There is no single right way for a community trust to operate, but the decisions made in this regard have significant implications for impact, reporting and measurement.
In February, Tshikululu facilitated a session on building capacity for impactful delivery at the INSPIREd Community Trusts Learning Event, hosted by the Initiative for Social Performance in Renewable Energy (INSPIRE). Drawing on Tshikululu’s more than 25 years’ experience in managing social investment trusts, and leveraging insights from our Community Trust Benchmarking Report, this interactive session explored the governance and operating models of Trusts in South Africa, the key factors Trusts should consider when deciding on an operating model, and the implications of this choice for delivering impact.
A community trust holds the community’s equity share in a local company, such as a renewable energy plant or mining operation, in trust. Its role is to ensure that the benefits flowing from this shareholding reach a broad base of the community’s households. While there are certain fundamental compliance requirements, how community trusts operate is largely at the discretion of the trustees and the founder company. It is important to approach these decisions strategically to ensure that the operations of a trust support the achievement of its purpose and goals.
At Tshikululu, we guide social investors through key questions to help them make informed decisions about their community trusts:
1. What is the trust’s purpose?
The trust’s reason for existing is at the core of decision-making about governance and operations. Community trusts and their founding companies must clearly establish the intended impact of the trust, who its beneficiaries are, and the type of benefit it intends to create. The “why” is at the centre of the operating model, and it must be impact-focused – prioritising mere compliance or community appeasement creates a trust that exists to check boxes rather than create impact in any meaningful way.
2. What is your exit plan?
When establishing a community trust, start with the end in mind. Do you see the trust winding up responsibly in 20 years, or will it build up an endowment to enable it to sustain impact in the community in perpetuity? Determining the exit plan is a fundamental consideration in the design of a trust operating model.
3. What type of social investor will the trust be?
There are many different types of social investor, which we position along the social investor spectrum. Different social investors have different requirements, needs and impact goals. Tshikululu uses this model to define five different types of social investors, defined across 15 distinct social investor characteristics. While there are no strict lines between the different types of social investors, this model helps Tshikululu to design the right social investment solution for each client. For example, a trust that sees itself more as a philanthropic grantmaker may choose not to develop intensive monitoring and evaluation capacity, as its priority is to distribute funds broadly in response to areas of need and good causes as they arise. A systemic social investor, on the other hand, which seeks to catalyse change at a systems level, will need to ensure that the trust has adequate capacity for strategic planning, monitoring, reporting and impact measurement.
4. What operating model makes the most sense for the trust?
Tshikululu works with community trusts across the range of operating models – trusts that fully or partially outsource the administration or operational functions to one or more agencies or partners; trusts that employ their own staff; and trusts with proxy administration, where support services are provided by the founder company. Each of these models has benefits and drawbacks, and the choice of a model depends on factors such as the trust’s budget, the nature of the relationship with the founder company, and where the trust falls on the social investor spectrum. Structure follows strategy – the purpose of the trust must determine the ultimate choice of operating model.
Tshikululu currently manages 19 social investment trusts and provides advisory services to a broad range of trusts and other social investors. Regardless of the specific operating model, consideration given to social impact strategy, governance, careful design, and monitoring and evaluation creates effective community trusts. Thoughtful decision-making right from the establishment of a trust enhances the trust’s potential to create sustainable impact for its beneficiaries. As our understanding of best practice continues to evolve, Tshikululu’s partnerships and expertise ensure that we stay at the cutting edge and can provide our community trust clients with tailored guidance and support as we work together to drive social impact.