initially screened companies by performing social audits
on company performance. The audits assessed 17 SRI areas, including affirmative action,
environmental management, and equal opportunity for women. Only about 20 companies passed all
these screens at first. However, the CGF continued to engage with companies to encourage them to
adopt practices such as triple bottom line reporting that would qualify them for inclusion in the
"Ours is not just simply a name and shame exercise but is a sustained process of
engagement towards the transformation of socio-economic woes into meaningful contributions to
growing this economy," said Zithulele Cindi, public officer of Unity Incorporation.
example, COMANCO commenced its social audit of South African Breweries (ticker: SBWRF.PK) in 1992;
it was not until 1994 that the company qualified for inclusion in the CGF investment universe.
Other companies have gone through an even more protracted process. Some companies, such as Rand
Water and the Naspers Group, were not included in the fund for five years.
"What has been
encouraging about Naspers is its spending on training, empowerment, adherence to health and safety
standards, and corporate governance. Employee representatives spoken to were happy about employment
conditions compared to six or eight years ago," said Mr. Cindi. "They scored poorly though on
employment as it relates to job creation and will need to take a long term view on acquisitions in
Companies can also be removed from the fund. COMANCO constantly monitors
companies in the CGF universe as well as those that have yet to pass its social audit. The first
company removed from the CGF was the Western Deep Level mine, due to a lack of progress on safety
at the mine. More recent removals include Hoskens Consolidated Investments and Liberty Life.
COMANCO borrowed the term "refuseniks" from the glasnost-era Soviet vernacular to refer to
companies that refuse to submit to its social audit. Aspen Pharmacare, Sun International, and
Vanadium Corporation, among many others, have been listed as refuseniks. Such branding generates
results. Over a one-year period, almost three quarters of some 30 refuseniks reformed their ways
to gain entrance into the CGF universe.
Over the years, the CGF has whittled its
initial list of 17 SRI criteria to 8 criteria, and now includes good corporate governance, health
and safety, and corporate social responsibility. COMANCO weighs each of these criteria equally in
its social assessments.
In addition to COMANCO's social audits, Unity Incorporation has
been involved in shareowner action since the inception of the CGF. Within its first two years,
Unity engaged with such companies as De Beers, Southvaal, Nedcor, and Dimension Data. Unity
believes its shareowner initiatives on affirmative action and corporate spending on employee
training inspired two recent pieces of South African legislation: the Employment Equity Act and the
Skills Development Levy Acts.
The CGF has also inspired the introduction of other SRI
funds, notably the Frater Earth Equity Fund, which advertises itself as the first South African SRI
fund to employ an "overlay" approach of
shareowner action instead of screening.
Mr. Cindi sees the increase of SRI funds in
South Africa as good for the country. "There have been other players who have come into the SRI
market and we welcome them," he said.