Towards a New NPO Act

The fifth draft of the Draft NPO Policy Framework on the Amendments of the Nonprofit Organisations Act 71 of 1997 was issued to nonprofit organisations (NPOs) ahead of a consultative meeting in Johannesburg at the end of March 2014. The Nonprofit Organisations Directorate has clearly taken pains to address the concerns of civil society with this version of the framework, which recognises the valuable contribution and role of NPOs in building South Africa’s economy.

The Framework proposes an NPO Directorate as a specialised direct public service that is ‘a focussed and fully ring-fenced entity’ but still reports to the responsible Minister (in this case, the Minister for Social Development). Amendments to the Act will aspire ‘to promote transparency and accountability within the NPO sector without placing onerous requirements on organisations’. The business case for changes to the structure of the Directorate will be developed through a feasibility study, although it is not clear whether the study will be by internal or independent researchers.

Recognition ValueThis fifth version of the framework is more inclusive than previous versions, recognising the important role of civil society in the development of the country. It explicitly makes the point that NPOs are not only delivering social services but contributing to economic growth and stability. The framework says: “It is not the aim of government to simply write unreasonably stringent measures that will hamper the growth of the NPO sector.”

One of the striking things about the framework is the acknowledgement of how little is known about the real size, employment conditions, salaries and income levels of the NPO sector in South Africa. While the Directorate is able to cite a growth in registrations of more than 11 percent per annum, it acknowledges that the majority of registered organisations are still non-compliant and that some 80 percent of registered organisations are voluntary associations.

One of the proposals in the framework is for the Directorate to conduct research on the ‘income levels and contribution to the South African economy’ of NPOs and make this available to the public. This should be welcomed and encouraged – the more we understand about the South African NPO sector, the better we will be able to lobby for, and jointly create, enabling policies and practices.

Reducing the BurdenA key component of the framework is the recognition of the burden of multiple registrations and compliance mechanisms on NPOs and, particularly, that smaller organisations are often unable to meet the minimum requirements. GreaterGood welcomes the proposal to simplify the registration processes and the assertion that Trusts, Voluntary Associations and Nonprofit Companies should be subjected to the same registration and compliance requirements.

We also welcome the move towards electronic registration and faster turnaround times, working with a network of partners offering registration services in areas where Internet penetration is not as good. However, we would like to urge the Directorate to investigate the use of cellphone and USSD solutions which have been very successful at connecting isolated communities with services in similar economies like Kenya and Nigeria.

Size Is Not EverythingAnother proposal to be welcomed is the ‘risk-based approach for monitoring compliance’ and the recognition that, because of the diversity of the sector, the current ‘one size fits all’ approach is not appropriate. However, we would caution against the assumption that the size of an organisation is the key factor in the assessment of risk. According to the framework, “The larger the size and the higher the income levels of the organisation… the more vulnerable and at risk the organisations can be.” Over the last 10 years that GreaterGood and GreaterCapital has assessed organisations and conducted project risk ratings, we have found that size and income levels are not necessarily associated with greater risk. There are many factors at play and a solid, evidence-based risk assessment tool should be developed to address this.

Self-RegulationThe proposals in this version of the framework cover the concept of self-regulation by the sector in some detail. This is a long way from the first few versions which created anxiety in the sector in terms of enforcement. The fifth version explicitly states: “the intention is not to create a body that will continually interfere in the affairs of organisations.” While we welcome the softer approach, GreaterGood does have concerns about what evidence there is of the efficacy of self-regulation. There are a number of good governance initiatives in existence already and disagreement within the sector about which is the most appropriate. We believe there is a need for an independent, unified compliance framework based on accurate information about size, income and expenditure practices and salary benchmarks in the NPO sector.

While self-regulation is given recognition in the framework, an NPO Tribunal and appeal mechanism is still proposed to provide a dispute resolution process outside of the costly and time consuming court process. While this could be of great benefit to the sector, our concern is the make-up of the tribunal and the perception of its impartiality. Furthermore, we are not sure that the ‘blacklisting’ of organisations (which is still proposed) is useful. While we of course acknowledge that fraud and mismanagement must be exposed, the potential for hasty, unfair and prejudicial ‘blacklistings’ – outside of a judicial process – means that the process would have to be very carefully detailed and followed.

GreaterGood and GreaterCapital welcomes the open and consultative nature of the process for developing this framework and believes that, by working collectively, the resultant changes to the NPO Act will be able to meet the needs of our growing and changing sector.

- Sophie Hobbs is the head of strategic communication at GreaterGood and GreaterCapital. This article first appeared in the Greater Impact, 8 April 2014.  

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