More NPOs, less funding: what does this mean for the decade ahead?

As we enter a new decade, it is good to take stock of our current reality and use this to inform our activities and thinking over the next 10 years.

As a nation, we have one of the largest socio-economic divides in the world. Our subdued economy is not assisting in turning the tide on this reality. It is therefore not surprising that the number of registered not-for-profit organisations have grown from 153 677 in 2016 to 220 543 in 2019. This is a 43% growth in registered NPOs over the last 3 years! The majority of these NPOs are micro (less than R50 000 annual income) or small (R50 000 – R500 000 annual income). This sector is also estimated to provide over 1 million job opportunities (both paid and unpaid) annually, according to a study conducted by the Funding Practice Alliance ‒ Inyathelo, Community Development Resource Association and Social Change Assistance Trust.

It’s encouraging to see that as the challenges grow in South Africa, more and more people are putting up their hands to form part of the solution. The next question, however, is: what does the funding landscape look like? And has it grown in step with the increase in the number of NPOs?

According to Trialogue’s Business In Society Handbook 2019, R10.2 billion rand was spent on corporate social investments (CSI) in the last financial year. This is a 5% increase from the R9.7 billion estimated in 2018. This sounds like good news, but the real growth, when adjusted for inflation, shows a flattening out of the CSI spend within the corporate sector. The sectors which are the most supported through CSI spend are education (50%), social and community development (15%) and food and security (9%).

Nedbank’s Giving Report IV looks specifically at high net-worth individuals’ (HNI) philanthropic engagements. According to their report, released towards the end of 2019, 83% of HNI were reported to give time, money or goods in 2018. This shows a slight decrease from the last reported value of 88% in 2015. The good news, however, is that those who are contributing seem to giving larger amounts than reported in 2015. The most popular sectors to partner with for HNIs are social and community development (66%), religious institutions or causes (41%) and education (32%).

On a positive note, South Africans and ‘ubuntu’ seem to go hand-in-hand when you look at the generosity of individuals in our country. The Charities Aid Foundations’ South Africa Giving Report 2019 notes that 80% of South Africans gave money in the last 12 months. The average amount per individual donated was calculated at R1200 over the last 12 months. This value is significant when considering the socio-economic standing of our population and the level of unemployment. These individuals mostly supported the poor (55%), religious organisations (50%) and children (41%).

The levelling-out of the funding landscape does leave one concerned when considering the growing number of NPOs. It is not all bad news, however. The resource shortage has had some very positive effects on the social development ecosystem. Corporates are maturing in their social investment approach and taking a broader view on social impact. They are beginning to look at all facets of their organisation to see how these can be leveraged for positive impact, in contrast to only focusing on the 1% NPAT that they have to invest in social causes. HNIs are increasingly requiring some form of measurement to determine if their philanthropic contributions are affecting tangible and effective social impact, and sector-wide innovation and increased professionalism are on the up.

The traditional NPO/business sector divide is seen to be getting smaller every year, with self-generated income growing by 41% over the last year within the NPO sector. As this growth continues over the next decade, we can anticipate more NPOs functioning primarily as social enterprises, self-generating most of their income, with CSI and philanthropic funding moving to secondary and tertiary income sources. This will be a vast shift from the current make-up of the main NPO income streams, with 29% of income coming from South African companies, 17% from private individuals, 11% from South African trusts/foundations and 10% from the South African government.

One can take hope from the fact that, despite the tough economic landscape in South Africa, individuals are generous. The reality of our subdued economy will continue to influence the social investment spend of business and corporates, as well as impact the number of HNIs who invest into the social fabric of South Africa. It will, however, also stimulate innovation and an increase in efficiency of investment and implementation by both the donor and NPO sector respectively.

In looking at the current reality and how this will impact the decade ahead, I believe it will be a tough, yet pioneering season, where the development sector will be significantly reshaped and will set a new example to many on the African continent and beyond.