[Question] Setting up a Foundation in Sth Africa

[Londoner]

Hi, please bear with me because a) I'm new and b) I currently reside in the UK.

I'm soon to relocate to South Africa to do some work for an old friend who owns a commercially successful company that is not strong on CSR. I've convinced him to set up a Foundation to deliver 'community building' programmes in less developed communities in SA. The Foundation will be financially sustained by the 'parent' company and issue grants to small NGOs. It will also be an important marketing tool for the parent company.

Is a S21 company the appropriate legal structure for such a Foundation?

What are the tax concessions for the 'parent' company e.g if they were to devote 2% of their annual profits to the Foundation?

Are there any other obvious tax incentives in this type of CSR project?

Many thanks and forgive me if this is all a bit basic.

[wynn]

Very noble, I hope you have a strong 'donorfatigue threshold' and I am sure this is what the country needs.

Set up a 'Not For Profit' NGO or a Trust as a vehicle to do this.

[Londoner]

Hi,

Thanks for your views on the Trust aspect.

However, not sure of the relevance of your 'donor fatigue' comment given that we will be making grants available to the NGOs.......

[Dave A]

Not much to be had in tax breaks, but it does score points in our BEE system here if you're doing business in sectors here where this matters.

I'll leave Wynn to expand on his Donor fatigue comment, although I have a hunch as to why he might feel a touch cynical.

[wynn]

Donating to an NGO is commendable, the broblem is that there are a lot of really credible people in Mzansi who make an excellent living off donations made to NGO's that they run like private fiefdoms.
Extremely high salaries for themselves and wages for friends and ghost employees, nice offices with a rental kickback, housing subsidies in excess of actual costs, excessive and padded expenses, NGO vehicles that are used privately as taxis etc.
I have been told of a few in Grahamstown where the recipients recieve a very little in the way of assistance, but having said that my lips are sealed because they are a lot cleverer than me.

I think if you can take a lesson from the donated tin of biscuits that gets passed from department to department where everybody helps themselves to a handfull until eventually the poor kid who the biscuits are intended for gets nothing but an empty tin and a few crumbs.

So put your checks and balances in place to make sure you are not taken for a ride and that the intended recipients recieve full value.

Nuff said???

[roryf]

Our company donates to a Section 21 NGO and the benefit for us is that the Section 21 NGO services or helps the disadvantaged black people in our area. With this donation we get 25 points for Corporate Social Investment (CSI) for our BBBEE. Apart from the points we get, it certainly feels good being able to help others.Yes, there are people out there that will try and take advantage but you will need to do regular checks.

On the tax side we are able to add the donation/s as an expense provided that the donation/s are to a registered Section 21 NGO.

I do spend quite a bit of time with the NGO checking where the money goes. We have seen our community helped and at the end of the day you can't take all your money with you!

[Londoner]

Donating to an NGO is commendable, the broblem is that there are a lot of really credible people in Mzansi who make an excellent living off donations made to NGO's that they run like private fiefdoms.
Extremely high salaries for themselves and wages for friends and ghost employees, nice offices with a rental kickback, housing subsidies in excess of actual costs, excessive and padded expenses, NGO vehicles that are used privately as taxis etc.
I have been told of a few in Grahamstown where the recipients recieve a very little in the way of assistance, but having said that my lips are sealed because they are a lot cleverer than me.

I think if you can take a lesson from the donated tin of biscuits that gets passed from department to department where everybody helps themselves to a handfull until eventually the poor kid who the biscuits are intended for gets nothing but an empty tin and a few crumbs.

So put your checks and balances in place to make sure you are not taken for a ride and that the intended recipients recieve full value.

Nuff said???

Many thanks for the warning. Perhaps one of the reasons I have been given this role is because of my Public Sector background in the UK where evaluation, evidence and outcomes has been the very fabric of my everyday professional experience. Not suggesting that everything will be transferable to SA however I'll be pleased to come back here in 12 month's time to let you know how things have gone.

[Londoner]

Our company donates to a Section 21 NGO and the benefit for us is that the Section 21 NGO services or helps the disadvantaged black people in our area. With this donation we get 25 points for Corporate Social Investment (CSI) for our BBBEE. Apart from the points we get, it certainly feels good being able to help others.Yes, there are people out there that will try and take advantage but you will need to do regular checks.

On the tax side we are able to add the donation/s as an expense provided that the donation/s are to a registered Section 21 NGO.

I do spend quite a bit of time with the NGO checking where the money goes. We have seen our community helped and at the end of the day you can't take all your money with you!

This is interesting and is something that I'm not familiar with so here are the basic questions:

What is a BBBEE?

Why is it necessary to achieve points?

Are the donations to the S21s from your profits?

Is there a tax exemption on giving in this way or do you record it as an expense?

[wynn]

BBBEE = Broad Based Black Economic Empowerment which is the refree that has been introduced to level the playing fields but is a bit like 'Bryce Lawrence' (only sees what it want's to see)

A Previously Advantaged Business (owned by a White) has to score a number of points by having either Black partners or donate to a Black Empowering Charity etc.

Donations to S21 NGO's could be from your profits or from shareholding schemes.

Not too sure about tax implications though?


PS a lot of politically connected black people took advantage of BBBEE and previous BEE (Black Economic Empowerment) when the economy was good and now that a few chickens have come home to roost are squirming under the pressure and are calling for 'Nationalisation' so that the Government can buy them out and they can carry on the good life without interruption.

[Londoner]

BBBEE = Broad Based Black Economic Empowerment which is the refree that has been introduced to level the playing fields but is a bit like 'Bryce Lawrence' (only sees what it want's to see)

A Previously Advantaged Business (owned by a White) has to score a number of points by having either Black partners or donate to a Black Empowering Charity etc.

Donations to S21 NGO's could be from your profits or from shareholding schemes.

Not too sure about tax implications though?


PS a lot of politically connected black people took advantage of BBBEE and previous BEE (Black Economic Empowerment) when the economy was good and now that a few chickens have come home to roost are squirming under the pressure and are calling for 'Nationalisation' so that the Government can buy them out and they can carry on the good life without interruption.

Ok, very useful to know, thanks.