For companies, to give or how to give?

By Paul Busharizi

COVID-19 | DONATIONS

The current coronavirus crisis has prompted a huge outpouring of corporate giving, a recognition that many will be hit very badly by the slowdown in the economy.

Initial giving was coordinated by New Vision CEO Robert Kabushenga and now being coordinated by the prime minister's office using the National Response Fund.
Billions of shillings in cash, goods, and services.

Government's own initiative to provide some food -- maize flour and beans, to urban distressed kind of set the pace. One may argue about the procurement processes and amounts offered the recipients, but it was useful stimulus for others to start giving.

It was important that corporate Uganda decided to coordinate their actions in that way they would not suffer duplication and other uncoordinated troop movements.

According to the Income-tax Act, companies can contribute up to five percent of their income to a charitable organisation that is set up to cause social advancement -- alleviate poverty, education, health among others.

So if a company makes a billion shillings in revenues it can contribute sh50m, which will count towards its expenses and therefore tax-deductible.

Any amount beyond that threshold will not be tax-deductible.

Interestingly the US with its long philanthropic tradition allows individuals leeway to contribute up to 20% of their incomes and companies 0.5% of annual sales.

In Uganda, individual donations are not tax-deductible, which is a loss because in the US most donations -- seven in every ten dollars, are contributed by individuals.

The question of how much one company has contributed viz-a-viz another has been burning the wires. Reasonable concerns, if to those who much is given much will be expected.

The bigger question for me is the nature of the giving and whether it achieves the intended purpose of alleviating the affected persons suffering.

So telecom giant, MTN, for instance, have contributed about sh2b to the COVID-19 effort. About half of it was in hard cash, the rest was in form of media space, help to National Water & Sewerage Corporation (NWSC) to provide water stands in water stressed areas of Kampala, support to the Uganda Red Cross and to fit and put a call center at the disposal of the health ministry.

We shouldn't forget that MTN waived all fees sent on money transfers using its mobile money service, which must have run into a few hundred million shillings to date.

It Is an interesting breakdown because who is to say that the waiving of money transfer fees or the call center they set up for the health ministry has not had a wider benefit than the water stands or the cash handed over to the effort?

It raises an interesting question of, beyond the photo opportunities, how effective corporate social responsibility for the intended recipients?

Is it better to give in kind or in actual hard cash and allow recipients to make the decision on what to use the aid?

This last question is an interesting one, take for instance the government food hand out, there are ways of thinking about its effectiveness, I list two.

The argument can be made that giving people food directly ensures that they will eat. And because the government is buying in such huge volumes the unit cost is so low that the shilling can be stretched much further.

So if as was planned government is going to buy a few million kilograms of maize flour, the bargaining power that comes with this makes it obvious they will not buy retail, at worst they will be buying ex-factory and even then can push for a discount.

To take the same amount and dish out to the recipients who will buy their maize flour retail, means fewer people will be impacted or at least each beneficiary will not get as much as if the flour was centrally bought.

The other argument can be made that if you gave the recipients the cash equivalents they may not buy food, but attend to other needs that are more pressing.

Thankfully harvests were not bad last season and are expected to come in on target this season, so food shortages may not be people's more urgent need but health care or water or even transport may be more urgent and the money can be spent accordingly.

This last part feeds nicely into the debate of how to raise demand so that businesses can get back on their feet quickly after the lockdown has been lifted.

To lift the economy out of the last global financial crisis in 2008, the US government spent hundreds of billions of dollars propping up companies. Their argument was that if the companies collapsed millions would find themselves out of a job and the economy as a whole would come crashing down.

Critics say this was the biggest example of capitalist cronyism in world history. Jobs were still lost as company owners cut back on costs to repay the government and get out from under its wings. The benefits of the bailout were concentrated among very few people.

The alternative, they argued would have been to give individual cash handouts, which would allow the beneficiaries to go shopping and shore up the companies anyway, with the benefits spread much wider.

The second is more populist and probably better economics anyway.
You don't look a gift horse in the mouth, but if corporate donation or government handouts are to go beyond making managers' look and feel good there're serious questions that need to be considered.

And while we are still at it, who is to say that police officer Maneno Ayikoru who donated her March salary of sh200,000 to the effort, isn't the most giving of us all?

pbusharizi@newvision.co.ug
Twitter @pbusharizi