Non-profit organisations (NPOs) are a critical partner in the corporate social investment (CSI) landscape, playing the role of implementer, so that corporates can deliver on their CSI objectives. The majority of companies surveyed in 2022 (94%) channel funding to NPOs, which received 58% of companies’ CSI spend, on average. In this article, Trialogue draws on data collected through our online survey of 115 NPOs between May and August 2022 to present an overview of NPO income, as well as the impact of Covid-19 on funding and corporate support. Encouragingly, nearly two-thirds of the surveyed organisations reported an increase in income, with more organisations having reserves for three months or more.
Number and type of non-profits
According to the Department of Social Development (DSD), there were 266 531 registered NPOs in South Africa at the end of September 2022, up from 248 902 in September 2021 and 228 822 in May 2020. Further, the DSD was still processing 5 273 new applications and had deregistered 466 organisations at the end of September 2022.
In Trialogue’s 2022 sample, the most common forms of registration were as an NPO registered with the DSD (69%) and as a public benefit organisation (PBO) with Section 18A status with the South African Revenue Service (SARS) (60%).
NPO annual income and changes in income
• The NPO sample was relatively evenly distributed in terms of organisation income, although weighted towards medium organisations with an annual income between R2 million and
R20 million (51%). About one-fifth of the sample (19%) had annual incomes of more than R20 million.
• Almost a third of the NPOs (30%) had an annual income of less than R2 million in 2022, lower than the proportion of NPOs in the same category in 2021 (58%). However, year-on-year variations in NPO income are most likely due to different samples – of the 115 NPOs that participated in the 2022 research, only 20% (or 23 organisations) also participated in the 2021 research.
• In a positive trend, for the past three years over half of NPOs have reported increased year-on-year income. In 2022, almost two-thirds of NPOs (64%) reported that their income had increased from the previous year, up from 56%
• A further positive sign is that 70% of the NPOs surveyed in 2022 predict that their organisation’s income is likely to increase in the next two years.
- Less than a third of NPOs (30%) did not have any cash reserves, down from 53% in 2021.
- Half of NPOs had reserves of up to a year, up from 38% in 2021. More than a third of NPOs (38%) had reserves of more than six months in 2022 (up from 21% in 2021), with 14% of NPOs having reserves of one year or more (compared to 8% in 2021).
Sources of income
- The majority of NPOs in the sample (76%) continue to receive income from South African companies with corporate funds accounting for an average of 27% of NPO income in 2022. More than half of the NPOs surveyed reported an increase in corporate funding (53%)
- NPOs had funding relationships with a median of ten South African companies, with responses ranging from one to 374 companies (higher than 2021 at 250 companies).
- Almost two thirds of NPOs that receive corporate funding (63%) claimed it was for two or more years. Close to a third each said it was for more than three years (32%) or for one year or less (31%).
- Two-thirds of NPOs (66%) received income from South African trusts/foundations (significantly up from 38% in 2021), contributing an average of 20%. of NPO income. Over half of the NPO respondents reported an increase in funding from trusts/foundations in South Africa (55%). NPOs reported receiving support from between one and 110 South African trusts/foundations, with a median of three.
- This was followed by support from South African individuals, which 60% of NPOs received, and which provided 12% of NPO income on average. Roughly a third each said that income from this source had increased, decreased, and stayed the same. The number of funding relationships with South African private individuals ranged from two to 4 217 with a median of 30,
- Fewer NPOs (19%) received funding from foreign private donors than in 2021 (43%), with the average contribution to NPO income decreasing to 7% from 12% in 2021. The number of foreign private donors ranged between two to 100, with a median of five. Surprisingly, 60% of the NPOs who received income from foreign private donors reported an increase in funding from the same source. This could be attributed to different samples.
- Nearly half of the NPOs (45%) generated at least some of their own income, which accounted for 12% of income on average in 2021, similar to last year.
- A third of the NPOs (32%) received investment income in 2022, up from 28% in 2021, though the average contribution of investment revenue to NPO income remained unchanged at 1%.
- None of the NPOs sampled had debt in 2022.
- In line with previous years, the vast majority of NPOs (88%) received non- cash donations in 2022 (products, services and/or volunteering time).
- A total of 42 NPOs that received non- cash donations quantified the donations as a percentage of income, amounting to 22% of income on average, up from 20% in 2021. The median non-cash proportion of income was 2%, with responses ranging from 0.5% to 100% of income (higher for organisations with an annual income of less than R500 000).
- In rand value, 48 NPOs received an average of R1 248 640 in non-cash donations. The rand value of non-cash donations ranged from R1 000 to R42 million, with a median of R135 000.
Impact of Covid-19 on NPO income
- Less than half of NPOs (41%) experienced a reduction in income due to Covid-19 in 2022, compared to 53% in 2021. One-quarter (25%) claimed that income was reduced by more than 20% and 16% reported that it was reduced by less than 20%. None of the sampled NPOs had their income ceased/put
- A third of the NPOs (32%) reported an increase in income due to Covid-19, and 22% of the respondents did not experience any impact on their income in 2022 (up from 12% in 2021).
Impact of Covid-19 on corporate support
- A change in the magnitude of funding received was the most common pandemic-related impact experienced by the NPOs surveyed in 2022 (39% included it as an impact in this question, although over 70% said that the pandemic had led to increased or decreased income in the question above).
- Greater collaboration (27%), increased consultation between funders and recipients (26%) and increased financial support (25%) were all experienced by at least a quarter of the NPOs sampled.
- The most common impacts are expected to persist in the longer term by a sizeable number of the NPOs: greater collaboration (43%), more consultation between funders and recipients (38%), change in the magnitude of funding (36%) and increased non-financial support (31%).
- Fifteen percent of the NPOs experienced no changes in giving practice with 4% expecting no change in giving practice in the longer term.
Most NPOs (60%) had at least one part-time internal staff member to manage fundraising, up from 43% in 2021. Just over one-third of NPOs (35%) had no staff to manage the function, down from 53% in 2021. And only 5% used external resources to manage fundraising.
Half of the NPOs (50%) had a budget for fundraising in 2022. Of those NPOs that provided detailed budget information (35 organisations), more than half (54%) allocated less than 5% of their overall budget to fundraising, and about a third (34%) allocated between 6% and 10%. Fewer NPOs (9%) allocated more than 10% of their budget to fundraising, down from 19% in 2021. The median allocation to fundraising was 5% of organisation budget.
- Sending solicited proposals (92% of NPOs) and unsolicited proposals (61% of NPOs) remained two of the most popular methods of fundraising and contributed the highest share of NPO income, accounting for 48% and 12%, respectively.
- With pandemic restrictions over, the proportion of NPOs using fundraising events doubled from 34% in 2021 to 67% in 2022. The average contribution of these events to NPO income was relatively unchanged at 4%.
- Digital fundraising campaigns were the fourth most-used fundraising method (49% of NPOs), with an average contribution to income of 6%.
- More NPOs sourced income through major gift solicitation in 2022 (38%), with its average contribution to NPO income increasing from 4% in 2021 to 7% in 2022.
- Fewer NPOs used face-to-face canvassing and peer-to-peer fundraising in 2022, accounting for a combined contribution of 8% of NPO income, down from 11% in 2021.
Treasury backs down on compulsory universal NPO registration
A General Laws Amendment Bill was published in September 2022 to prevent severe economic consequences arising from the threat of ‘greylisting’ in South Africa. This refers to a risk-based approach to reduce the opportunities for South African companies to be used to hide the proceeds of money laundering and terrorist financing.
The non-profit sector, which depends heavily on foreign donor funds, would be devastated by the greylisting, which would block and/or slow the flow of funding to South Africa. Sweeping provisions in the Bill are not useful, appropriate or achievable, so the NPO sector felt the Bill could not be passed in the form proposed. With only nine days allowed for comment, the sector galvanised to build awareness and understanding of the Bill’s potential impact.
The Bill, which proposed to amend five Acts, among them the Nonprofit Organisations Act, would make NPO registration compulsory, including for foreign non-profits ‘operating’ in South Africa.
Treasury and the other government actors involved in drafting and driving the Bill gave feedback on these submissions on 18 October 2022 and have backed down on the mandatory universal NPO registration requirement, identifying instead a class of ‘at risk’ non-profits, which must register. Those who are identified as ‘at risk’ are those raising funds locally, but donating or spending them cross-border. Work is ongoing on the definition of this class of non-profits, and on where the registration of these will ‘sit’.
There is widespread concern that the NPO Directorate within the DSD does not have the systems, security, skills, credibility, data-granularity of records or staff to allow it to house this register in a way that would be accepted by the Financial Action Task Force (FATF) as effective in dealing with the perceived risk.
Nicole Copley is the founder of ngoLAW. For further information on the Bill, visit https://ngolawsa.co.za/news-views/