According to a study conducted by Inyathelo, there were 220 543 NPOs registered with the Department of Social Development in 2019. The number of NGOs has increased by more than 40% in the last three years.
Why this matters is because NGOs typically (and unfortunately) compete for funding. Starting an NGO does not mean easy access to funding and NGO leaders usually find it quite challenging to raise enough funding to keep their NGOs in good financial health.
If you are planning on starting an NGO, or have already started one, it is a good idea to draw up a summary of the every-day expenses of the NGO. That way you will have a rough idea of how much money the NGO will need to run smoothly on a monthly basis.
Once you have done that, you can start planning your different income streams for the NGO. It is a good idea to have more than one income stream as the decision by one big funder to withdraw funding can sometimes force an NGO to shut down due to lack of funds. Multiple funding sources makes this less of a possibility.
There are different ways to fund an NGO, which we will briefly outline:
Grants
The bigger, more formal and tightly regulated NGOs are more likely to rely on grants. These are usually issued by state agencies, foreign offices of developed countries and similar organisations. Grant proposal writing can be time consuming, and smaller NGOs do not always have the resources for this.
Corporate Social Investment (CSI)
In South Africa, many companies want to make a positive difference in society by giving back to causes they care about. Some companies have very structured CSI budgets and application processes, whereas others decide where to allocate funding on a more informal basis. If you decide to appeal to a company for funding, here are a few pointers:
Give yourself enough time. Companies usually determine their budgets long in advance, so approach them long (6 months to a year) before you are hoping to receive the funds.
Do your research. For example, if you are an NGO that wants to teach unemployed youth how to bake so that they can sell baked goods as a means of making an income, then use google to find companies that sell baking supplies. They may also want to get B-BBEE points for supporting a skills development initiative in their sector. Also try and find out exactly who the specific contact person is, and address your appeal for funding to them. If you send an email to many "info@company name-type addresses", the chances of getting a response are very small.
Good governance. Even if your NGO is very small, make sure that you can at least show a record of how funds are spent. If you are registered as an NPO, NPC or a trust, make sure that all your records are up to date and that you have had your annual meetings as required.
A vision, a plan and a budget. Have a vision and a clear plan for the organisation that you can easily and clearly share with potential funders. Break this down into smaller, attainable and practical goals with funding requirement amounts attached to them. This way people can also give smaller amounts.
Stories to share. If you can tell (true) stories of the issues/ problems that your story is helping to address, backed up with facts, it can be more effective to help illustrate how you are adding value. You can also build a collection of photos to share with potential donors. Here are some photography tips for NGOs and on how to take good photos with your smartphone.
Have a list of needs. Have a list of requirements whether they are specific items that you wish donors to purchase, or specific services that you need volunteers' help with. If you need to set up a vegetable garden or IT network, ask for volunteers and decide in advance what tasks need to be done and communicate this clearly.
Tax benefit for donors. If you would like to appeal to private donors and companies for funding, and you have already registered as a NPO, NPC, voluntary association or a trust, then you can apply to SARS for a special tax exemption that allows donors to receive a tax benefit for donating to your organisation. This is known as section 18A status, but it is quite a strict application process and you have to specify what activities your organisation performs, as not all functions performed by NGOs are deemed to be worthy of receiving section 18A status. NGOs that have section 18A status need to issue receipts of donations received, to the donors. Here's more on how this works.
Crowdfunding
This is a relatively new concept and works on the principle of many (an online "crowd") donating money towards a cause or NGO. There are a few websites where you can put your project up, with a description and pictures, to ask for funding. This sometimes takes time and it also takes effort. It helps to share the link, get the word out and engage with potential donors via email, sms, social media and in person, to appeal for them to donate. Note that some crowdfunding websites (they are also called "platforms") take a percentage of the funds donated to cover their overhead costs.
South African crowdfunding websites:
Social Enterprise
While the concept seems relatively new in South Africa, basically, what this is a business that aims to solve a social issue or problem, while generating an income. The biggest aim is not to make money, but rather to address the social issue, and the returns are usually reinvested in the business to keep it operational. Because of the shortage of NGO funding in South Africa, it is good for NGOs to start thinking how they could start charging a small fee or making an income from what they do. While this is not possible in all cases, it is helpful because it allows the NGO to be more less reliant on external parties for its funding.
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