Building and broadening our supply chain
Discovery provides financial support, in the form of loans and grants, and non-financial support, in the form of training and mentorship opportunities, to selected enterprise and supplier development (ESD) beneficiaries. Grants to the value of R12 million were provided in the 2019 financial year, our current ESD loan book is sitting at just over R115 million, and the programme has supported 23 independent entrepreneurs in this financial year.
We work with enterprises where we see the potential for them to become successful businesses with a sustainable market, with business development support provided beyond funding where required. Funding is based on a thorough due diligence process conducted by the Finance team on the initial proposal, and additional development support is provided in areas where further development of the proposal is required. Robust governance practices are in place to manage the awarding of funding, with all decisions interrogated and monitored by the ESD Investment Committee, which comprises of key executive directors within the Discovery Group.
We are constantly searching for qualifying beneficiaries and it can be challenging to find companies that meet our criteria. We coordinate closely with the procurement team to identify and ensure that we are supporting suppliers that are strategic to Discovery's business.
The ESD programme’s key objectives are as follows, all of which contribute to the ambition of being a force for social good:
Addressing youth unemployment
Providing access to, and lowering the cost of, healthcare
Developing our supply chain
Supporting innovative ideas for new products or services.
Discovery achieved its target for enterprise and supplier development, as set by the Financial Sector Code.
According to the World Bank, SMEs in emerging economies contribute up to 60% of total employment and up to 40% of national income, but access to finance is a key constraint to their growth. However, the reality in South Africa is far different. According to a study by the Small Business Institute in October 2018, “while formal SMEs contribute nearly 98.5% of the number of formal firms in the economy, they only account for 28% of the jobs”. This highlights the need for targeted support for high-growth SMEs that drive job creation and economic growth - typically medium-sized businesses.
Discovery is a proud shareholder of the SA SME Fund, a private sector led initiative born out of the CEO Initiative, a partnership between the SA Government and the CEOs of a number of companies to stimulate the economy and create jobs. The R1.4 billion Fund focuses on building entrepreneurs and SMEs.
The SA SME Fund launched the CEO Circle in March 2019 as an initiative that aims to accelerate the growth of high-growth black businesses within the SA SME shareholders’ supply chains. In August, seven companies were selected as CEO Circle Entrepreneurs 2019 (from an initial list of 140 nominations). They will get access to personalised support including access to capital, senior mentors and corporate decision makers. Importantly, all these companies have more than R50 million in revenue per year, high year-on-year growth, and are founded and led by black entrepreneurs.
Mid-sized companies are an important engine of economic growth. We will leverage the enormous power of our shareholders (being the top 50 corporates) and fund managers to help grow these businesses into significant players in the South African economy.
Adrian Gore, Discovery Group CEO and Chairman of the SA SME Fund
The SA SME Fund also has a key focus on investing in and growing the venture capital industry in South Africa.
This support is critical for stimulating the dynamism and innovation of our economy.
Discovery committed an initial investment to the SA SME Fund of R20 million.
Driving preferential procurement
to support emerging businesses
To support the Group’s ambition to maintain a B-BBEE contributor level 2 by 2023, the procurement team has taken a strategic decision to increase procurement spend with designated groups, with a focus on black youth-owned businesses. Support includes identifying suitable companies and facilitating access within Discovery’s federated model in order to give them greater exposure and broaden their networks across the organisation.
To overcome the risk of working with companies that may not have the track record required, we pair them up with existing suppliers who are willing and able to mentor and support promising new businesses. While these development and partnership opportunities can be difficult to find and require willingness from more established suppliers, we are continually leveraging our position and buying power to achieve positive impact in supporting promising young businesses.
We also engage closely with existing suppliers to improve their B-BBEE ratings. While our primary objective is to optimise value for money, we maintain minimum requirements for awarding contracts. In instances where a supplier with a sub-optimal B-BBEE level is awarded a contract on the basis of a value proposition, we often agree predefined milestones with the supplier that must be achieved over the term of the contract.
One notable success has been our supplier for the staff restaurants at 1 Discovery Place, which has improved from level 4 in 2017 to level 1 in January 2019. Beyond meeting the contracted terms with Discovery, their B-BBEE performance has improved their profile and broader opportunities.
A key objective for procurement is to maintain fairness and integrity in the process of awarding and managing contracts. We work closely with internal teams to ensure clarity in defining the scope of work and transparency in the criteria we use in evaluating bidder proposals.
Discovery is a strategic partner in establishing Mohau Equity Partners, a strategic long-term investor and 100% black women-owned business supported by funding from Discovery. Our objective is for Mohau to identify entrenched and strategic suppliers within Discovery that require support in improving their B-BBEE profile. Mohau has already made a number of strategic investments to support the transformation of our supply chain, including a key supplier of consumables and devices used in Discovery wellness days.
Amendments to the B-BBEE Codes of Good Practice in 2018 have had an adverse impact on the levels of some of our suppliers. Our partnership with Mohau aims to support willing suppliers to improve their transformation performance.
Our objective to support black youth-owned business is about much more than the B-BBEE scorecard; it is about nation building and leveraging our success to improve the ecosystems where we have influence. We find that what they may lack in experience, they make up in agility and nimbleness, which matches Discovery’s entrepreneurial culture.
We will continue to identify promising youth-owned black businesses and link them to opportunities in Discovery. One example is Isazi, which has developed an industry-leading document workflow solution using artificial and human intelligence to benefit its clients and unemployed youth.
More detail can be found in ‘Our stories’ through the link at the end of this page.
In the 2019 financial year, we spent over R1.37 billion as part of our procurement on black-owned businesses, equating to 24.3% of our total procurement spend of over R5.63 billion. Over
R535 million was spent on black women-owned enterprises.
Supporting and developing
Community health and wellbeing are of primary importance to us. In refining our approach to corporate social investment (CSI), we are working to achieve greater scale and thus greater impact by replicating working models and introducing social impact accelerators where necessary. We will retain our focus on healthcare, along with specific programmes in human resources for health, maternal and child health, and community development.
Our CSI philosophy is embedded in the overall business philosophy of being a pioneering and leading global business that implicitly transforms financial services. We are focused on ensuring that the social development models used in our initiatives and by our partners are measurable, replicable, scalable and inclusive.
Scaling our impact is key and we’re shifting CSI functions to focus less on philanthropy and more on social development. It's about more than just the Rands and cents, it's about leveraging the models and the way Discovery thinks about the world, the way we think about business. We are not only working in social development spaces but connecting that back to commercial and economic viability to ensure programme sustainability. That is real shared value.
Ruth Lewin, Discovery’s Head of Sustainability
Supporting our employees in their quest
to volunteer for good
Discovery ForGood, our employee volunteer programme, demonstrates that Discovery’s purpose lives in the actions of its people. Having met and exceeded our target to engage 60% of our staff in volunteer activities between 2014 and 2018, we have set a 70% engagement target for 2019 to 2023. As a cumulative target, we are already showing good progress, with 27% achieved up to the end of June 2019.
The objective of the volunteer programme is to leverage the capabilities of our staff in building healthier communities. Given the wide range of skills across Discovery, we work with communities to understand their real needs and match these to the skills and resources volunteered by Discovery’s people.
For example, in our flagship Orange Farm partnership, our leadership development team provide a leadership programme for school principals. Importantly, these are interventions that were identified and requested by the relevant stakeholders in these communities.
We are also broadening the scope of activities for employees to volunteer their time and energy, to ensure that we provide an opportunity for employees to share their passion for being a force for good beyond their day-to-day work-related skills set. A good example is in providing mentorships to individuals or teams to ensure the success of ongoing programmes.
The Discovery|COJ Business Centre is an incubator programme that continues to provide business support, training and mentorship to entrepreneurs from the area.
We continue to strengthen the relationships with our development partners, the municipality and community stakeholders to ensure the sustainability of the model beyond the intervention of Discovery. We are in process of signing a Master Framework Agreement with City of Johannesburg (CoJ) to ensure that lines of accountability and commitment to the project are clear and maintained.
Also in Orange Farm, the Discovery CoJ Technical Skills Centre continues to provide technical training, and where possible, internships or job placements for young people. In partnership with PACT/USAID, Discovery implemented the YOLO (You Only Live Once) and ZAZI programmes. These focus on social and behaviour change communication for adolescents and youth of both sexes (in responding to the social and behavioural drivers of HIV), and positive decision making, negotiating relationships and addressing gender-based violence for young women aged 15 to 24 years old, respectively.
Key indicators for the Discovery CoJ Technical Skills Centre for 2019
47 technicians trained
39 technicians placed in learnerships or jobs
7 youth placed in internships
549 youth attending behaviour change workshops
2 969 employees volunteered over 19 339.30 hours of
their time, worth over R3 million in 2019.
Harnessing the power of an emerging network
of leaders as a force for social good
The Discovery Foundation disburses grants to address the shortage of healthcare resources through training medical specialists, developing academic medicine and research centres, and increasing the number of sub-specialists to adequately meet the country’s healthcare needs.
A number of interventions are in place to achieve the Foundation’s mandate of ensuring 75% of financial support reaches black people. This includes our focus on targeting historically disadvantaged institutions, and underserved and rural areas. We also engaged with the Deans of specific medical schools and CEOs of associated academic hospitals to raise awareness about the Foundation’s funding programmes and the potential for collaboration in training, services and research across various academic health platforms.
In the 2019 financial year, 92% of academic and sub-specialist awardees in terms of award value, met the B-BBEE criteria set by the Discovery Foundation. In terms of headcount, 86% of awardees met the B-BBEE criteria. We enjoy high levels of collaboration and support from Foundation alumni, who participate in the screening committee processes and help host the annual Discovery Foundation conference with parallel sessions on topics that add value to the strategic direction of the Foundation.
In the 2019 financial year, the Foundation committed in excess of R19 million (2018: over R21 million) on the awards programme, with R13 million (2018: R16.3 million) spent directly to provide 43 (2018:52) doctors with specialist training and clinical research opportunities. Approximately R11.1 million (2018: R7.7 million) was awarded to a total of 14 institutions (2018: 11 institutions).
Funding programmes to improve the lives
of vulnerable communities
The Discovery Fund strengthens and improves health systems by developing human capital and skills, as well as primary healthcare service delivery. It also provides support to health policy, advocacy and infrastructure programmes. Focus areas include maternal and child health, HIV and AIDS, and tuberculosis.
The Discovery Fund is funding and actively involved in key programmes, including:
Safe Travel to School
Discovery Insure's Safe Travel to School programme is implemented by the Discovery Fund and our partner Childsafe. It currently transports approximately 18 000 children to school every day (a dramatic increase from 10 356 last year) and we have 863 drivers on the programme. A steering committee comprising representatives from Discovery Insure, Fund Trustees, CSI and Marketing are working to guide and support the excellent work being done.
Hlokomela started as an innovative HIV and Aids educational and treatment programme. It now supports farmworker communities across almost 100 farms in Limpopo and Mpumalanga. Discovery has funded a research project through HE2R0 (the health economics and epidemiology research unit at the University of the Witwatersrand) to investigate funding and partnership models to extend Hlokomela’s services into primary healthcare and extend this model to other farms. A steering committee will be developing an implementation strategy for the proposed model, and includes representation from the Discovery CSI and Marketing teams, Hlokomela, Agri SA, Tshikululu and HE2RO. We are also in discussion with Agri SA on improving healthcare provision to farm workers, with a business case in development and aligned to other social programmes provided by Agri SA.
Umthombo Youth Development Foundation
We support the Umthombo Youth Development Foundation, which identifies, trains and supports rural youth to become qualified health care professionals to address the human resource shortages at rural hospitals. The success of the model has been driven by ongoing mentoring for those young people to support their progress during their university studies, with a 92% pass rate since Umthombo started. Originally working to capacitate the Mosvold Hospital, it has grown into an NGO that is providing healthcare professionals to district hospitals in the broader area up to the Mozambique border. Given their success, Umthombo is scaling and diversifying its model to include education by attracting skilled science and maths teachers to underserved rural areas. Replicating these models will help scale the impact in social programmes that are driving sustainable impact to communities in need.
Discovery Fund is also funding important initiatives in attracting skills and training in healthcare, including:
Africa Health Placements
Africa Health Placements, which recruits local and international doctors to work in South Africa’s understaffed rural hospitals
Breast Health Foundation
Breast Health Foundation’s training platform, Phakamisa, provides online training to healthcare professionals on breast care in private and public hospitals.
We are applying the Social Impact Accelerator Programme to provide a high-engagement mechanism to better support the Fund’s high-impact, long-term and flagship programme partners to scale the impact of their interventions.