08April

What funders should know about developments regarding the NPO Amendment Bill

The Non-Profit Organisations (NPO) Act is directly relevant for independent philanthropic funders, for a number of reasons – not only are many independent funders and intermediary organisations registered as NPOs, but they also fund NPOs, who will be affected by the amendments. Read more from our director,  Nazeema Mohamed.

What funders should know about developments regarding the NPO Amendment Bill

Amendments to the NPO Act have implications for the strategic role of civil society in South Africa, and on how this sector works with government to ensure optimal achievement of the country’s development objectives.

 

How it started

On 6 October 2021, Inyathelo was alerted by a colleague in the sector to a call for comment on what she described as “a freshly issued NPO Amendment Bill.” She noted the Bill was “clumsily drafted, contained some mysterious provisions, and was not supported by an explanatory memo,” and that some fundamental changes were proposed. She asked us if we had heard about the Bill and whether we would take up the matter with the sector.

Inyathelo called a sector-wide meeting where a Working Group was elected to liaise with the Department of Social Development (DSD). The Group was also asked to submit a response from the sector on the substance of the Bill. There have been many concerns expressed about the Bill which seeks to amend the current Non-Profit Organisations (NPO) Act, 1997 (Act 71 of 1997). While the DSD directorate responsible for NPOs has been at pains to explain that it views changes as cosmetic and administrative, the NPO sector has argued that these are substantive policy changes and insisted that there be an extension to the very tight deadline for comments on the Bill.

 

Engagement with government

Accordingly, on 10 November 2021, an online meeting was organised between the DSD and NPO sector representatives. The focus of the Working Group at that meeting was to follow-up on a letter it had written from the sector requesting an extension to the 31 October 2021 deadline for comments on the Bill, and to ensure that it would be extended.

At the meeting, Mr. Netshipale, Deputy Director General: Community Development of the DSD, said that the substance of the amendments in the Bill dated back to the 2012 policy summit, when relevant policy changes to the NPO Act had been proposed by the NPO sector. He explained the delay in reviewing the NPO Act and assured participants that the amendments proposed were long overdue. He stated they were administrative and a first phase in the review of the NPO Act. He mentioned that going forward, a second phase in the policy review process would be undertaken and include broad consultation with the sector. The DSD further explained that according to their legal department, the extension required cabinet approval and the Department was unable to grant an extension, however, they were committed to tabling the request.

Representatives of the Working Group pointed out that, in addition to the extension, the “cosmetic changes” mentioned were in fact substantive policy changes and would have an impact on NPOs. They also felt there had not been proper consultation and procedural issues related to the Bill had been problematic. For example, the Bill was not on the DSD website at the time it was announced, and there was no explanatory memorandum of objectives, which made it difficult for the NPO sector to comment. The DSD conceded and indicated that comments on the Bill would be accepted after the deadline, while waiting for feedback on an extended deadline from cabinet.

 

Developments during 2022

At the end of January, the Working Group queried cabinet’s decision and was informed that the DSD had sought further legal counsel and were informed that extending the deadline for comments on the Bill was an administrative decision. The Working Group requested information on submissions that had been received by the DSD and asked if an analysis of the submissions was available.

Since no analysis had been done, the legal services organisation, NGO Law, recorded and summarised the submissions made to date and provided feedback to the sector in an online discussion on 10 March 2022. At the time of writing, a further meeting was planned by the DSD for 23 March 2022 to provide more information on the proposed amendments.

DSD only received 15 submissions on the NPO Amendment Bill. Several factors can account for the limited response from the sector and apparent disengagement. It should be considered that many NPOs are heavily involved in addressing immediate internal challenges of trying to recover from the financial fallout and other impacts of the pandemic. Dealing with these immediate stressors could put the need to contribute to a national matter lower on the agenda for some NPOs. Another core problem is that the directorate dealing with NPOs, within the DSD, is poorly capacitated with insufficient staff and resources to address the enormous challenges facing it. Many NPOs currently skip registration and register directly with SARS to receive 18A status. Perceived empty promises alongside limited support to the sector during the pandemic may be another reason for disenchantment.

 

The role of civil society and development programmes

President Ramaphosa announced a social sector summit and drafting a social compact in his State of the Nation Address (SONA) in 2018, speaking of the importance of collaborating with civil society and building solidarity around government development programmes. This was again raised in the 2022 SONA, referring to a “comprehensive social compact to grow our economy, create jobs and combat hunger.” However, four years after the 2018 SONA, the social compact and social sector summit conversations appear vacuous, and there is an obvious lack of capacity and resources in the DSD to deliver on these promises.

Currently there is agreement to an extension of six weeks after the meeting of 23 March, for final comment on the Bill. However, discussions and submissions to date within the NPO sector Working Group highlight numerous concerns. Sector representatives find the draft Bill unclear, qualitatively weak, and lacking detail. The outcomes as per the proposed changes remain uncertain.

 

Concerns of the Working Group

Overall, there is agreement in the Working Group that the Bill is not fit for purpose. Examples include but are not limited to:

  • The NPO directorate name change, to a Registrar. There is a lack of clarity about whether that Registrar will be independent and move out of the DSD; concerns about capacity and resources remain.

  • Accountability of the NPO sector: There is a lack of knowledge about, and implementation of, good governance at many NPOs. A new structure for boards has been proposed, which includes deputies. The sector agrees that governance is an issue, and there is a need for self-regulation, but not in the way it has been formulated in the Bill.

  • Cleaning up the NPO database: At present many NPOs are registered with identical names. There is also a campaign to deregister those NPOs which do not meet legislative requirements. However, there are concerns that the DSD lacks the capacity to address the database issues, and the form this will take in terms of the Bill proposals.

  • Registration of international NPOs. The DSD has shared that this provision has been included in the Bill because of information received from a government investigative team that some NPOs could be caught up in money laundering and finance for terrorist activities. While there is agreement on the need to counter corruption and terrorism, there are concerns the sector will be overregulated with draconian controls.

 

Conclusion

In conclusion, our proposal is that the Bill be scrapped as it is poorly drafted, there are major policy implications, the sector has not been given sufficient opportunity to engage, and the time frames mean it would be passed without due consideration. There are limitations on both sides. Many NPOs are engaged in their own financial survival, and in addressing the needs brought about by the pandemic and socio-economic inequality. The DSD directorate dealing with NPOs, in turn, is also understaffed and lacking much-needed resources. Both sides need to work together and engage for an optimal outcome, to ensure there is cooperation for social benefit. There is currently the opportunity to engage and address key issues. The sector needs to be unified so all can move forward and find common ground.


First published on the IPASA website