Non Profit Partnership

Introduction

After the onset of democracy in South Africa, NGOs faced tremendous challenges and difficulties. These difficulties are evidenced by their crisis in terms of their relationship to the state and funding crisis as many donors were withdrawing their funds from South Africa, seeking more destitute countries to work in.

The relationship between NGOS and government therefore underwent a serious change. NGOs were seen as having the ability to mobilize communities, introduce skills and enhance social commitment. Government on the other hand has resources, skills, finance and capacity.

After the democratic elections in 1994, government realised that fragmentation of the NPO sector did not produce synergistic factors required to pull South Africans out of poverty. To this end a number of policy changes as well as new focus programmes were designed to marshal development aid and programmes throughout the country. This led to the formation of statutory organisations such as TNDT (the predecessor of NDA).

During the nascent years of our democracy, a number of Ministries embarked on missions to consolidate their mandate and programmes. Specific statutory organisations were formed while in other cases investment companies were created. These organisations were officially allowed to receive donor funds and distribute them directly to beneficiary service providers as well as communities. In theory this process allowed efficiencies and economies of scale. Practically, the organizations that were mandated to distribute these funds have the same weaknesses as many provincial governments. Lack of capacity, inadequate funding, political machinations and an obsession with investments rather than servicing the needy, and a focus on the survival of the organisation has been the order of the day.

Special Funds:

An analysis of special funds received by 12 developmental parastatals and investment companies shows similar patterns of expenditure. Recent press reports have highlighted management problems at NDA and Umsobomvu Trust Fund. A year after their creation, these organisations had not yet disbursed funds. A criticism levelled against these organisations by many in our sector is that they are slow in disbursing funds, and spend to much on administration.

The Lotteries Fund:

The National Lottery Distribution Fund is tasked with the distribution of funds to charitable organizations. A surplus in excess of R10 million in the 2001/2002 financial period was realised. Distribution of funds only started a year after the formation of the National Lottery. A study by the Centre for Civil society, commissioned by the Non-Profit Partnership, showed that the processing of applications has been shrouded in secrecy and lengthy delays in processing have not been uncommon. In addition other problems experienced by NGOs has been the failure on the part of the board to furnish reasons for rejection of applications, failure to allocate funds to the RDP and miscellaneous categories and the provision of funding to organisations for a period of one year only.

The National Development Agency:

The RDP identified the need for a framework guiding the relationship between government and NGOs in order to involve NGOs in development initiatives. It decided to establish an agency to respond to the immediate needs of NGOs involved in development and to look at setting up a longer term institution to co-ordinate the funding of NGOs and promote sustainable partnership between government and these organisations. Hence, the establishment of the National Development Agency.

The National Development Agency Act of 1998 states that its primary object is to contribute towards the eradication of poverty and its causes by granting funds to civil society organisations for the purposes of carrying out projects or programmes and strengthening the institutional capacity of other civil society organisations. However as was the case with the Lotteries Board, some problems arose which are currently being addressed by NPP, amongst these the following has been identified:

The main problem identified by research conducted by the Centre for Civil society on behalf of the Non-Profit Partnership, is the fact that the NDA was given a huge task and insufficient funds to execute its mandate effectively. Other problems include the composition of the board, the fact that civil society should be more involved in decision making of the board and the failure to make provision for appeals against funding and other decisions.

The National Skills Fund:

The National Skills fund under the Department of Labour received more than R46 million and yet only one and a half million was expended in the 2000/2001 financial year.

Ntsika Fund:

Ntsika Fund, a creation of the Department of Trade and Industry, received more than R27 million from donors in 2000/2001. In spite of additional resources from its investment portfolios, only a third of funds were disbursed to projects. Most of its targets have been revised downwards but again the trend of less disbursements is evident. Compared to the previous year, the approval and commitment rate of funds in 2000/2001 for Ntsika has actually gone down by more than 50%.

Khula:

Khula, another seemingly successful entity, has an array of investment arms. The group received more than R65 million in donor funds in 2002 but only R13 million in credit guarantees was paid out.

The Local Economic Development Fund:

The Local Economic Development Fund, a creation by the Department of Local Government received an injection of R42 million in 1999. Although R39 million was allocated to projects nationally with impressive job generation projectiles, it is not clear whether these projects have taken off the ground or not. Coupled with lack of capacity in municipalities, questions about effectiveness of these programmes hang in the air.

The Development Bank of Southern Africa:

Another catalyst in the provision of infrastructure is the Development Bank of Southern Africa. The company had a surplus in excess of R592 million but loan disbursements amounted to R433 million and grants a mere R9.7 million. All the above indicate less spending by agencies.

Social Development and Treasury:

The Department of Social Development which is tasked to eradicate poverty in South Africa, received a vote of R1 952 502 000 in the 2003/2004 national budget. This is less than the total budget for the 2001/2002 financial period. However it is noted that there were special once-off allocations in the 2001/2002 period. An important programme of policy and planning in the department continue to receive marginal attention. The good news though is that the projected budget for the 2004/2003 financial year will be more than double the current one. However the catch lies in the number of beneficiaries of the grant systems and administration. Donor support to the department of social service has actually been grounded.

Treasury, which is the repository of governmental funds has reported less financial commitments by Provinces. In the nine months of 2002, Provinces spend R104.5 billion (71.1%) of total budget. The social development component spent R23.8 billion in 2001/2002 which was slightly more than the previous year. The social services expenditure which include health, social development and education spent R86.5 billion against a budget of R117.6 billion.

Clearly there is insufficient capacity in Provinces and statutory organisations in distributing funds. Although most administrative systems have been streamlined, there seems to be no pro-active approach when dealing with communities and clients. A purely market approach has been taken, a position which defeats the earlier objectives of these organisations. Most of these organisations have taken the same position as that of commercial banks.

Recommendations:

It is suggested that the proliferation of specialist statutory organisations be harmonised so that they talk to each other, complement one another rather than compete with each other.

A unified national tracking system with an accessible database should be established to oversee and report on activities of these organisations.

3. Although long term viability issues need to be considered, policy changes should be reviewed so that there is no focus on corporatization and investment of funds in equity markets etc.

4. Set targets should be realistic and measurable.

5. More funds should be made available to cushion communities that are increasingly being affected by massive price increases.

6. Channelling special funds to these organisations by donors and government should not be seen as an investment to yield profits. These funds should be treated the way they are: relief funds.

At the end of each financial year, funding organisations should be required to account in a public forum

Civil society representation in the distribution and allocation of funds e.g. NDA

Reasons for declining – assists with identifying weakness in organisations and will enable capacity building where organisations are allowed to rectify weaknesses.

Support for capacity building – there should be more explicit support for capacity building in the sector

Information on donor funding should, especially through Treasury should be made more accessible to civil society organisations.