Sadly, I have written similar articles over many years, in response to major financial blows.
My first was in 1985 when apartheid leader, PW Botha, did not have the courage, wisdom or humanity to cross the Rubicon (as his cruel stubbornness was dubbed). Everyone expected the announcement of the beginning of the dismantling of legislated discrimination. He failed South Africa. Overnight, the prime rate rocketed. Economic sanctions and disinvestment intensified. The USA and EEC imposed trade restrictions, and American companies began withdrawing their investments. The rand plummeted, foreign capital fled, and the economy suffered a severe recession. The country had been dealing with internal unrest, and the failure to introduce reforms exacerbated the crisis. The sport boycott was intensified. Unemployment and inflation soared, and the GDP declined. Sanctions crippled key industries. Bankruptcies soared, people lost their jobs and families lost their homes. NPOs’ income plummeted and those they served suffered as a result. Some NPOs assisting people doubly disadvantaged by both apartheid and poverty did benefit from foreign donations, though (unlike today when substantial international support is given elsewhere).
As South African fundraisers, we found our roles somewhat easier after the collapse of communism pulled the rug out from under the ‘rooi gevaar’ obsessed apartheid government and acting President FW de Klerk initiated freedom and democracy. (Or, as national treasure, Pieter-Dirk Uys puts it, ‘PW was on sick leave and FW was temping and he freed Mandela’.) The economy improved rapidly. Madiba charmed the world. Everyone loved him. There was global hope for the country. As local finances improved, more money was donated to good causes. The CSI sector was formalising and strengthening (and leading the world in doing so). International donors wanted to support the miracle of a peaceful transition to democracy on the southern tip of Africa (which many historians consider a world-first).
There have been bumps along the way, peaking because of the 2008 global financial collapse, caused by a combination of risky lending practices, financial deregulation, and excessive speculation in housing markets. The results were devastating. Stock markets crashed, wiping out trillions in global wealth. Credit markets froze, making it difficult for businesses and individuals to secure loans and unemployment soared as companies downsized or closed. Donations to NPOs also suffered.
The COVID-19 pandemic too had a disastrous effect on non-profit funding and some organisations are just beginning to reach pre-pandemic income levels.
Ongoing media exposés of corruption in South Africa and a presumption by many international donors that as the democracy matures, their funding is no longer needed, along with crises and needs elsewhere, have contributed to a reduction in international support for local needs. Low economic growth, aggravated by 18 years of loadshedding and unfavourable foreign direct investment (FDI) conditions, have worsened matters. Many non-profits have continued to see a reduction in income.
The country’s grey listing and IMF ranking of South Africa last among 49 countries in their Ease of Doing Business Index (highlighting excessive regulation and government inefficiencies that hinder economic growth), have not helped its image, nor given foreign donors peace of mind.
President Trump’s halting of USAID support, along with the UK government’s partial redirecting of its foreign aid budget towards its defence spending in response to Putin’s invasion of Ukraine and Trump’s possible cancelling South Africa’s AGOA status, have sparked another non-profit funding crisis.
So, how should NPOs, tertiary institutions, faith-based organisations and schools respond? (This is where I find myself repeating much past advice.)
- Fund spending: Before fundraisers are simply asked to step up their efforts, it’s useful to remember that when times are tough, the focus is generally on ways to raise more money. However, it’s a good idea to relook at all expenses and identify where savings could be made and only then seek donor support – one could well be asked about how costs have been trimmed.
- Mergers: In response to post-pandemic tough times in the UK, 131 non-profits have recently merged. Donors feel strongly that there are too many NPOs and encourage organisations to ‘break down the silos’, and fold one or two into one entity. (Seven CSI managers and two SA donor trust staff consulted for this article, confirmed their support and encouragement for NPOs merging.)
- Volunteer support: Too few NPOs’ websites feature volunteer opportunities (probably as volunteerism and its benefits to those who give of their time is yet to be properly grasped). Organograms should feature volunteer roles, and we should not simply accept anyone who offers their time. Well managed volunteer programmes, while they save NPOs’ salary bills, can benefit organisations in numerous other ways too.
- Expansion of funding sources: There are about 35 ‘sources’ of funding (of which companies, trusts, events, crowdfunding and bequests are just five). Tough financial times often force the consideration of additional sources – in keeping with Winston Churchill’s advice to, ‘Never let a good crisis go to waste.’
- Income generation: Not all resourcing of non-profits should be via donations. NPOs should also make/generate money. This not only ensures undesignated income but also impresses donors. Many organisations are ‘sitting on gold’ – unused premises that can be let, core services that could be charged for (possibly on a sliding scale) or any other ways to earn an income.
- Innovation: Asking board members, staff and often even those served, for ideas to resource an organisation, can result in both innovative input and a sense of community. It’s advised to approach such consultation from a positive angle – not; ‘If we don’t find solutions, we will have to retrench staff, pause some projects or even close up.’ Rather: ‘Times are tough, and we need suggestions to resource our NPO and continue to offer services. Please share ideas.’ This is likely to illicit some naïve, but caring, suggestions, such as: ‘We should get 1000 people to each sign a debit order for R100 a month’, or ‘We should tell corporates that giving to us will help their BEEE status’ Or ‘We must tell people that when they donate, they can have a tax rebate’. (During the pandemic, I arranged my first online auction. It was a great deal of work but netted my client organisation R750 000 – and substantially expanded its mailing list and social media followers. I wouldn’t have thought of this had people not been prevented from gathering in a room.)
- Reserves: Be careful of spending reserves and do not dip into an endowment fund. When such money is gone, it’s gone.
- Valuable gestures: Might senior staff be persuaded to take a temporary reduction in salary? Depending on their current levels of giving, board members could be asked to make one-off donations. Such measures are preferable to retrenching low paid team members.
- Update the funding plan: Many plans and strategies for resourcing NPOs will date back a year or two. Too much has changed to keep plugging away at them. Tight times call for more focused and realistic planning. Now is the time to update funding (and other) plans.
