NGOs play a critical role in advancing social change and transformation, but their current funding model needs to be addressed for them make a sustainable impact in South Africa.\ ______________________________________________________________________________________________________________________

By Kentse Radebe and Ncedisa Nkonyeni

From the Treatment Action Campaign’s advocacy campaign which led to the roll-out of anti-retroviral medication to the gains in making quality education a priority by Equal Education; non-governmental organisations (NGOs) have played an important role in advocating for equality and social justice in South Africa. However, this week, on World NGO Day, one of the most pressing questions facing NGOs in South Africa is whether they are making a sustainable impact.

There are an estimated 200 000 NGOs in South Africa and in 2015, there were just over 140 000 registered NGOs. A report by the Kagiso Trust highlights that the rise in the number of NGOs represents an increase of over 200% over the last ten years. Nazeema Mohamed, the Executive Director of Inyathelo, explains that “the economic recession, unemployment and failed service delivery may be factors impacting the growth of the sector.” A poor economic outlook which has translated into a decline in government spending across critical sectors has meant that NGOs have increasingly been filling an important gap where government services are limited or non-existent. A critique of the growing number of NGOs is that this is representative of the failure of the state and that this makes NGO sextension agents for basic services. This assessment has significant implications for the critical role that NGOs play in advancing social change and transformation.

Competition for funding

The rise in the number of NGOs does not mirror the decrease in local and international funding which has seen a number of NGOs scale back their services or shut down completely. Data from Inyathelo, which focusses on resource mobilisation and capacity building for NGOs, indicates that a majority of newly formed NGOs are small and micro organisations with annual incomes ranging between R50 000 and R500 000. Even though there are significant investments in the sector, the high number of NGOs contributes towards increased competition for funding and, to a degree, this limits the impact within the sector as there is a replication of programmes and a lack of an overarching strategic mission. The challenges of operating in an unpredictable landscape were highlighted during an event hosted by Community Chest to celebrate World NGO Day in Cape Town.

One of the significant highlights of the event was the acknowledgement that the capacity of NGOs to innovate would be greatly enhanced if there was an opportunity to strategically collaborate and move away from working in silos. Collaboration also presents an opportunity to pool resources and invest in broader mission-led initiatives that could strengthen the social impact that NGOs have in communities. This is critical as funding and social impact are key components within the sector.

Complexity and impact

With a decrease in funding, NGOs are placed under significant pressure to deliver high social impact whilst dealing with expectations from funders, work within the confines of restricted funding grants and illustrate positive outcomes. Part of the challenge is that NGOs are operating in a starvation-cycle context; NGOs with limited funding are forced to underinvest in critical organisational operations like financial systems, human resources, and fundraising. Some funding grants explicitly only cover programmatic costs and not the indirect costs associated with delivering an intervention or programme. This often means NGOs are not capacitated to deliver high social impact and this can, in some instances, lead to the mismanagement of organisations. In addition, the unequal power dynamic between NGOs and funders also means that NGOs are not positioned to challenge the rationale for underfunding indirect costs which would allow NGOs to invest in the organisation and be sustainable.

A consequence and contradiction presented to NGOs is that the pressure to illustrate impact, in order to secure funding, sometimes undermines the core mission of the organisation. NGOs invest significant resources in collecting data on selected indicators and targets as opposed to improving the quality of interventions and programmes. In effect, this creates a toxic system, where NGOs are incentivised to “game the numbers” in order to secure funding. Ultimately, in this context, the losers are the under-served and marginalised communities who depend on the critical services provided by NGOs.

It is clear that the current funding model for NGOs needs to be addressed to better meet the needs of NGOs, funders and the users and beneficiaries of these services. We need to build a system where NGOs are adequately supported to do their work and where well-designed outcome and impact measurements help funders, government and communities identify where change is needed.

Ncedisa Nkonyeni is the Systems Innovation Lead and Kentse Radebe is the Systems Innovation Project Manage, both at the Bertha Centre for Social Innovation and Entrepreneurship at the UCT Graduate School of Business.