Inyathelo Executive Director Shelagh Gastrow was invited to address the 6th annual ‘Making CSI Matter’ conference in Johannesburg at the end of May. The conference is aimed at people who are grappling with CSI and development practice, and who want to refresh their thinking. Shelagh was asked to discuss the current threats and opportunities for NPOs, and how NPOs and corporate funders can find common ground.
"Multiple sites of power are crucial to a democracy and a vibrant civil society provides just that. It is estimated that there are over 100 000 organisations that make up our civil society. Some are membership-based and can therefore rightly claim to represent their own communities. Others are established by individuals and groups who are passionate about a specific cause and they create a mechanism to work in that field. Although these organisations are not membership based, they still have enormous value because they exist."
If we are to look at the main areas that emerge in this hive of activity, they tend to develop into welfare and service delivery on the one hand, and advocacy and policy development on the other.
The government has for some time objected to civil society organisations with the critique that nobody has voted for these organisations and that they are therefore unaccountable. Our constitution defends our right to free association and freedom of expression. Any individual has the right to hold the state to account as does a group, an organisation, a movement, a society or any other structure. And besides, civil society isn’t only there to check the state but also to keep a watchful eye on the corporate sector. Civil society organisations have been very effective at exposing businesses that exploit child labour, or are guilty of unfair labour practice, or environmental degradation, or price-fixing and excessive profit making.
In any event, the accusation about NGOs being unaccountable and unrepresentative is a non-starter. Civil society is our space where citizens have the right, and the freedom, to organise with like-minded people around particular issues or to work for particular socio-political, economic and/or cultural causes. CSOs are accountable – to their members, beneficiaries, donors and communities. It is political parties that are failing to account for where their funds come from, or where they have invested their party money. They also don’t seem to feel the need to tell us when their cadres benefit from private and other deals.
Funding of the Civil Society Sector
There has been substantial media coverage about a funding crisis in the non-profit sector and, for many organisations, this is reality.
According to a 2012 Non-profit Job Losses and Service Cuts survey undertaken by GreaterGood South Africa, 80% of participating organisations had experienced significant declines in funding. This had led to retrenchments and the closure of some well-known organisations. We don’t know the real impact as we have no current data on the size and scope of the sector. However, in 2002 Mark Swilling and Bev Russell produced a research document that indicated that there were about 305 000 full time employees in the sector. This is no small number! The main reduction of funding was that from international aid agencies with some reduction in local corporate funding for non-profits as a result of the recession. Currently business confidence in South Africa is quite low and people are not investing heavily in business enterprises within the country, although South African companies are doing well outside the country. This all has a knock on effect on our own civil society and institutions such as universities.
On the other hand, it also means that organisations haven’t planned ahead and have not put effective strategies in place to ensure financial sustainability. Four key pillars for financial sustainability include (1) a diversity of donors, (2) some form of income generation in line with the organisation’s objectives, (3) building of reserves and possibly (4) purchasing their own premises. Income generation implies a mixed model and in this respect many organisations can become effective social enterprises without losing the values that drive the non-profit community.
From Inyathelo’s view, we understand that fundraising is not fair – it is not about the best idea or the best proposal, but it is about building personal relationships based on trust. Trust is no doubt the underlying contract between a donor and a grantee, but it doesn’t happen without engagement. Relationships cannot only be on paper. The growing demand for detailed reporting including outputs, outcomes and impact has something to do with current donor practice where trust is reduced and relationships are curtailed. The building of real, trusting partnerships requires face to face engagement. It is imperative that non-profits understand this as much as the donor community.
We at Inyathelo believe that there are resources available to the civil society sector, but organisations and their leaders need to attract these resources, rather than chase money. They need to put in place effective advancement practice including good governance, quality leadership, good financial management, functioning programmes that deliver on their objectives, monitoring and evaluation; they need to be visible and let the world know what they think and do; they need to be clear where they are going, what they want to achieve and how they will do it. They cannot rely on proposal writing as the first port of call. This standard way of raising money is probably the least effective and I am always amazed that people continue with a practice that doesn’t work. There is no silver bullet – the bottom line is that organisational leadership has to build relationships and this takes time and effort.
The Lotteries and the National Development Agency
These two agencies were established with an expressed objective to support and serve the civil society sector, but have been notorious in their failure to do so. The NDA was for years embroiled in various charges of corruption by its senior management and the lotteries was plagued by administrative bungling and a lack of transparency in respect of the Distribution Agencies that report to the Minister of Trade and Industry. The NDA appears to have contracted into its shell, paying out a significant percentage of its annual allocation to its internal functions, whilst appearing to be running its own programmes rather than supporting civil society. There are attempts to review the lotteries and new legislation is awaiting comment.
Relationship with Government
This takes us to the issue which is the relationship between civil society and government. During the anti-apartheid struggle, civil society organisations played a major role in the political shift. This included the hundreds of organisations that formed the backbone of the United Democratic Front, organisations such as the Black Sash and Idasa that helped to break the political log-jam. Civil society organisations played a role in drafting the constitution, in implementing the National Peace Accord and in promoting the RDP. However, over time, as government began to find its feet, civil society found itself on the outside, merely serving as a partner with government in the context of poverty alleviation. What does poverty alleviation mean? In my view it merely means making poverty bearable. It is not about changing a system to get rid of poverty. This led government and quasi government structures such as the NDA and the Lotteries to see civil society organisations, especially NGOs, as merely service providers to the poor and even worse, as a nuisance.
There are many organisations that provide services to the poor (it is allegedly estimated that 30% of social services are provided by the non-profit sector) and they have become major recipients of government money, leading to a heavy dependency on government largesse. This has led to a question relating to the independence of these organisations – do they align their programmes with government priorities, or do they stick to their own objectives? Can they advocate on behalf of their beneficiaries; can they criticize the hand that feeds them?
A key question to ask of government is whether it is meeting its mandate? The existing Non-Profit Organisations Act was promulgated in 1997 and it contains a clause which reads :
Every organ of state must determine and co-ordinate the implementation of its policies and measures in a manner designated to promote, support and enhance the capacity of non-profit organisations to perform their functions.
Certainly, this clause has largely been ignored.
The Act also provided for the establishment of an NPO Directorate within the Department of Social Development to offer support services to the sector. However, the Directorate was severely under resourced and it has had huge difficulties in servicing the sector. Worse was the mass deregistration of organisations that took place at the end of 2012 and early in 2013 – apparently a new efficient computer system implanted into a dysfunctional entity.
We are all aware that expectations relating to government service delivery have not been met. As a result, various new, dynamic and activist organisational structures within communities and beyond have emerged and most of them rely on volunteer membership for their impact. These are generally termed social movements.
At the same time, there are other more structured organisations that are involved in issues relating to systemic change such as educational improvement, refugee rights, gender issues, corruption and political rights. These organisations, often termed social justice organisations, sometimes attract government ire. Their skills base can be quite sophisticated and this enables them to participate in legislative processes such as making submissions to portfolio committees in parliament, organizing campaigns including raising awareness through the media, undertaking effective research and even going to court. There has been on-going sniping on the part of government about the role of such organisations. Higher Education Minister Blade Nzimande accused some NGOs as being part of an “ideological third force”. A statement issued by the ad hoc Committee on the Protection of State Information Bill in 2012, following the Bill’s passing, accused civil society organisations of “half-truths, distorted conflations and mischievous political deportment”. Some NGOs have been vilified and accused of being “foreign spies”. SADTU also described some NGOs as “imperialist neoliberal forces” and threateningly asserted that the union would not accept a situation in which they could be used as “proxies to pursue certain political agendas”.
We therefore have an uneasy relationship between civil society and government. Government needs organisations to deliver services, but on its own terms and within the parameters of its own agenda. Those who aren’t directly involved in service delivery are often seen as a threat, rather than a potential partner.
The publication of King III presented the non-profit sector with a number of challenges as it was written for the corporate sector which is based on different values and functions differently. Perhaps the most obvious difference between the two sectors is that the corporate sector exists to achieve the maximum amount of profit possible, whereas the NPO sector, by definition has to channel any resources it generates towards the benefit of the organisation and the work that it does. But there are other differences too. Directors of an NPO freely and voluntary give of their time to fulfil an altruistic purpose; in the corporate sector, directors do not freely give of their time, and expect the highest possible remuneration for their investment. As well illustrated by exposes the world over – South Africa being no exception – such remuneration is sometimes astronomical in its largesse.
King III focused on the new Companies Act, but the majority of NPOs are trusts and voluntary associations. Trusts and voluntary associations have their own body of law including aspects of common law as well as guidance from international principle and practice, especially taking into account the degree of funding of South African NPOs that comes from abroad. Most especially though, we felt that the requirements of King III were too overwhelming for the capacity of most civil society organisations. This did not mean that they were incompetent. An article in the Financial Mail of 14 October 2011 entitled “Strangled by Rules” explained that local companies were overwhelmed by the requirements of King III and that governance issues were crowding out all other items on board agendas.
In essence, King III served as a catalyst, forcing the non-profit sector to look inward at its own governance practices. This is particularly pertinent considering the work NPOs do. Very often, this involves the provision of public services – the building of schools, for instance, or providing emergency access to medicine in natural disasters. Governance of any organisation and its funding are critical to donor and beneficiary confidence.
There was therefore an urgent need for the South African non-profit sector to explore the development of a Good Governance Code or Charter that spoke to, among others, the specific governance and risk management needs of NPOs. Such a Code needed to be aware of the multi-layered and multi-textured nature of NPOs and it needed to serve as a way of building confidence in the non-profit sector. Following a two year consultative process with hundreds of non-profits, a Working Group produced the Independent Code of Governance for Non-Profit Organisations in South Africa. This can be found on the website www.governance.org.za and organisations can subscribe to the Code through the website. We currently have over 50 organisations that have publicly subscribed and donors can measure their governance performance against this commitment. Over the next three years we will be promoting this Code across the country to ensure that it has currency and can stand as the key governance document for the sector.
This Code does not purport to be a comprehensive statement of the law and it acknowledges the existence of other Codes such as King III. It is basically a statement of values, principles and recommended practice.
Relationships with Business
There are two components that impact on civil society’s relationship with South African business, mainly through CSI operations. These are the BEE codes and the capacity to measure delivery and impact. Business is not generally altruistic, although there are some key exceptions to the rule. I am not opposed to the for-profit sector : it is critical to the development of our economy, it provides work and produces the products we need. However, in terms of values, the corporate sector is extractive by nature : it will extract what it can from its employees, its customers, its suppliers etc. The non-profit sector is about giving back to society.
Are there therefore real opportunities for partnership between civil society and business? In many instances there will be common ground in terms of what people are trying to achieve, although they might approach the problem from different angles. For example, an organisation might be working with matriculants to prepare them for university. This could be supported by a company as it desperately needs good, talented, qualified graduates and it understands that the seed bed of such future employees (our school system) is currently barely functioning and that the add-on provided by educational NGOs has value. There are a range of opportunities for corporates and civil society organisations to partner, but there has to be respect for different values and agendas.
The BEE Codes have also had an impact on such partnerships. Whilst there might have been some level of altruism previously, this has been wiped out on a significant scale by the need to tick boxes to gain BEE points. There are some companies that no longer have any values, but only request proposals from organisations that can prove the 75% black beneficiary targets. So, for example, you might find a company supporting a pro-abortion organisation and an anti-abortion organisation, both of which have 75% black beneficiaries, but with totally divergent values. Whilst the imperative to transform our society is totally understood, the reality of this requirement has had an impact on the interface between civil society and the corporate sector in terms of a common value base.
The issue of social return on investment has also created confusion. Although it is important and correct for organisations to report on how funds were spent, whether they delivered on their programmes and what the impact of the programmes were, there is the utopian idea that somehow business practice can save the world. In response, the following quote from Michael Edwards in his book “Small Change” is appropriate :
“Expecting price competition, the profit motive, short-term deliverables, and supply-chain control to bring about a world of compassion and solidarity is, to say the least, a little strange. You wouldn’t use a typewriter to plough a field or a tractor to write a book, so why use markets where different principles apply?”
Social change is complex and messy, organisations need to navigate society, social structures, interest groups and differing agendas in order to achieve consensus. The process alone can take months or years, before any actual work takes place. When Jonathan Schrire was encouraged to build a school in Vrygrond, a hugely disadvantaged area in Cape Town, two members of his committee were killed before the school was built. It took enormous courage and persistence to deliver and complete this incredibly successful project. How does one measure this? Does this process not matter in terms of return on investment, but only that the school was built, how many pupils attend and what their final matric results are?
According to James Taylor of the Community Development Resource Agency, we have approached developmental work in a linear, mechanistic and instrumental way. This is effective in resolving simple and even complicated problems where there is a direct and predictable cause and effect relationship between input, output and outcome. But we are starting to understand that this framework could thwart our capacity to address the multifaceted, complicated systemic problems that we face.
There are huge opportunities for the corporate sector to work with civil society, but there should be clear guidelines for good partnerships between the two. For corporates, these include :
- Ensuring that your objectives dovetail and that you are not forcing an organisation to change course to where it doesn’t want to go or where it doesn’t have the skills sets to go. This will invariably end in a sad way.
- Respect your partner’s knowledge in its field of endeavor and in the community in which it works.
- Whilst sharing skills can be enormously helpful, there is no purpose in trying to micro-manage a partner organisation. Besides being bad manners, it can undermine what both parties are trying to achieve.
- Understand that social change takes time. Immediate impact in the social sphere is unlikely.
- Make a contribution to overheads. Organisations cannot function without overheads. Companies would not dream of running without offices, equipment, marketing and staff. So goes the NGO. Each project has to pay its way in the organisation including oversight, governance, rental, supplies, equipment etc.
- Make a contribution towards building the capacity of your partner organisations. No business would dream of eliminating staff training and resources from its budget. So goes the NGO.
- Don’t be judgmental about costs such as salaries. There is no reason why people running NGOs should live on a pittance. They are professionals in their own right and are partners with the corporate sector. Don’t revert to the charitable paradigm and reduce them to beggars. It is humiliating to use the power game because the funds come from the corporate entity. These organisations are enabling the corporate sector to undertake interventions that they simply cannot do themselves.
- Be clear about how you exit a relationship. A warning is not an exit strategy. Companies could open doors to other donors; provide training and capacity building in fundraising and development; contribute towards an endowment. If you have a long term relationship, it is unethical to stop support suddenly.
- Make a medium to long term commitment. Organisations cannot make guarantees that their work will endure if they need to continually resubmit requests for support on an annual basis. This insecurity leads to staff losses, and an inability to plan for the future.
- Do your due diligence. Before investing in an organisation, ensure that it is sustainable, that it has the skills required to undertake its projects and that you are confident and have trust in its leadership. This means that companies need to know their partners and that this is not just a paper relationship. Meet with the Director, visit their offices. The state of their working environment will tell you immediately if the organisation is well managed or not.
- Understand that reserve funds and endowments are a good thing. The argument that an organisation has a reserve and therefore doesn’t require funding is spurious. What this actually means is that the organisation will be there to carry out its objectives if things go wrong financially. Because non-profit donor income is subject to the whims of donors, it is good practice to build a reserve to see the organisation through transitions. Donors who object to an organisation’s financial success are operating in a patronizing, charitable paradigm – expecting professionalism, yet abandoning their own business principles in the case of non-profit organisations.
For non-profits there are also some basic rules :
- Do not assume that a donor is obliged to fund you. You need to attract funds from partners that share your objectives and hopefully values.
- Build relationships based on trust and be transparent. This takes time and your Executive Director needs to find this time.
- Ensure that your objectives dovetail with the objectives of your corporate partner and that any outcome indicators are agreed.
- Don’t be swayed into mission drift because there is money involved.
- Ensure that you have a good paper trail and can account for all funds.
- Put effective thanking and reporting systems in place.
- Stick to your contracts and report on time, both narrative and financial.
- Recognise your corporate partner, both privately and publicly. Starting with a thank you letter, this can extend to a recognition event, a certificate of recognition, the naming of space, a plaque on a wall and publicity in your annual report and website.
- Bring your partner into the organisation – share your achievements.
- Continually monitor your programmes and projects, find the places you can improve and share this knowledge with your donor. Be proactive about evaluations – engage with the donor about what they would like to know in the process and share what you would like to learn.
- Inform your partner immediately if things go wrong – you don’t want them to hear about this from other sources. Be open and honest – we are all human.
- Understand that your champion in the company, such as the CSI officer, is accountable to his/her board. Your failures reflect on him/her. It is therefore important to maintain a transparent relationship and to answer questions that need to be asked.
If I have a message for business and its relationships with non-profits, it is to move away from a mechanistic way of grantmaking and to start looking at the systemic issues that impact on our society and therefore impact on business. Although social justice organisations involve some risk for a company, particularly in relation to government, systemic change will often create the milieu in which the company can do better business. This is long term thinking and is not so pretty in an annual report, but it is often better for the country. Without imagination you will continue to support change without change, you will only make poverty bearable, but won’t provide for the future that we need in SA. Take off the linear matrix and the blinkers and start to engage in the very messy, muddled and complex world in which we live.