Inyathelo in the Headlines

Draft Bill puts nonprofits on edge - 15 January 2016 - Mail & Guardian

NPOs fear increasing state control, and an amplification of the existing dysfunction

by Ra’Eesa Pather 

For years, South African nonprofit organisations have struggled to maintain their registration status as NPOs in the department of social development's database. Although registration with the department is voluntary, nonprofits rely on their registration number to secure funding from donors. Now, the department has set a deadline of March 2016 for the completion of the formal processes with the Cabinet, Parliament and the public sector that will lead to a draft NPO Bill.

Like all sectors of society, nonprofits are governed by legislation to ensure they behave lawfully. But laws can have tumultuous histories too. Under apartheid, the existing NPO Act of 1997, which regulates the nonprofit organisation sector, was named the Fundraising Act. The National Party used the Act as a tool to prevent the funding of civil society. After apartheid, regulation became a focal point for policymakers behind the NPO Act who wanted to eradicate government control over civil society.

"I think against the backdrop of that experience those who were involved at that time were extremely anxious that one should not once again place powers in the hands of the state to control civil society," said Richard Rosenthal, a lawyer specialising in the sector.

At the end of 2012, a civil society organisation reported that there was an astonishing mass deregistration of 50 000 NPOs, which led to them losing their registration status, and possible funders.

The department contested the figure and said just over 23 000 organisations had been deregistered. Tens of thousands more were listed as noncompliant. Nonprofits are listed as compliant or deregistered when they fail to comply with the NPO Act, namely by failing to file annual financial reports and narrative accounts of their activities.

In the same year, the department released a policy framework to review the Act. It recommended that two new statutory bodies, the South African Nonprofit Organisations Regulatory Authority (Sanpora) and the South African Nonprofit Organisations Tribunal (Sanpotri) be established to better regulate the sector.

These bodies would ultimately give the state more power over NPOs because of their regulatory authority, which is just one of the concerns that NPOs have fought against.

For the past year, the department has been silent on the progress of the Bill, but the NPO directorate, which is a branch of the department that implements the Act, has remained woefully ineffective. The department has admitted many times that the directorate is underresourced and "does not have the capacity to discharge this function effectively", because it is unable to keep up with the high number of nonprofits that apply for registration.

In its proposed amendments, the department suggests that the two new bodies are the answer to the directorate's woes. The framework outlines that the regulatory authority "will be mandated to encourage the formation of nonprofit organisations and their accountability through an efficient and effective registration facility ... education and awareness raising, dissemination of information on nonprofit organisations and enforcement of the law", and the tribunal will act as an independent mediator between the government and NPOs. But, according to the document, "its decisions should be binding to all parties concerned".

In addition to the concerns this type of control raises for civil society, Rosenthal said, in creating two new bodies when the directorate doesn't function efficiently is nonsensical.

"The existing NPO directorate is notoriously inefficient and dysfunctional, and therefore to create something bigger in its own image would be just madness," Rosenthal said. But despite the public outcry against the move, the two bodies might still be established.

"A decision regarding Sanpora and Sanoptri will be part of ongoing draft Bill consultations," Lumka Olifant, the spokesperson for the department, said. The department has since reviewed its proposed amendments, but the directorate is still moving at a snail's pace for many NPOs battling with its online registration system.

Olifant said the move to a digital system was one of the solutions to the directorate's ineffectiveness, among other internal structural changes. "There have been efforts to strengthen the capacity of the NPO unit within the department of social development. As such it has been elevated to chief directorate and currently to a branch with a staff complement of more than 60 officials, who are dedicated to provide services to NPOs," Olifant said.

"At provincial level, there are dedicated units responsible for provision of professional services to NPOs. The national department is providing [the] Train the Trainer programme to officials at provincial and local level as a mechanism of strengthening their capacity to deliver quality services to NPOs," she added.

But nonprofit organisations maintain that not enough has been done, and the online system often doesn't work, leaving NPOs struggling to upload the necessary documents in order to comply with the Act.

"The capacity issues with the department of social development must be addressed. The inability of the NPO directorate to perform its duties efficiently can affect NPOs quite severely, including impacting on the NPOs' ability to access funding.

"It would also be good to see the department being more open and improving their communication with the civil society sector," said Janine Ogle, an advocacy co-ordinator for Inyathelo, an organisation that serves as a bridge between nonprofits and the government.

Currently, organisations are grappling to comply with the NPO Act because they lack the resources to do so. An example of this is that their financial reports must be signed by auditors, whom they have to pay in addition to their operating costs.

For Rosenthal, deregistration is akin to capital punishment for nonprofits because it can lead to funding cuts. The need for a better regulatory body that comprises all stakeholders has been debated for years.

According to him, some of the most fundamental tasks in NPO legislation is to ensure that nonprofits can pursue their activities without government interference, and that the government must abide by the NPO Act's directive that they create an enabling environment for organisations.

NPOs will have to wait until March to see the draft Bill, and whether there will be more statutory control, answers to the directorate's shortcomings, and what these will mean for their future.

"If you pass a law and half the population fails to comply with it, there's something wrong with the law and not the population, Rosenthal said.