The growing role of business and tax incentives

Tuesday, 27 August, 2002 - 23:00

Non Profit Partnership (NPP) 1 was launched in 1998 to develop
financial sustainability for the nonprofit sector. Its members believe that

Non Profit Partnership (NPP) 1 was launched in 1998 to develop
financial sustainability for the nonprofit sector. Its members believe that
because corporations and governments are beneficiaries of the nonprofit
sector’s work in society, they should help ensure the sector’s long-term
financial future.

   In addition to money, corporations can strengthen the
nonprofit sector by providing a variety of resources, said NPP Director
Eugene Saldanha. This includes volunteer time, advice, human resources,
company resources and skills training. In-kind donations such as computers,
photocopying machines and use of these services are also beneficial.

   Unfortunately, Saldanha said, "corporates have a comfort
zone after writing out a check."

1 In 1998, the South African NGO Coalition (SANGOCO),
the Southern African Grantmakers Association (SAGA) and the United Kingdom-based
Charities Aid Foundation (CAF), formed the NPP.

example of a member of the corporate world who provided assistance is a
bank’s ex-chief executive officer, who told the NPP that he was available
to help for six months. He now offers advice and accompanies the NPP to
negotiations with corporations. His involvement has lengthened beyond the
original six months, and Saldanha is hoping he will become a NPP board member.

   This is the kind of giving the NPP wants to nurture in
the national corporate culture. Some corporations have begun to embrace
corporate citizenship, even if largely as a business or political imperative.
ABSA, one of South Africa’s largest banks, is one of them. It operates a
foundation that has R15 million ($1.8 million) in assets and it funds education,
income generation and HIV/AIDS projects.

   Gail Campbell, ABSA Foundation’s consultant for corporate
social investment, said surveys conducted throughout the bank show that
staff members are interested in promoting social responsibility projects.

percent of bank staff said they would like to get involved in some of the
community work the foundation is funding," she said.

   Seventy-three percent of the bank’s 34,000 employees said
"yes" to the "give as you earn" concept, which could add up to substantial
sums of money for development projects. The number of participants would
have been even higher had people known they could give as little as R1 ($0.125)
a month, Campbell said.

   Promoting such workplace giving is one of three of NPP’s
major programs that has received Mott Foundation support totaling $163,000
(R1.3 million) through June 2001.

   An example of a workplace giving program that has been
successful for many years is the one based at the Western Cape Community
Chest. This program is facilitated by the trade union movement, which raises
money from, among others, low-paid textile factory workers. Workplace giving
programs also raise money from highly-paid executives. In the Western Cape,
workers raised R2 million ($250,000) for the Community Chest in 2000, thereby
helping support the work of 472 welfare and social development programs
in the province.
the NPP has successfully negotiated a medical aid and emergency needs fund
for employees in the nonprofit sector. It has also conducted public policy
work to push for lottery funds to be distributed to nonprofit organizations
and has negotiated lower bank service charges for the sector.

   But perhaps its most successful campaign to date has been
to get tax laws amended to benefit the nonprofit sector. South Africa’s
new tax law broadens the definition of "public benefit organizations" that
qualify for tax exemption. In addition to other expansions, the beneficiary
category now includes pre-primary and primary schools, homes for children
and the aged, and organizations providing HIV/AIDS care.

   The limit on tax deductions for donations from individuals
has been raised from 2 percent to 5 percent annually, an amount that Saldanha
describes as "disappointing" because it didn’t go far enough, even though
it is in line with companies. Even if the latter is more symbolic than significant,
the NPP and other nonprofit organizations have forced the government to
listen. The NPP still wants to see tax breaks for those who donate goods,
not just cash.

Primary schools, home for children and the aged, and organization providing HIV/AIDS care now qualify for tax exemptions.    The
Mott Foundation has supported the NPP’s successful campaign to make the
country’s tax laws more favorable for the nonprofit sector. Tax laws could
encourage greater giving from individuals and families. In particular, estate
duty and inheritance tax laws could be amended to encourage more of this
kind of giving. The great reserves of untapped individual and family wealth
in South Africa could be vested in promoting a sustainable NGO sector.

   Trevor Manuel, the minister of finance, has acknowledged
the role the nonprofit sector plays and recognizes that the tax law changes
have not gone far enough.

   Still, the NPP’s work in tax legislation has given hope
and help to non-governmental organizations (NGOs) in neighboring countries,
including Zimbabwe and Namibia, Saldanha said. Information-sharing, through
phone calls and conferences such as the International Conference on Income
Tax and the NGO Sector, held in March 2001 in South Africa, is making way
for tax law changes in the southern region of the continent, he said.

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