Compulsory CSR, Whatever Next?

There is a bill in the Senate that is stealthily making its way through the legislative process which should interest all business owners – A Bill for an Act to Provide for the Establishment of the Corporate Social Responsibility (CSR) Commission.
The bill, if passed into law, will create a CSR Commission which will cost Nigerians N362, 039,072.48 per annum (I know…don’t ask) and make it compulsory for businesses to give no less than 3.5% of their profit before tax to meet their CSR obligations.

According to the sponsor of the bill, Senator Chukwumerijie, the bill will address ‘the low sense of CSR of business companies…largely caused by (i) lack of adequate laws to regulate their behaviour and compel positive responsible response to the community and (ii) lack of a supervisory authority to enforce the laws’. In a country where businesses have to generate their own power and provide their own security and other amenities, this is laughable.
Unfortunately the overall effect of the Bill, if passed into law, is not as funny. Apart from the conflict mandatory CSR has with one basic principle of CSR i.e., corporate responsibility being driven by market forces and competitive strategy not, law, there is the issue of multiple taxation. Nigerian companies pay between 20-30% of their profit as tax (85% for oil producing companies), as well as withholding tax (10%) capital gains tax (5%), Education tax (2%) and VAT (5%). As if this is not enough, the House of Representatives currently has a Bill calling for the imposition of an additional 2% Energy Tax to be paid by companies and we have not factored in personal income tax and State and Local Govt taxes which come disguised as parking space permits (in front of the building you own or rent), radio license, computer license, noise tax (from the generating set businesses have to run because government cannot live up to its responsibilities) etc.

Under the provisions of the CSR Bill, the Commission – which will, I am ready to bet, be run in true Nigerian fashion with civil servants more interested in eating, sleeping, selling and politicking – will be charged with duplicating the responsibilities of existing agencies. For instance, if the CSR Commission is charged with ‘implementing social and environmental regulation consistent with convention’ then why do we need the Environmental Protection Agency and National Environmental Standards and Regulations Enforcement Agency? And if the Consumer Protection Council has spent years working in collaboration with the private and public sector to create an acceptable ISO standard for the voluntary practice of CSR, why do we need the Commission to ‘create a standard for social responsibility of corporate organizations that is consistent with international standards’?
All these issues and much more were raised by the private sector last week at a public hearing hosted by the Senate’s Establishment and Public Service Committee which has been tasked with reviewing the CSR Bill.

Everyone should endeavour to attend a public hearing (although they are ‘public’ you will be asked for your invitation – but never mind that, try and attend) at least once in their lives…it is quite an experience. I was filled with pride and sorrow, rage and glee. Pride and glee came from the submissions of the private sector which were thorough, analytical and well delivered: multiple taxes are crippling our businesses and will drive away foreign direct investment because of the extremely unattractive high cost of conducting business in Nigeria; many companies are already voluntarily managing their social responsibilities; the lopsidedness of the Bill in favour of the ‘donor ’ part of CSR neglecting the internal codes of good corporate conduct and governance, the fact that with a global recession countries such as the UK are reducing taxes…the list was endless and the opposition to the bill was overwhelming.
Sorrow and rage came from the responses of some of the Committee members to the issue of multiple taxation. According to one, paying corporate taxes did not absolve companies from ‘providing’ for the communities within which they operate. This Senator expressed disgust with the fact that the ‘creeks’ had NOTHING and yet there were ‘very healthy companies doing business in those communities’. Almost as one, the audience asked ‘what about the State Governments?’ i.e., what are their responsibilities? And then the penny dropped; this was not really about CSR, it was about the Niger Delta.

This undoubtedly complicates issues – not only because no one can deny the underdevelopment and environmental degradation under which the citizens of the Niger Delta live but because none of the submissions made during the hearing specifically addressed the Niger Delta issue.
In my opinion, the Niger Delta Development Commission (NDDC), the newly created Ministry of the Niger Delta as well as the Governors of the Niger Delta states should be the ones explaining where their budgets have gone or are going. It is public knowledge that Rivers, Akwa Ibom, Bayelsa and Delta States got the largest portion of state revenue allocation in 2008 with N250 Billion, N167 Billion, II6 Billion and 115 Billion respectively. If the legislature is genuinely concerned with the ‘creeks’ – it may be in their powers to ask for an account on how this money was spent. The NNDC has been in existence for a couple of years – has it published a report explaining the progress made in ‘developing’ the Niger Delta? Why should corporate and individual Nigerians be made to pay for the profligacy and waste of our government? While elected and public officials on all levels and most painfully, the Niger Delta States, have fleets of official cars, houses in every city in every country, they want hard working Nigerians who have paid their taxes, the same taxes which support our wasteful government to ‘develop’ and ‘support’ the communities in which they operate…are the Senators really incapable of understanding that the businesses are the communities and vice versa?

It is unclear if this bill will pass into law, but one thing is for sure; it will not solve the Niger Delta issue.

Published February 10 2009