Nonprofit organisations have long faced funding crises, but announcements of global aid cuts have intensified the sector’s challenges, leaving both nonprofits and the communities they serve increasingly vulnerable. Fiona Zerbst examines how nonprofits are responding to the crisis and reimagining the funding landscape.
In 2025, something almost unthinkable happened: the United States (US), the United Kingdom (UK), France, Germany, the Netherlands and other major donor nations began scaling back their Official Development Assistance (ODA) commitments (for more details on ODA commitments and cuts, see page 64). This was driven by a convergence of domestic pressures, including economic slowdowns, shifting geopolitical priorities, rising populist sentiment and a growing emphasis on national interests over global solidarity.
The shift has had a chilling effect on a world already struggling with the impact of increasing global conflict and displacement, climate change and deepening inequality. A report by the Human Rights Funders Network (HRFN), titled Funding at a Crossroads: Foreign Aid Cuts and Implications for Global Human Rights, points out that foreign aid focused on human rights is projected to decline by up to US$1.9 billion annually by 2026, which will severely undermine human rights for millions worldwide. Those who will be hardest hit include the most vulnerable groups: women and girls, LGBTQI+ people, persons with disability and those living with HIV and Aids.
This is just one of the impacts of aid cuts, which are placing immense strain on civil society organisations and nonprofits working at the frontlines to secure fundamental human rights – including access to food, education, healthcare and safety.
These organisations, often operating with limited resources, are being forced to scale back programmes, reduce staff, or close entirely, just as demand for their services is rising. As traditional funding streams contract, the burden of sustaining essential services is increasingly falling on under-resourced local actors, threatening hard-won development gains and deepening the vulnerability of already marginalised communities.
How nonprofits have been affected
ICVA – an international nongovernmental organisation (NGO) network – conducted a global survey among NGOs and NGO networks from 27 January to 7 February 2025 to understand the impact of the US foreign aid suspension. The Impacts of the US Funding Suspension indicated some concerning trends.
Of the 246 NGOs responding, 68% were recipients of USAID funding and 67% of NGOs reported that funding cuts had negative impacts on their services, ranging from downsizing to total shutdowns. Alarmingly, 39% of NGOs reported losses of US$1 million or more.
The impact was widespread – feeding centres closed, access to life-saving treatments for cholera, malaria and HIV were disrupted and many gender-based violence and child protection programmes were suspended, increasing the risk of child labour, early marriage, school dropout, domestic abuse and femicide. Worryingly, there was widespread frustration, distrust and insecurity in communities, with many believing NGOs had misappropriated funds when disbursements were halted.
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The report indicated that 56% of NGOs reported looking for alternative funding, but many believed the chances of finding such financing would be limited.
In South Africa, nonprofit organisations were also affected. EPIC-Africa and @AfricanNGOs conducted a pan-African survey from 17 March to 10 April 2025 to gauge the impact of US Government (USG) funding cuts. Information from 364 respondents from 40 African countries was analysed, of which 243 civil society organisations (CSOs) received USG funding directly or via intermediaries.
The July 2025 report, From Fragility to Fortitude: Building Resilient African CSOs in the Wake of the US Government Funding Collapse, revealed that almost half of USG-funded African CSOs reported budget cuts of 50% or more and more than 60% had to suspend or scale back their core programmes.
In addition, an alarming 64% of CSOs said their communities experienced severe impact, with CSOs working in health, HIV/Aids and education most severely impacted. CSOs considered diversifying funding streams, strengthening local philanthropy and community giving, investing in digital tools and visibility and advocating for more equitable funding partnerships as possible solutions.
Trialogue research
Trialogue’s primary research indicates that only 15% of the 110 nonprofits surveyed between May and July 2025 were affected by the USAID and PEPFAR funding freeze. However, of those affected, more than half (56%) reported losing income and 38% had to stop some of their programmes.
Right to Care navigates the funding crisis
Right to Care is a nonprofit organisation that has been supporting and delivering prevention, care and treatment services for HIV and associated diseases for more than 20 years. It is one of the largest public health nonprofits in southern Africa, operating in South Africa, Eswatini, Mozambique, Lesotho, Zambia and Malawi.
The organisation’s programmes have traditionally been funded by the US President’s Emergency Plan for AIDS Relief (PEPFAR) and the Centers for Disease Control and Prevention (CDC).
“Even before US aid was withdrawn, we had been talking about diversifying our income stream through public-private partnerships,” says Valentina Trivella, programme manager and medical adviser at Right to Care. “The stop order was a massive shock – about 600 of our staff were affected as we had to retrench or not renew contracts. Our head office has lost almost 60% of staff.”
The organisation’s five major programmes were shut down, despite its 19 years of clean audits and excellent track record in public health. However, funding for its voluntary medical male circumcision (VMMC) programme was partially, temporarily restored in October 2025, albeit at 50% of its previous level.
Trivella says Right to Care has had to pivot to focus on “internal and local funding, including pooled funding” – but one of the challenges, she explains, is that the structure of international aid, such as USAID funding, typically allows for a higher allocation towards indirect cost recovery to sustain organisational operations. By contrast, partnerships with private companies are often negotiated more tightly, with far stricter parameters around cost recovery. “This has required us to rethink and restructure funding proposals to ensure operational activities remain adequately supported,” she notes.
Another challenge in working with private companies is that the Department of Health (DoH) must approve any interventions made, which can be time-consuming and complex. However, Right to Care believes it is a good ‘bridge’ between the public and private sectors in this regard, as it has a longstanding relationship with the DoH and is aware of the interventions required and their alignment.
Exploring outcomes-based funding
Right to Care’s partnership with Anglo American – a public-private collaboration aimed at improving healthcare access and outcomes in South Africa – offers a promising way forward.
The Mma wa Nnete project – the name translates to ‘Real mothers’ – is a strategic partnership between Right to Care, The Healthy Brains Global Initiative (HBGI) and Anglo American. It addresses significant mental health challenges among mothers in Limpopo, the province with the second-highest teenage pregnancy rate in South Africa and where 31% of pregnant women experience antenatal depression. The programme focuses on improving maternal mental wellbeing, reducing infant and child mortality and morbidity, and increasing the uptake of immunisations.
In a webinar hosted by the African Venture Philanthropy Alliance in June 2025, Right to Care shared its role as implementer. During the pilot, more than 1 500 mothers in eight communities across two districts in Limpopo were enrolled over 12 months.
Although Anglo American fully funded the pilot, funds were deployed through an outcomes-based finance model, explained Imke Engelbrecht, team lead of public-private partnerships at Right to Care. A portion of the funding was released upfront to cover costs, while the balance was tied to independently validated results. This allowed Right to Care to test an innovative maternal mental wellbeing model in a safe yet performance-driven environment, helping to create a proof of concept for blended finance in maternal mental health. The resulting evidence enabled engagement with funders and the government to scale the project.
Outcomes-based funding benefits all stakeholders, Engelbrecht says, and reduces reliance on a single donor or funding stream, which helps to make nonprofits more sustainable. It also encourages blended finance structures where public, private and philanthropic funds can be used to share risk and scale high-impact programmes. This can lead to better outcomes for communities.
Taking Care of Business (TCB): Building internal stability through enterprise and innovation
Origins of TCB
Founded in 2010 by Tracey Chambers and Tracey Gilmore, TCB, formerly known as The Clothing Bank, is a South African nonprofit that uses a social enterprise model to support unemployed individuals – primarily women – by helping them become self-employed traders. With approximately 75% of its operations self-funded, TCB offers a compelling alternative to traditional donor-dependent models, blending entrepreneurial training, income generation and social impact.
Surplus to sustainability
TCB operates on a social enterprise model, blending entrepreneurial training, income generation and social impact. Its approach integrates:
- Circular economy principles – it repurposes surplus stock and appliances, creating work for unemployed individuals.
- Skills development – it trains participants to run their own small businesses.
- Revenue generation – repurposed goods and services are sold to sustain operations.
Diversified programmes meet market gaps
TCB currently runs six programmes:
- ‘Resell’ equips unemployed mothers to become successful fashion traders using surplus clothing from the fashion supply chain.
- ‘Repair’ equips unemployed individuals, including men, to run appliance repair and trading businesses, reducing e-waste.
- ‘Remake’ uses fabric offcuts for small-scale production, allowing women with basic sewing skills to create marketable products and run their own small businesses.
- ‘Redistribute’ donates merchandise and clothing to nonprofits that support vulnerable communities, including disaster relief.
- ‘Reskill’ provides training and coaching to other organisations, helping their participants or staff move out of survival mode and into self-actualisation. For example, TCB has partnered with Food Lovers Market to roll out a financial literacy programme for staff.
- ‘Grow ECD’ supports preschools to operate as sustainable businesses that deliver quality education in low-income communities. Grow ECD supports 260 ECD centres through its comprehensive Small Business Programme, which includes a classroom kit, training, mentorship, curriculum and management app. The kit, valued at R27 000, is paid off over time, enabling operators to run their centres effectively. Though part of TCB, Grow operates as a separate legal entity and does not generate significant revenue, making it more reliant on external funding.
Strategic partnerships and blended finance
TCB’s funding model combines earned income with strategic partnerships that strengthen both financial resilience and social impact.
- Retail partnerships. Retailers such as Woolworths, TFG, Mr Price, Pick n Pay Clothing, Truworths, Clicks and Shoprite have been key partners, providing surplus goods and collaborating on sustainability initiatives. This includes repurposing TFG’s advertising banners to make sleeping bags, which have been donated to shelters. Woolworths’ Denim Drop-off campaign, a pilot take-back initiative for used denim, led to the creation of new items, including handbags, toys and cushions, for resale. TFG’s head of sustainability, Helen Twemlow, sits on TCB’s board. “This helps us sharpen our key performance indicators and maintain mission focus,” says Gilmore.
- Government and institutional support. TCB had early support from the Jobs Fund and the Department of Trade, Industry and Competition (DTIC). At the same time, long-term relationships with funders like the Allan Gray Foundation have provided stability.
- Circular economy networks: TCB has engaged with GreenCape, Wesgro, the Department of Forestry, Fisheries and the Environment (DFFE) and others to innovate around waste reduction.
Measuring impact
TCB measures success across five pillars: people, performance, process, programme and partnerships. TCB utilises the Greenlight Movement tool, which is adapted from the Poverty Stoplight model introduced to Chambers during a visit to South America. Developed locally in collaboration with Laura Berg, the tool tracks participants’ progress at 12 and 24 months, utilising a strengths-based approach. It highlights areas of improvement while acknowledging persistent challenges, such as personal security. TCB prioritises staff support as much as beneficiary impact, providing courses in parenting and nutrition, for example, and emphasising the importance of continuous learning.
Strategies for resilience
One of TCB’s most significant challenges came when a long-term stock donor abruptly stopped contributing, ending a 10-year relationship. The team responded by expanding its network and securing new partnerships, including PEP, which came on board immediately. This experience reinforced the importance of diverse strengths within the team and the need for strategic agility.
TCB’s future strategy prioritises stability rather than aggressive growth. While reserves allow for one year of self-funding, challenges such as space constraints and economic stagnation persist. Innovation remains central to TCB’s mission, proving that commercial activity and social impact can coexist and thrive within a nonprofit framework.
Amandla’s innovative funding model: Scaling Safe-Hub beyond grants
Amandla is a nonprofit organisation with a social enterprise focus. It uses a blended finance model to achieve its aims.
The origins of Safe-Hub
Founded by German national Florian Zech after he spent a transformative year living in Khayelitsha in 2007, Safe-Hub began as a grassroots initiative that used football as a low-barrier entry point to engage young people, keeping them away from substance abuse and peer pressure from gangs. Over time, Safe-Hub has evolved into a platform that offers life skills, mentorship and career readiness in a safe and supportive environment.
From a programme to a platform
Safe-Hub is now a comprehensive platform for youth development, integrating services across early childhood development, health, education and local economic development. At the heart of each Safe-Hub is a strong local community of practice – a network of partners from government, civil society and the private sector working together in one shared space. This collective approach enables systemic impact for young people and ensures that Safe-Hubs are deeply rooted in and shaped by the communities they serve. With support from the Development Bank of Southern Africa (DBSA) and National Treasury, the model has expanded to 16 sites across South Africa.
Blended finance: A sustainable approach
To reduce its reliance on donor funding, Amandla developed a blended financial model:
- Township-based call centres: In partnership with DBSA and Merchants, Amandla launched South Africa’s first township call centres in Alexandra and Jabulani. These centres have created more than 4 000 full-time jobs, serve clients such as Makro, DoorDash and Capital One and generate revenue that flows back into the Safe-Hub ecosystem.
- Cross-subsidisation: Revenue from commercial operations (such as the call centres) helps fund nonprofit activities, creating a circular economy that benefits local communities.
- Strategic partnerships: Collaborations with companies, foundations and government strengthen both financial and social impact. The infrastructure is purpose-built to host multiple partners and services (education, health, employability), increasing community value while spreading operating costs. Currently, 537 organisations are under contract with Safe-Hub, using the spaces for co-working, programme delivery, or informal partnerships.
- Local economic integration: By identifying and incubating local small businesses, such as a start-up security firm that grew from three to more than 50 employees, Amandla helps to stimulate township economies and build long-term sustainability.
DBSA’s funding is structured as a loan repaid in social impact and impact is measured across 20–30 indicators that include employment, education and community empowerment. Results are audited by the Auditor General, ensuring transparency and accountability.
Site-based annual reports detail programme delivery and impact, tailored for the DBSA and other stakeholders. These reports reinforce Amandla’s commitment to transparency and evidence-based scaling.
Beyond aid: Building a resilient future for nonprofits
Relying on grants and foreign donors isn’t a sustainable model for most nonprofits. As global priorities shift, organisations that depended on predictable streams of foreign assistance face growing uncertainty.
Nonprofits need to move from a survival mindset – focusing on securing the next grant – to actively investing in adaptability, innovation and long-term sustainability. This will result from a more balanced approach to resourcing, which involves blending traditional donor support with creative income generation, strengthening local partnerships and operational models designed to withstand shocks.
The highlighted case studies, together with the lessons drawn from them, illustrate how nonprofits can think differently about their operating and financial models, with a view towards becoming more resourceful and independent in future.
Lessons for nonprofits
The funding crisis has underscored the fact that nonprofits cannot afford to rely on a single donor or traditional aid stream. To thrive financially, organisations should consider the following three actionable principles:
| 1. Diversify revenue streams beyond grants. Nonprofits should explore social enterprise and blended finance models that combine grants with earned income, membership programmes, or fee-for-service offerings, as Amandla has done. Crowdfunding and peer-to-peer campaigns can also help expand donor bases and generate recurring income streams. |
| 2. Invest in reserves and financial planning. A robust reserve fund can serve as a buffer during a crisis and TCB has been fortunate enough to establish one. Bridgespan recommends scenario planning and cost analysis, which can help your organisation to anticipate risks and adapt quickly. |
| 3. Strengthen local philanthropy and community giving. African CSOs surveyed by EPIC-Africa identified local philanthropy as a critical lifeline. Building trust with communities, cultivating individual donors and creating subscription-based giving programmes can provide steady, unrestricted income. These efforts also deepen accountability and local ownership of impact, according to IMP Advancement. |
The era of predictable foreign aid is over. Nonprofits that thrive will be those that think like social enterprises, act like strategic partners and plan like resilient businesses. By embracing these lessons, nonprofits can transform vulnerability into strength and ensure that their missions endure, even in the most uncertain times.
