An Emerging Funding Crisis for South African Civil Society

ngos donors CSOs government
Wednesday, 12 January, 2011 - 10:26

Lack of funding and donors’ tendency to channel funds through government departments by way of bilateral or multilateral arrangements, are some of the factors contributing to the decrease in donor funding in South Africa

Traditional funding sources for NGOs are drying up and grants are being reduced due to various factors. Externally, the fact that South Africa is viewed as a middle income economy has resulted in decreased funding opportunities. It has also been noted that the inadequate expenditure of funds by the South African government has contributed to the decrease in donor funding. The recent economic recession has seen some funding organisations in the United States merging to survive, just like their United Kingdom counterparts. Some have indicated that they intend to focus on programmes that are replicable regionally, say, in a number of countries within the Southern Africa Developing Countries (SADC).

Internally, rising operating costs, mounting debts, and the inability of some CSOs to sustain the same level of work as they used to before are some of the challenges that are worsening the crisis. The level of flexibility in doing work has decreased tremendously. CSOs have to stick to the business plans (funding proposals) as presented and agreed upon with their funding partners. There is also a dearth of skilled employees as the State and other sectors continue to poach key personnel from the NGO sector.

The period prior to 1994 is often regarded as having been a robust period for civil society in South Africa. Not only did many CSOs, particularly anti-apartheid organisations, have definite direction and purpose (most were formed to fight an oppressive state and create a non-racial South Africa); they also had relatively easy access to funds for carrying out their objectives. The apartheid regime was regarded as undemocratic and illegitimate, foreign donors saw CSOs as legitimate vehicles for channelling funds to apartheid victims.

The 1980s were seen to have a plethora of CSOs that filled the service gap created by the apartheid state’s separate development policy, and mobilised against apartheid. Ironically, the rapid growth of civil society occurred in a highly constrained policy and legal environment, which sought to control activities and funding in the sector. Fundraising in the sector was strictly controlled, largely by a number of laws. These laws were specifically aimed at curtailing the operations of anti-apartheid organisations; they gave the government powers to decide which organisations it would allow to exist in the legal framework.

The Fundraising Act (Act 107 of 1978), for instance, gave the minister of social welfare and pensions the power to prohibit the collection of funds by a CSO if s/he deemed that this was in the public interest, thus introducing stringent political control over the process of obtaining a fundraising number. Moreover, the process of procuring a number was very complex; many organisations with relatively lower levels of expertise or resources were unable to comply with all the requirements (Kihato, 2001: 8).

The nature of CSO-donor relations in the past was largely shaped by the apartheid government’s hostility towards anti-apartheid organisations. Many donors who were sympathetic to the struggle channelled funding to CSOs that claimed to support marginalised groups and promote democracy. Partly as a result of this hostile environment, the administration and expenditure of funds was not strictly controlled; few recipient organisations were required to keep books, undergo independent audits, or report back to donors on how their money had been spent, as it was believed this could expose those organisations to the attentions of the state. Therefore, while some conditions were laid down, few donors took steps to ensure that their funds were efficiently used in practice, and had the intended impact.

In addition, the European Commission’s ‘easy and flexible’ approach to funding South African CSOs meant that the latter were exempted from the cumbersome and time-consuming procedures surrounding funding applications, project proposals, and the monitoring of funded projects applicable in other countries. Thus the relationship between donors and civil society during apartheid was extremely flexible, with donors adopting a highly accommodating attitude to local demands. Local actors certainly had the upper hand in deciding which organisations should be funded, and how funds would be disbursed. This relationship, characterised by high levels of trust, was extremely unusual. Not only was it unique to South Africa; it has also become an irregularity in post-apartheid South Africa. Foreign donors preferred to empower CSOs that either cushioned the blow of separate development policies, or mobilised against the apartheid state. Funded activities and organisations varied greatly, from poverty relief through education grants for black South Africans to direct contributions to liberation movements (Kihato, 2001:10)

In the recent past, drastic reduction in funding has had a negative effect on both the government and civil society. Government has no big problem weathering the storm. However, the heavy reliance of civil society on foreign funds means that it is more vulnerable than the government to shifts in donor funding patterns. The financial insecurity within civil society could affect organisations’ ability to influence policy processes and even lead to a drift away from the core mission of NGOs as they struggle to survive.

Donor support is predicated on the notion that a strong civil society would demand a more democratically accountable and transparent state, and lead to sustainable good governance. The task for donors has been to identify those types of organisations likely to play a key role in civil society and those forms of support that could be directed toward them in order to strengthen their capacity to participate in a vigorous and effective manner (Biekart, 1998; Robinson, 1996; Van Rooy, 1998).

International government institutions, like the European Union, United Nations Development Programmes, Swedish International Development Agency, United States International Development Agency and the Danish Development Agency, have opted to either stop funding South African CSOs or to channel their funding through South African government ministries by way of bilateral or multilateral arrangements. Even so, funds for such arrangements have been scaled down by some of these institutions. These institutions refer CSOs to the South African government for assistance.

There also seems to have been a distinct change in donor attitude. Previously a donor may have questioned the appearance of a reserve on an organisation’s financial statements - taking that as an indication that the organisation may not have an immediate need for further funding. Now, there seems to have been an almost complete about-turn. Increasingly, donors are enquiring after and insisting on information about an organisation’s plan for financial sustainability. The existence of a reserve may now in fact count in an organisation’s favour when applying for funds or grants on the basis that it shows that the organisation is likely to be in existence for however long the project will last. It can also indicate that the organisation is not entirely reliant on that particular donor’s funding.

Conclusion

Increasingly, donor projects require cross-country comparisons, with a view to engaging countries within and among regions around common issues, and identifying possible common learning experiences. Consequently, an organisation’s ability to develop partnerships with institutions from other countries is key to operating in the new funding environment. Foreign political donors tend to relate to ‘like-minded’ CSOs, which have similar ideologies and understandings of democracy. They also relate specifically to formal organisations, not only because these have the capacity to understand and perform within donor bureaucratic frameworks, but also because they have the ability to influence political outcomes in a certain way.

CSOs in developed countries since the 80s have been shifting more towards operating with cognisance of how they sustain themselves. IIEC for example contracts with the UK government and other governments in Asia to provide consultancy activities by way of research and piloting concepts of energy conservation and techniques. This way it does not have to rely on donor funding. Some local NGOs are however, trying hard to venture into the profit making sector with the objective of using the surplus (profit) funds that they make to take them through periods when they would be low on funding and where possible to expand the scope of their programmes.

The obtaining scenario is, however, bleak for many NGOs. In the short to medium term, many are likely to shut down operations. The more serious challenge will be that of sustaining the consolidation of our democracy. As civil society become weakened and even sink into oblivion courtesy of dwindling funding and as opposition parties remain weak and fragmented, chances are that more complacency will creep into the ruling party, African National Congress and even more vices will be conjured.........sadly, impunity will reign supreme.

- Noxolo Kabane, Intern, Sustainable Settlements Programme, Afesis-corplan, a NGO contributing to community-driven development and good local governance in the Border-Kei in the Eastern Cape. This article first appeared in the December/January 2011 edition of Transformer (link to: www.afesis.org.za/the-Transformer/decemberjanuary-2011). It is republished here with the permission of Afesis-corplan.

References

Biekart, K. The Politics of Civil Society Building: European Private Aid Agencies and Democratic Transitions in Central America, International Books/Transnational Institute, Utrecht, 1998.
Robinson, M. The role of aid donors in strengthening civil society. in A. Clayton (ed.), NGOs, Civil Society and the State, INTRAC, Oxford, 1996.
Van Rooy, A. Civil Society and the Aid Industry, Earthscan, London, 1998.
Maxine, R and Friedman, S. Funding freedom: Synthesis report on the impact of foreign political aid to civil society organisations in South Africa, Centre for Policy Studies, 2001.
Kihato, C. Shifting sands: The relationship between foreign donors and South African civil society during and after apartheid, Centre for Policy Studies, 2001.

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