- In 2020, two-thirds of South African NGOs reported severe income losses
- Another hard lockdown could cripple the entire sector.
- The dire situation has led to the thrivers and sustainers of the NGO sector becoming the strugglers.
- Government has reduced its social development spend with a reduction of R6.5 billion (3%) in 2021 – seen in light of rising unemployment, currently at 32.6%,[i] a crisis is looming.
- The reality is that society has required nonprofits to take the lead on most humanitarian efforts since the start of the pandemic.
- Perhaps it is time for Cabinet Ministers to do more than revisit the restrictions imposed on citizens and organisations doing good, and to dip into their own pockets.
The pressure on NGOs since the first lockdown over a year ago has not subsided by any means and the news of another hard lockdown could cripple the sector entirely.
Especially in light of a survey by Tshikululu Social Investments in 2020,[ii] reporting income losses for two-thirds of NPOs since the beginning of lockdown and indicating that the sector could take years to recover, with some organisations not recovering at all.
However, there has been little movement at a policy level to ease the burden on NGOs of delivering vital social services. While the President called on citizens to remember that “complacency comes at a high price” this is true for government too. Its inability to roll out the vaccines has led to further trauma in the sector.
Dr Armand Bam, Head of Social Impact at the University of Stellenbosch Business School (USB) says whilst scholars and practitioners have raised the red flag regarding an unprecedented strain on the finances of NGOs, little can be seen by way of policy development that recognises the support required in this sector.
“The government has reduced social development spending by 3% in 2021 – this is a reduction of R6.5 billion from the initial allocation of the 2020/21 MTSF which will culminate into cumulative reduction of R38.5 billion Rand over the next three years. This is spending typically directed to recipients via nonprofits and needs to be seen in light of rising unemployment, currently at 32,6% and the highest since StatsSA started the Quarterly Labour Force surveys in 2008, impacting on government’s ability to gather taxes from its citizens, of which a portion is used for nonprofits to deliver services.”
“What we witnessed with the initial hard lockdown was an almost immediate suffering amongst nonprofits. NGOs had to adapt – and in many cases, expand – their programmes and how they were delivered while at the same time cancelling many fundraising events, the lifeblood of many nonprofits.
“The question we must ask ourselves as a society is whether this sector can continue to absorb this pressure and what will be the true impact of a constriction of their activities that a harder lockdown will bring?”
Dr Bam said a number of studies pointed to the rising calls for services coinciding with a loss in funds to provide the services.
An international study[iii] in 2020 showed that more than 60% of NPO’s suffered the impact in a decline in individual donations. More significantly, over 50% of these NPOs indicated the need for retrenchment of staff, reduced working hours or reduced pay in order to stay afloat.
The situation in South Africa was no different – in the Tshikululu survey of over 300 NPOs, 66% of respondents indicated an immediate impact of lockdown on loss of income, in some instances a loss of over 75%, and two-thirds said that the impacts of the pandemic threatened their resilience and sustainability.
More than a third of the local NPOs surveyed had also taken steps such as temporarily laying off staff, reducing working hours or cutting salaries.
“A lasting impact was a common sentiment expressed across these studies. NPOs were due to experience at least 18 months of hardship before they might be able to revitalise their organisations. Many nonprofits have not recovered from being forced into new ways of balancing the value of their social mission with the viability of their operations,” says Dr Bam.
He says NGOs are organisations that address societal problems, tackling issues that business and government are unable and unsuited to address on their own. COVID-19 has brought their utility to the fore and the disruption of the pandemic has required nonprofits to take the lead on most of the humanitarian efforts during this time.
“We need clarity in this time of crisis. While we can praise the efforts of NPOs during this time, it has also exposed the soft underbelly within this sector. There has always been, and will always be, a reliance on business and government to finance the delivery of NPOs’ services. The liquidity of many of these organisations at the start of the pandemic was already at stake with most operating with less than three months’ operating reserves, restricting their financial flexibility.”
The BDO Nonprofit Standards Benchmarking Survey 2020[iv] showed that in past economic downturns, it had typically taken NPOs five years to fully recover.
“Those organisations that were able to thrive and sustain themselves had at least six months of net assets at their disposal with no restrictions and were able to invest in technology. This is, and has not been, the case for many NPOs in South Africa and we have seen thrivers and sustainers become strugglers,” he said.
Dr Bam says while many nonprofit organisations have been able to adapt to some degree to new ways of operating, the recent murmurings by government and political leaders of harder lockdowns is cause for concern.
“Access to health, education, food security, decent living conditions, at a minimum, are expected in flourishing societies. Our greatest challenge of addressing inequality in these areas will be further set back if NPOs cannot continue to do the work required. Understandably, the need to ensure our health care system is not overloaded must be considered, but what more then can we do to ensure that NPOs are still able to deliver on their mission and remain viable?”
Dr Bam says more emergency funds are clearly not the answer. With South Africa’s economy forecast to recover to pre-COVID levels only in 2025, he says “we are in for a rough ride”.
He points out that the slow vaccination rollout has contributed significantly to delaying this recovery.
“We must bear in mind that any return to a hard lockdown will subdue this economic recovery and stifle prospects of growth. We are too easily invited to ‘family gatherings’ while our government does not act with responsibility. Let the leadership once again show with intent their solidarity with citizens and put their money where their mouths are! It is time for Cabinet Ministers to do more than revisit what restrictions to impose on citizens and organisations doing good and to dip into their own pockets. A salary sacrifice should be on the cards as well.”
[i] Stats SA. Quarterly Labour Force Survey, Q1:2021. http://www.statssa.gov.za/publications/P0211/Media%20release%20QLFS%20Q1%202021.pdf
[iv] BDO 2020 Nonprofit Standards Benchmarking Survey. Download at https://www.bdo.com/insights/industries/nonprofit/nonprofitstandards
Press release supplied by Linda Christensen
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