In our view

Code of governance will help sustain civil society - 25 Apr 2012 BUSINESS REPORT (Star)

The financial collapse and cutbacks facing many leading civil society organisations have exposed an inherent weakness in South Africa’s non-profit sector.

Not only are we too reliant on funds and donations from overseas but we also don’t have an agreed set of values, standards and principles to ensure that our valuable and limited resources are well-managed.

Although the principles of good governance are broadly the same in all entities, whether they are multinational listed companies or small non-profit community-based organisations, the manner in which these principles are applied and the cost and practicality of their application differs considerably. This is why the non-profit sector in South Africa needs to agree on, and commit to, its own independent code of governance.

The rules and regulations used to govern corporates and other “for-profit” entities often fail to consider the rights and interests of our various and distinct constituencies, such as social beneficiaries and donors.

Their codes also don’t give adequate recognition to certain realities and challenges facing non-profit organisations (NPOs) such as the fact that board members usually serve without remuneration.

NPOs are, by nature, committed to a number of values and principles that are distinct and very different from those applicable to the corporate sector.

The primary difference of purpose is that an NPO exists to serve the common good, and promote a public benefit, rather than to achieve individual profit or advance self-interest, which is the purpose of for-profit entities.

At a civil society consultative forum meeting in August 2010, we set up a working group to draft a voluntary, independent code of governance for our non-profit sector. We are currently circulating the draft and asking for suggestions on how to improve it so that it can be collectively owned and adopted.

One of the challenges we face is that the NPO sector in South Africa is large and very diverse. One recent estimate suggests that there may be as many as 150 000 NPOs depending on how the term “non-profit organisation” is defined.

Of these, 85 000 have an NPO number, which indicates formal registration with the NPO directorate in the Department of Social Development, but only about 10 000 of these have a PBO number, indicating that they have been approved by the SA Revenue Service (Sars) as “public benefit organisations” (PBOs).

A non-profit organisation is only exempted from income tax, donations tax, estate duty, and other fiscal levies once it has been approved by Sars as a PBO. Even fewer organisations (in addition to being registered NPOs and approved PBOs) are also exempt from charging VAT (value-added tax) and entitled to reclaim VAT paid on their supplies.

So, what is loosely described as “the NPO sector” includes well-established organisations with large donor grants, as well as many much smaller, informally constituted, community-based organisations (CBOs). Many CBOs don’t have written constitutions, are not registered NPOs, don’t have PBO status and therefore can’t make the most of the tax benefits available to NPOs. In this context, with organisations of varying size, capacity and purpose, it is unrealistic to conceive of a single code of governance applicable in the same ways to all groups, large or small, formal or informal, whether endowed, community-based, or even multinational.

But in spite of these differences there are certain fundamental values and operating principles to which all NPOs should subscribe. Although the manner in which these values and principles are applied in practice may differ across the non-profit sector, the code of governance we have drafted seeks to recognise both the similarities and the differences, and promote core values that apply universally.

These values include the acknowledgement that an NPO exists to promote a public benefit purpose and should serve the public interest with fidelity, altruism, goodwill and integrity. It also says the capacity and resources of the organisation should also be applied exclusively for the advancement and implementation of such public benefit purpose.

As with other codes, it asks that the board accept primary responsibility to ensure adherence to the core values; and to exercise effective leadership, and to secure legal and fiscal compliance.

The draft NPO code also asks that organisations and their office bearers commit themselves to the operational principle of transparency and accountability to donors, beneficiaries and the public, and observe utmost good faith, specifically avoiding self-benefit, nepotism and conflicts of interest.

In line with our constitution, the code asks non-profits to conduct their affairs in accordance with the principles of equality and non-discrimination, just administration, and treat all people with due deference, dignity and respect. There is also a section that asks NPOs to commit to remunerating their employees fairly, and to observe best practice in the conduct of their staff policies and human relations, acting with fairness, impartiality, and without fear, favour, or prejudice, in the best interest of its beneficiaries.

Although the draft code of governance seeks to empower and encourage “best practice” among NPOs, it is voluntary and does not impose oversight, sanctions, or unaffordable standards. But by committing ourselves to a common set of principles, values and responsibilities, we will help build a bridge to sustainability, improving our capacity to attract donors, quality board members and volunteers, and enhance the reputation of our organisations and secure public trust and support.

The working group will be hosting workshops in Cape Town, Gauteng, Durban, Port Elizabeth and Bloemfontein this month to get further input and encourage dialogue and debate around the draft code of governance.

It is available to read and download on and you can submit comments to Janine Ogle on 021 465 6981 or This email address is being protected from spambots. You need JavaScript enabled to view it. before the end of this month.

Shelagh Gastrow is the executive director at Inyathelo, The SA Institute of Advancement. She is also a member of the NPO working group nominated to put together a draft code of governance for the sector.