Funding Crisis for Research NGOs in South Africa Looming Larger Than Ever

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Friday, 23 July, 2010 - 09:40

Many nonprofit organisations are on the brink of collapse due to a lack funding. The sector has already lost many activists and leaders to government and business, while many organisations struggle to remunerate their staff. The recent global financial crisis and donors’ tendency to fund corporate social investment projects as opposed to policy research organisations, also add to the problem

There is a looming crisis in the civil society sector in South Africa, and if nothing is done urgently, we might see key organisations in the sector suffer catastrophic consequences over in the next year if not earlier.

Indisputably civil society organisations played a crucial role in dislodging apartheid and ushering in a new democratic era in 1994. Not only that, but these organisations have also provided the necessary support for democratic governance, either through direct provision of social services to the underprivileged or enriching our public discourses through grounded primary research and insightful analysis of social policy problems confronting leaders in government and business. They have become an integral part of the country’s policy making and service delivery landscape, often carrying out the work under conditions of abject remuneration.

On many occasions they have come to the rescue either in terms of critiquing poorly conceived national policy initiatives, exposing incompetence in the public service and lack of understanding of the nature of the challenges facing our democracy. These feats have been achieved invariably at a fraction of the cost of running many government agencies. Testimony abounds in government policy initiatives, conferences or public utterances replete with praiseworthy allusions to the importance of civil society engagement with the state, even if such allusions often serve more cynical purposes.

Despite their achievements, and having thoroughly proven their worth in supporting and underpinning our democracy, there are still no guarantees of financial support for civil society organisations in South Africa. In fact ironically many civil society organisations, having nurtured capable leaders and activists who have subsequently gone into government and business, are becoming victims of our democratic era. The pre-democratic era of funding plenty for many is well and truly over. The past two years have witnessed a dramatic decline (sometimes between 40% and 50%) in funding mainly from foreign donor agencies.

This has rendered a large number of non-profit organisations (NPOs) extremely vulnerable to collapse, with many not only losing their experienced staff and senior leadership – invariably to government and business where conditions of employment and remuneration are better. Many have been forced to introduce drastic cuts to their budgets, operational activities as well as staff, which in turn is destroying the capacity of many NPOs to render the services or carry out the projects in their books. Donors no longer provide operational financial support, which is absolutely crucial to sustaining NPOs, in addition to project funding.

While the situation is dire for everyone, it is even worse for research organisations as they are likely to be regarded by funders as not producing direct, tangible products and services with direct and immediate impacts on poverty alleviation. Many foreign donor agencies and domestic Corporate Social Investment (CSI) programmes are increasingly funding visible and specific short-duration social upliftment projects with immediate, tangible and visible impact in the lives of communities. Many policy research organisations do not deliver social services or implement tangible social upliftment projects to impoverished communities. So there is a shocking decline in funding for grounded policy research and analysis in South Africa. Perhaps funders, like government, are convinced that critical research and thinking around policy, or public dialogue on social and economic policy choices, are unnecessary luxuries, opting instead to focus resources on technical managerial questions of implementation and service delivery. Yet research NGOs fulfil critical functions for our democracy - improving public policy making, informing engaged citizenships and stimulating civic life - the work of public benefit organisations such as research NGOs therefore remains vital, as it complements and supports the important work carried out by service delivery NGOs and government institutions.

Clearly the global economic recession has been a major factor, precipitating the funding cuts by virtually all international doors in South Africa. Some of the major foreign donor funding agencies (such as the Mott Foundation, Kellogg Foundation and DANIDA) have slashed their global funding drastically, in some cases reportedly by as much as 30%. For many NPOs in this country, especially those that rely on international sources of funding for 80% to 90% of their budgets (projects and operational costs), this has been nothing short of catastrophic. The current round of donor funding cut-backs has created a terminal situation the likes of which was only witnessed back in the early 1990s. Between 1992 and 1994 approximately 1000 NPOs found themselves deep in financial crisis due to donor funding cuts, with 200 to 400 organisations eventually collapsing.

Donors had decided at that time to welcome the new post-apartheid democratic order, under the leadership of Nelson Mandela, by shifting the bulk of their funding away from the NPO sector and towards bilateral funding relations with the new government. This was based on the erroneous assumption that, given its popular legitimacy and democratic credentials, the new democratic government would have the necessary institutional (i.e. technical, managerial and administrative) capacity to deliver services efficiently and effectively to the underprivileged. It has become clear now that government cannot possibly meet all the needs of the poor on its own, even with the best will and all the financial resources it requires – it needs civil society organisations to assist, as well as watch over it.

The traditional foreign donor agencies have scaled down their funding drastically or withdrawn completely, mainly due to the worst global recession the world has seen in decades. In addition, major foreign donors are increasingly viewing South Africa no longer as a deserving donor-recipient country. This has prompted many NPOs to increasingly look not only to government but also to domestic business for financial support. There should be positive receptivity from some sections of big business towards supporting NPOs because a significant number of erstwhile civil society leaders and activists of the late 1980s and 1990s are now in the private sector (some extremely successful BEE beneficiaries).

Business and NPOs are part of civil society, comprising key social actors with a keen interest in promoting effective and accountable democratic governance. Many leaders in the private sector do appreciate and understand the value of an independent and vibrant civil society and the role it can play in underpinning democracy in South Africa. Yet it is not entirely clear whether there is sufficient awareness of the devastation that the current funding crisis is wreaking within the sector, especially among policy research organisations. If these organisations were allowed to collapse, the long term consequences for the quality of our democracy will be incalculable.

Business is a potentially important source of financial support for research organisations. One option is multi-year grants, with emphasis on core/general support. Foreign donor agencies have largely terminated their core funding, predominantly opting for project specific funding. Yet as is the case with service delivery NPOs, research organisations need funding for non-project costs (i.e. administrative support staff, information technology systems, office equipment and ongoing capacity/skills development). What puzzles many of us in the sector is that while they insist on effective internal financial controls, proper administrative systems and skilled managers to administer and account for the use of the grants received, many foreign donors are increasingly unwilling to provide the necessary financial resources to ensure that these internal systems and skills/expertise are developed and maintained, and that project implementation occurs within the necessary institutional support setting.

This is where domestic corporate funding can play a vital role. Some corporate entities do provide in-kind support to non-profits, such as donating equipment (i.e. computers, etc.), office space and pro bono expertise which can go a long way in reducing some of the core/general costs of running non-profits in South Africa.

Dr. Thabo Rapoo is the Executive Director of the Centre for Policy Studies.

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