In a country where social impact organisations make a substantial contribution to advancing the wellbeing of communities – protecting their rights, filling service delivery gaps, defending democracy, and protecting the environment – pressure on local organisations to survive grim economic outlooks and political uncertainty could not be more challenging. Building on insights from a recent Resource Alliance study on the southern Africa funding environment, Sarah Scarth, the Resource Alliance’s Africa representative and executive consultant with Downes Murray International, explores why and how some organisations are thriving, while others are barely surviving.
The aim of the Resource Alliance’s Southern Africa Scoping Project Report (March 2016) was to hear from a range of voices in the social impact sector, so as to gain a comprehensive understanding of the funding environment, the challenges and barriers faced by organisations that operate within it, and what they most need and want in order to be more successful. The following key findings emerged:
- The funding landscape is changing throughout the region and the majority of organisations are finding it harder and more challenging to find sustainable sources of income.
- The majority of organisations are dependent on grant funding from a few donors and, largely as a result of lack of know-how, have not developed a diversified resource mobilisation strategy. This is seen as a major barrier to achieving financial sustainability.
- While the importance of strong leadership directly impacts an organisation’s success, investment in the development of leaders is very low; largely as a result of a lack of resources and poor recognition of its importance. The study encountered organisations that are finding innovative ways to mobilise resources, mainly by harnessing their fundraising capacity and knowledge. Strong organisations were characterised as those which have invested in fundraising and resource mobilisation (i.e. diverse approaches to funding), strong leadership and good financial management.
The study encountered organisations that are finding innovative ways to mobilise resources, mainly by harnessing their fundraising capacity and knowledge. Strong organisations were characterised as those which have invested in fundraising and resource mobilisation (i.e. diverse approaches to funding), strong leadership and good financial management.
Responding to shifts in international funding priorities
Funding from international donors is perceived to be declining for various reasons. Firstly, South Africa is now seen as a middle-income country (i.e. not deemed to be as ‘needy’) and there is a view that having been funded for many years, the country should now be more self-sufficient. In reality, however, the systemic problems we face are so much deeper.
Brexit, the Trump administration, the migration crisis in Europe, and the impact of the global recession are some significant shifts in the global political and socioeconomic environment which are negatively impacting local organisations, particularly those involved in HIV/Aids programming. In an article titled Donald Trump’s impact on South African Civil Society could be Far-reaching, philanthropy specialist Shelagh Gastrow writes: “As global political shifts change at an increasingly rapid pace, it can only be expected that foreign aid priorities will also change and current partners will be left high and dry.”
She adds that while there has been a shift away from funding HIV/Aids programmes, organisations working on the environment and global warming issues are seeing increased support, although this has not necessarily translated in South Africa. Education, she says, remains a popular choice for foreign donors that support a wide range of initiatives within this sector, from early childhood development, to higher education.
Adapting without compromising
“Most social justice groups in South Africa are funded by US-based private philanthropic foundations. The values to which these foundations aspire are currently under attack within the US and foundation boards are starting to review their grantmaking, asking themselves where their priorities should lie in current circumstances. For many, this means refocusing within the US and cutting funding for initiatives in other countries,” says Gastrow. She advises that, in these turbulent times with shifting foreign aid priorities, ”financially it is not healthy to be tied and dependent on international aid agencies for a long period of time”.
So, are the international funding taps really running dry or are there still pools of funding available out there? Eelco Keij, a US foundation fundraising expert and director of fundraising at Radboud University in the Netherlands, says that the new reality is ‘adapt or die’. “Sadly, I’ve seen several non-profit organisations go under because they’ve been unable to adapt quickly enough to funding constraints and more stringent conditions from funders,” he says. Despite many US foundations having recovered from the 2008 financial crisis, multimillion-dollar grants are no longer distributed as readily and there are far more requirements to meet.
“Funders are more demanding, there are fewer guarantees, and they primarily want to work with those organisations who will help them deliver on their priorities. Fundraising from foundations is entirely about what the donor wants to achieve and when fundraisers operate from this perspective, they will be more successful,” says Keij. The good news is that, despite this new landscape, he believes the US is still a strong market for organisations which are more focused, strategic and astute in searching out and connecting with foundations which are a good match. Finding and building connections with prospective donors, however, requires extensive research, commitment and hard work.
Monitoring, evaluation and learning specialist, Jerushah Rangasami of Impact Consulting, agrees that accepting institutional and large foundation funding essentially ‘contracts’ you to deliver on the funder’s strategy. “The relationship works best when the organisation’s and funder’s strategies are aligned and you are both working towards the same outcome.” However, Rangasami cautions of the disastrous risks involved if, in the pursuit of securing funding, an organisation positions itself to serve the needs of one funder, at the expense or compromise of its own core mission and purpose. What happens to the organisation if and when this funding comes to an end?
Through her work with organisations that receive multi-year funding from international and local funders, Rangasami has observed that many local NPOs are not familiar with how international grant funding practice works and therefore don’t know how to access it. “Understanding how grants from big institutional donors are made, and what influences grantmaking decisions, could open up funding opportunities for more local organisations that would tick the boxes for many international funders. However, because they don’t present themselves correctly or at all, they are never considered.”
Rangasami explains that there are always trends that influence how funding is made. For example, donors like The Global Fund will look at the impact of its programme on a global scale and this influences how they shift and reprioritise their funding for their next five-year funding cycle. They will consider where the need is greatest and what interventions are working best, and shift their funding accordingly. Developing a deeper understanding of various donor approaches to grantmaking can position local organisations to better respond to fundraising requirements.
Rangasami adds that many large donors do not fund local organisations directly, but rather through a separate funding management mechanism, such as FHI360 or NACOSA. Sophie Hobbs, NACOSA’s head of Business Development and Strategic Communications explains: “In the health sector, big institutional donors like Global Fund, Pepfar and USAID will work through a ‘country coordinating mechanism’ or similar structure, which has representatives from the government and the funder, along with civil society observers. The funding is awarded to the country and passed onto an organisation like NACOSA, which will then sub-grant to other organisations through a call for proposals. All these big funders work closely together so that there is no duplication of effort and all their funding is very specific and targeted.”
There are different funding mechanisms for each sector and it helps to connect and network with other organisations that are already receiving funding from prospective donors. But is it just the same organisations that tend to receive repeat funding? Not necessarily, says Rangasami. This ‘devolved’ funding approach can also be positive for less known or new and emerging organisations, as the motivation is to get funds to grassroots organisations working at a community level.
Building resilience
At an NPO Collaboration Dialogue held in Cape Town in September 2017, Lubna Bhayani, senior adviser, Funding and Influence for Eastern and Southern Africa at the International HIV/Aids Alliance, shared advice with local NPOs about how to build resilience and cope in a turbulent funding climate. She reiterated that understanding global trends and being comfortable with the big numbers which drive these trends is important for organisations that want to attract international funding. “If you don’t understand it yourself, find someone who does, so that you can analyse it and adjust accordingly,” says Bhayani.
She cautioned about the difficulties that come from organisations being required to respond to policy and funding shifts. For example, many organisations involved in HIV/Aids work have lost funding following the US Government’s Global Gag Rule or Mexico City Policy, which now excludes funding for overseas organisations that have anything to do with abortion. “It’s not just a case of deciding whether or not to comply with the US Government’s demands, but to the consequences from other funders if you do; like the Swedish Government that has made it clear that organisations which sign the gag order will not qualify for funding. When you are challenged at this level, you need to know where your moral boundaries are and what you are prepared and not prepared to accept,” she says. Bhayani also reinforced the importance of innovation, agility and flexibility. “How you present yourself is so important to attracting support, so you have to know yourself and your mission and vision really well.”
Taking a partnership approach is also recommended, says Lisa Thompson-Smeddle, who works throughout southern Africa, building capacity with NPOs through her Sustainable Development Network. She says that it is encouraging to see more organisations embracing a partnership model, which is attractive to funders and therefore builds resilience. “NPOs used to be so afraid of working with others, but this is starting to change and it’s great to see more organisations collaborating to tackle an issue,” she says.
Creating a diversified funding programme is essential for building a stronger organisation, since many donors, both local and international, will avoid working with organisations that are reliant on just one or two donors. “Developing other sources of income, either from social enterprise initiatives, individual giving or other income-generating initiatives is imperative to sustainability,” says Cathy Masters of CMDS. She emphasises that understanding the real costs of delivering a programme is often what separates those that survive from those that thrive.
“Too often we see organisations that under-cost, for fear of asking too much from a funder, or they are too easily pushed down when a funder pushes back, with some accepting anything in order to secure funding,” she says. The real cost, adds Masters, is not just the hard costs involved, but your time as well; it is important to build the organisation’s financial reserves and to aim to have at least three months running capital, but ideally more. “To build reserves, you need to develop sources of unrestricted income (i.e. from individual giving programmes), combined with good financial discipline, to ensure this money is never used for day-to-day expenses,” says Masters.
Evidence is key
With greater competition for limited funding, monitoring, evaluation and learning (MEL) becomes increasingly important for securing support based on your organisation’s impact. In its 2016 report on trends in the grantmaking sector, Next Generation says that the future focus will be on “making more impact with fewer resources” and that “evidence has become the most valuable currency”. When used strategically, says Rangasami, MEL can help non-profits to prove their worth (in terms of achievements and programme design) and to improve their programme so that positive social impact is maximised. In other words, MEL serves the functions of both accountability and learning.
Investing in a culture of reflection and learning can help organisations find new and innovative solutions to the challenges: an ethos that appeals to funders. “Funders, both here and abroad, are constantly looking at the evidence and, in response, they shift their funding priorities,” says Rangasami. “If you are watching your own monitoring and evaluation, you can be responsive and pioneering. Also, make it easy for funders by submitting your reports on time and tell them quickly what the outcomes are and therefore what their money is achieving. The organisations that do this are the ones that generally keep the funding gates open.
The importance of good leadership
Leadership is increasingly recognised as the key differentiator between those organisations that are able to ride out the storms and be stronger for it, and those that struggle along. The challenge is that investment in leadership development is way down the priority list for most NPOs. The good NPO leader is someone who can lead the board, staff, stakeholders and beneficiaries while actively developing a second tier of leadership, so that the task of leading does not always fall on his or her shoulders. According to Bhayani, the good NPO leader is “also someone who can hold the board accountable as they are the ones who need to provide strategic direction and be prepared to step in and step up during difficult times”.
It’s all about relationships
During these strained and tumultuous economic and political times, the one thing that we can all do to help our organisations survive and thrive is to focus on fostering strong relationships, built on transparency and honesty: with donors, so you know each other well; between organisational leadership and staff, to enable everyone to pull together and support one another when times are tough; and with stakeholders and beneficiaries, as they will support and advocate for you in good times and bad.
