Building NPO resilience in a challenging climate

Non-profit organisations (NPOs) operate in a landscape of uncertainty, challenge and disruption, and bear the weight of limited resources, unpredictable funding and unreliable government support. These organisations, so vital to society’s wellbeing, were profoundly affected by Covid-19. Tarryn Saunders looks at the impact of the pandemic on NPOs and considers how they should be strengthened and supported to remain resilient. What does resilience look like, and how can companies provide support?

The NPO sector before Covid-19

The Department of Social Development’s (DSD) statistics show the number of NPOs had been accelerating before
the pandemic. In 2016, there were 153 677 registered NPOs in South Africa; by the end of May 2020, there were 228 822. This rapid growth has been driven primarily by worsening socioeconomic issues, such as unemployment, hunger, and unequal access to education and healthcare, along with government’s inability to address these issues adequately.

However, more NPOs does not necessarily mean an equal increase in the overall value or distribution of services. Duplication of services and competition for limited funding and resources typically increase inefficiencies. While NPOs played an increasingly crucial role in delivering basic services and plugging the gaps in service delivery, by the start of the pandemic the sector was already suffering.

Trialogue’s research, published in the Business in Society Handbook 2019, found around a third of NPOs reported a decline in income that year. This was an increase from 24% in 2018. Worryingly, many NPOs (43%) did not have any cash reserves, although this was a decrease from 53% in 2018. Of the NPOs surveyed in 2019, 94%
said their greatest challenge was securing funding for operating costs and reserves.

NPO challenges during the pandemic

The pandemic severely affected how NPOs could operate and serve their communities. Some struggled to deliver
food parcels during lockdowns, most needed to move operations online, and some pivoted their business models to operate under crisis conditions. Covid-19 brought many crises that caused the sector to respond to increased demand, but with more restrictions and fewer resources. Many NPOs were stretched thinner than before, needing to reduce staff salaries and programmes, and feeling the impact of illness and loss within both their organisations and the communities they served.

In April 2020, the South African Government announced a R500 billion social relief and economic support
package. The non-profit sector was not included among the beneficiaries. NPO leaders appealed, gave suggestions
and urged the government to collaborate.

The DSD did eventually contribute R100 million to support certain organisations, but not the sector as a
whole. Later, a further R150 million was made available from the National Lotteries Commission.

In 2021, Trialogue’s research saw companies’ CSI spend decrease for the first time (there had been an upward
trend previously). Over half of companies surveyed reported reduced CSI expenditure, with Covid-19 and decreased profits cited as the cause. This meant less funding for NPOs. There were also changes to which sectors companies chose to fund. The education sector was the most popular, even though CSI spend on education decreased to 39% from 50% in 2020. The change was due to companies funding responses to the pandemic
directly, with food security, agriculture and disaster relief receiving more support than in previous years.

Tshikululu Social Investments conducted a survey, ‘The impact of COVID-19 on non-profit organisations’, between May and June 2020. Of 179 respondents, 66% saw a decline in income since lockdown, with only 2% reporting a loss of more than 75% of income and 10% retrenched staff members. Forty-nine organisations provided details of why their incomes decreased. For most, it was the reduction of in-person income-generating activities, such as events and selling goods; for others, payment delays and reduced donations. Organisations in the early childhood development (ECD) sector reported reduced income as parents struggled to pay school fees during lockdown. Notably, only 23% of respondents reported losing donors without gaining new ones during the lockdown.

Nearly three-quarters (72%) of the 733 respondents in Nation Builder’s survey on the effects of Covid-19 on the NPO sector, conducted in August 2020, experienced decreased funding, while 22% reported increased funding.
Staff decreased for 61% of respondents and 61% suffered an increase in project costs and overhead costs.

Trialogue’s 2020 survey had 115 non-profit respondents, with 24% reporting that their funding had stopped or been put on hold and 19% reporting that it had been reduced. A quarter of respondents reported needing to reduce their programmes. The Trialogue 2021 survey, with 117 respondents, showed 53% of respondents reporting reduced income that year. However, 30% reported an increase in income.

While research shows the effects of the pandemic were severe on an already strained sector, it also demonstrates NPOs’ resilience: to keep engaging with policy, find innovative ways of working and keep going despite the odds.

Resilience success stories

Why were some NPOs able to weather the crisis better than others were? A combination of financial resilience,
innovation, agility and strategic collaboration with other organisations proved most effective.

Book Dash, Main Award winner of the Nedbank Private Wealth Innovation Awards, used various strategies to ensure resilience. A social impact publisher of books for children, Book Dash believes every child should own 100 books by the age of five.

When they entered the awards, Book Dash had published 146 new open-licence books and translated them into the official South African languages. Their publishing model reduces publishing costs by around 80%, which means they can sell books to donors and partners for R10 a copy. Their main event to create new books is usually held in person. During the pandemic, they were forced to hold it online, as well as to find ways to distribute
books to children during lockdown. And they succeeded: in 2020, Book Dash celebrated the distribution of its one-millionth book.

Ten ways Book Dash demonstrated resilience and innovation

1. Collaboration with partners (such as distribution partners and ECD organisations) and volunteers helped
   them reach their goals.
2. Their business infrastructure allows them to remain agile and keep costs low, with small in-house teams
   supported by contractors.
3. Thorough evidence and documentation (from financial records to videos and testimonials) shows good governance, which builds trust.
4. Strong storytelling abilities help them communicate their mission, write proposals and connect with partners.
5. Innovative processes and systems (such as open-licence books with content created by volunteers) allow
   them to adapt quickly.
6. Time is dedicated to planning and systems development, so that growth is built into the organisation’s
   operations.
7. A diverse donor base, with a policy that no more than 20% of funding can come from one donor
8. Self-funding through book sales.
9. Reserves to cover expenses – in this case, the building of a sustainability fund
10. Regular unqualified audits provide a measure of resilience and elicit greater trust.

The winner of the Technology Award was The Feenix Trust. Their mission is to connect communities in an innovative way to deliver debt-free education. The organisation was started as a response to #FeesMustFall. Through its crowdfunding platform, it connects university students with individual and corporate donors.

During the pandemic, Feenix launched the #CapTheGap campaign to raise funds to buy laptops, data and food vouchers or students. When they entered the awards, they had raised R3.4 million and were able to equip more than 400 students for six months.

Ten ways Feenix demonstrated resilience and innovation

1. Strong, research-driven understanding of what students need to thrive.
2. Leveraging strong networks and partnerships with stakeholders, such as universities.
3. Adapting processes with partners and networks to deliver services (including with a bookshop for distributing devices, and Shoprite for food vouchers and data).
4. Shifting operations to respond to the need they identified, and building and testing the necessary infrastructure quickly.
5. Strong storytelling to communicate their mission and campaigns.
6. Applying for grants and receiving funding from various sources.
7. Collecting stories from students to build momentum and gain support on social media.
8. Strong relationships with beneficiaries.
9. A work culture of challenging themselves, adapting and innovating, and using tech start-up culture and principles
10. A company culture of collaboration, which meant strong networks were there when the crisis hit.

---

How companies can support NPO resilience

Companies can support NPOs in various financial and non-financial ways. While a once-off cash donation can quickly assist with meeting an individual need, longer-term partnerships bring numerous benefits and stronger resilience. NPOs often have a deep understanding of their development area and a presence in communities, but they frequently lack resources. Combining NPO expertise with a company’s business know-how and resources can create greater impact on a shared mission. Companies can also help create more resilient NPOs through sustainable and longer-term investment.

Companies can provide more unrestricted funding, freeing money to be used at the NPO’s discretion. This means funds can be used where they are most needed, on new innovations supporting strategic objectives, or on building
reserves that bolster financial resilience and sustainability. An NPO needs to prove good governance, outcomes and leadership to convince companies to consider unrestricted funding. But despite the many benefits unrestricted funding offers, most companies do not provide it and many of those surveyed in 2021 (86%) said they were not willing to consider it. If a donor company imposes too many restrictions on funding, or focuses purely on programme funding, they not only limit an NPO’s efficiency, but also prevent it from building reserves or using funds for other necessities.

Companies can also contribute to more innovative forms of finance such as loans, social impact bonds or specifically funding reserves and digital innovation. Trialogue’s 2021 survey showed more than a third of
companies provided funds to help NPOs generate their own funding and would consider doing so in future. Companies and NPOs need to work together to find forms of giving that work for everyone involved.

Non-cash contributions, such as products, services and volunteering time aren’t common in South Africa, but there are opportunities for companies to become more involved. This should be done with sensitivity and in careful consultation with the NPO, so that companies can respond to an actual need without disrupting operations. For example, sending staff to volunteer could be disruptive for an organisation that isn’t prepared for it or doesn’t require volunteers at that time.

---

The business case for capacity building

Companies can also use their expertise to support capacity building in NPOs. This can involve various forms of partnership and support, but should focus on engaging with NPOs to build the capacities they need to reach their short- and long-term goals, and to develop as sustainable organisations. There’s no approach that will fit all NPOs,
so companies should consult with NPOs to establish individual needs.

In Trialogue’s 2021 survey, 25% of corporate respondents said they had experienced more capacity building as a change in giving practices, as a result of Covid-19.

Ultimately, more resilient, well-run and sustainable NPOs decrease risks in partnerships for companies. Collaborating effectively, and using each other’s strengths for mutual support, will develop a more robust NPO sector and strengthen society as a whole.

---

Nedbank Private Wealth and Trialogue Academy have created a comprehensive online course on NPO
resilience. The course covers six key areas of resilience, with videos, text, case studies, extra resources and
ample opportunity to pause and reflect on your organisation to assess and grow resilience. The course is a
practical toolkit for NPOs to draw on to future-proof themselves.

---

Source: The Trialogue Business In Society Handbook 2022 (25th edition)