The main aim of the Socio-Economic Development (SED) element is to address the challenges posed by the prevailing socio-economic conditions of underdevelopment, which condemn the marginalised to perpetual dependence and poverty.
SED contributions consists of monetary and non-monetary contributions implemented for communities, natural persons or groups of natural persons that are actually initiated and implemented.
75% or more of the beneficiaries of the contributions should be black so that the full contribution is recognized.If the percentage of black beneficiaries is less than 75% then the value of the contribution is multiplied by the percentage of the black beneficiaries and that is what is counted.
There are different options to calculate the target spend of the SED scorecard.
- 1% of the Net Profit After Tax (NPAT)
- 1% average of the last 5 years NPAT
- 1% x “indicative profit margin” x Turnover (where “indicative profit margin” is NPAT/turnover)
- This method is used if the NPAT in the measurement period and average of the last 5 years NPAT at a loss or less than a quarter of the industry norm.
SED contributions include:
- grant contributions
- guarantees given or security provided for beneficiaries
- direct costs incurred by a company in assisting beneficiaries
- overhead costs of a company that are directly attributable to Socio-Economic Development contributions
- developmental capital advanced to beneficiary communities
- preferential terms granted by a company for its supply of goods or services to beneficiary communities
- payments made by a company to third parties to perform social development on its behalf
- provision of training or mentoring to beneficiary communities which will assist them to increase their financial capacity
- the maintenance by the company of a social development unit which focuses only on support of beneficiaries and beneficiary communities.
- Provision of training or mentoring to a beneficiary communities (such contributions are measurable by quantifying the cost of time spent by staff or management in carrying out such initiatives but any travel or commuting time does not form part of this cost). A clear justification must support any claim for time costs incurred, commensurate with the seniority and expertise of the trainer or mentor.
- Maintaining a Socio-Economic Development unit (such contributions include the salaries and wages of staff and other expenses involved in operating the unit). Remember that only that portion of salaries and wages attributable to time spent by the staff in and the other expenses related to promoting and implementing Socio-Economic Development, constitute contributions.
- Payments made by the company to third parties to perform Socio-Economic Development on the company’s behalf.
The various SED contributions have various factors upon they are multiplied. The Benefit Factor Matrix: