Several proposed legislative requirements for non-profit organisations in South Africa have given civil society pause for thought. Two bills in particular – the NPO Amendment Bill and the General Intelligence Laws Amendment Bill – appear intended to throttle civil society. However, as Nicole Copley, specialist lawyer at ngoLAW explains, the sector need not panic just yet.
The NPO Amendment Bill was released in 2021 and civil society groups asked for its withdrawal and further consultation. What were the key issues with the bill, why was it withdrawn, and will there be an additional Amendment Bill in future?
The 2021 NPO Amendment Bill was clumsily drafted and contained many errors, but the chief objection to the Bill was that it had been produced without the necessary coherent and negotiated policy ahead of its amendment. The process of drafting that policy framework has now begun and, as a representative of the NPO Working Group, I am part of a group that is currently formulating its proposed outline alongside the Department of Social Development.
What is the background to the proposed General Intelligence Laws Amendment Bill (GILAB) which was approved by Cabinet in May 2023, and how are NPOs likely to be affected by the bill if it is passed?
The central concern to civil society is the provision in the proposed GILAB that establishing or ‘operating’ ‘Non-Governmental Organisations and Religious Institutions’ in South Africa would require mandatory security “vetting” by the State Intelligence Services. The proposed security vetting is much more invasive than the registration and reporting requirements introduced in the 2022 General Laws Amendment Act.
The blanket requirement for all non-profits in South Africa does not focus on a relevant intelligence or security risk and reads as though the intention is to empower the state to hinder, delay or possibly stop non-profits from setting up or operating.
The provision is utterly inappropriate and flows, I think, from three possible sources/motivations: a complete lack of understanding of the size, complexity and layered nature of the non-profit sector; clumsy drafting and a failure to differentiate non-profits that do business with the state (in which case vetting could be reasonable) from independent organisations; and/or an intention to create an uproar about this part of the GILAB so that we ignore the larger problems with the proposed Bill, namely that it fails to carry through on any of the independent oversight of security services required in an open and free democracy.
What has civil society’s response to GILAB been, and is the Bill likely to be challenged in the Constitutional Court?
Civil society is rallying against the ill-conceived, poorly executed, and dangerous provisions. Intelwatch and Campaign for Free Expression are driving the campaign for awareness and opposition to the Bill, and their call from endorsement of a joint statement by civil society can be found at https://intelwatch.org.za/2023/09/06/endorse-gilab-statement/.
If GILAB is passed into law in its current form, I have no doubt that constitutional challenges will follow.
New reporting and disclosure requirements for NPOs have also been introduced. What are these requirements, and how will they affect NPOs?
The requirements coming out of the 2022 General Laws Amendment Act (GLAA) have two main practical impacts on the NPO sector. Firstly, South African based organisations which operate or provide funding cross-border must now, if they are not already registered, register as NPOs. Organisations that fall into the compulsory registration category now have to include more detail in their annual NPO reports than others whose registration is voluntary.
Secondly, disclosure of the identity and details of ‘beneficial owners’ of organisations. As non-profits have no owners, this refers to those who have ultimate control or voting power over an organisation (boards, directors, governing bodies, or trustees; members of voluntary associations or with-member NPCs; any founders or stakeholders of organisations which retain rights of control over board appointments, or other decision-making powers of the organisation).
It is important to note that the names and details sought are the people ‘at the very bottom’ of these powers. Where an entity or company holds these powers, the requirements refer to the ultimate shareholders and/or board members of the entity. The information on the “beneficial owners” includes the full names, date of birth, nationality, identity and passport numbers, residential and other addresses, and means of contact (and any changes in them). The level of public disclosure of the details lodged is also variable.
For organisations with 18A status from SARS, and who issue 18A receipts, SARS is rolling out a requirement to report on donations for which 18A receipts have been issued. These are called ‘Third Party Returns’ and are additional tax reports filed by affected organisations twice a year in a specific format. The aim is to close the loop on 18A fraudsters, and ultimately for the 18A donation field to be prepopulated in individual and corporate tax returns.
What are your recommendations to non-profits, and to the companies that support them, regarding responding to these regulations?
Non-profits are advised not to panic at the thought of any new regulations, but to regularly review and assess the types and levels of compliance required by law, their stakeholders, and donors. Boards should assess whether there are any non-compulsory registrations in place where the upkeep is not worth the benefit, or whether their legal structures or founding documents could be adapted to simplify reporting and compliance.
Donor organisations should routinely take a close look at their funding requirements – are they appropriate for the size of organisation, type of work and amount of funding granted?
Nicole Copley
Specialist lawyer at ngoLAW
Nicole@ngolawsa.co.za
https://ngolawsa.co.za/about-us/
Source: The original version of this article was published in the Trialogue Business in Society Handbook 2023 (26th edition).
