Making sense of funding the humanitarian ecosystem in South Africa

Last week I wrote about two research reports that was released in the last month and I focused specifically on the insights of the Trialogue Business in Society 2022 Handbook and The Giving Report issued by Nedbank Private Wealth.?These two reports focused on the giving practices of corporates (#CSI) and high-net worth individuals (#HNWIs) in South Africa. The three most salient points from these posts are:

1. Cash giving from business and high-net worth individuals #decreased
2. Noncash giving (products, services, skills and volunteer time) #increased
3. Spending on monitoring, evaluation and research is basically #nonexistent

And I alluded to the fact that this has dire consequences for the social sector. More specifically, social purpose organisations cannot use non-cash contributions to pay salaries and rent or invest in support, management, measurement, programmatic or technology to become more effective.?They too are affected by cost-of-living increases and products and services, volunteer skills and time (worthy as it may seem) cannot lead to a more effective, efficient and impactful sector.?One simply cannot do more with less.

Today – I want to highlight a few more issues and I am really looking forward to robust debate and discussion, comments and feedback, so please let me know what you think.

Reduced funding:

Whilst it is true that funding has decreased, it is important to understand what types of funding has reduced and why:

1. Reduced contributions: In this regard one has to consider the impact of reduced giving from state-owned enterprises who are facing a range of challenges including financial survival and who used to be large and substantial sources of funding for the social sector for example - the Transnet Foundation, the Eskom Foundation, SAA and SABC foundations and then of course – the allegations of bribery, corruption and misuse of what was supposed to be the largest social fund in South Africa – the National Lottery.
2. Reduced profitability: Corporate South Africa are still feeling the impact of Covid which has a direct impact on their profitability, and new challenges of rising inflation and interest rates are also having an effect. Coupled with a declining economy, destabilizing political environment, the fact that companies must make provision for becoming more self-sufficient with regards to energy and water security, all means that there are other critical priorities to consider. Quite frankly, they have less to give.
3. Reduced donor base: ?In addition, some companies of course are either facing business rescue or bankruptcy – and traditional large contributors like Tongaat and Steinhoff have left a mark and as such, the pool of corporate and business donors are shrinking.
4. Increased competition:?Of course, the entry of new actors also has an impact.?Consider for example the impact of traditional corporate funders like the MTN Foundation that are now working with the likes of UNICEF across Africa, that are also focusing on new development portfolios, and who are implementing their own programs, all of which means less for traditional social purpose organisations. And whilst the corporate donors are giving less, more social purpose organisations are being created all the time.

There is much more information to consider:

Let’s be clear. The two reports albeit very important only focused on 2 contributors to the sector.?In my humble opinion there are a) bigger and broader funding trends that we must be aware of to really understand the status and flow of resources ?in the humanitarian ecosystem and b) many other sources of information to consider in understanding the broader social sector and social funding systems. For example:?

1. The OECD Center of Philanthropy released a report on Domestic Philanthropy for Development and Gender Equality in South Africa, which makes for fascinating reading on new development priorities.
2. One must consider South Africa’s place from a Pan-African perspective, a sub-Saharan perspective as well as a Global South perspective. ?And in this regard great work is being done by the Cambridge Centre for Strategic Philanthropy in collaboration with CAPSI – the Center on African Philanthropy and Social Investment.
3. Of course, the Charities Aid Foundation World Giving Index that focuses on the giving of ordinary citizens and individuals provides another layer of insights.
4. Then there is the hard-hitting research report, co-commissioned by Vodacom, Safaricom and Vodafone Foundation suggesting that the sustainable development of the not-for-profit sector in Africa is being challenged by an imbalance in international investment. Foreign funding is predominately flowing to donor organisations headquartered in the Northern Hemisphere rather than going directly to the 90% of African civil society organisations (CSOs) that remain dependent on it. The Barriers to African Civil Society: Building the Sector’s Capacity and Potential to Scale Up is therefore another report that must be considered.

5.?????Lastly, there is great work being done by institutions across Africa, including:

• African Venture Philanthropy Alliance
• Africa Grantmakers Network
• Africa Philanthropy Forum
• East Africa Philanthropy Network
• Independent Philanthropy Association of South Africa (IPASA)
• Africa Grantmakers' Affinity Group
• Philanthropy Leadership Network

The sector is much more complex than you think:

Whilst the two reports I shared in my previous posts provide some overview of the sector, there are several other aspects to consider, for example:

1. Additional corporate resources: Several companies in South Africa outsource their CSI to social investment management company Tshikululu - who in 2021 had close to R1 billion funds under management. Of course, we must assume this money was already accounted for – as Trialogue base their figures on publicly available information (calculated at R10 billion) as reported by corporate South Africa. Their client base includes the likes of Discovery, First Rand, Absa, etc.
2. Additional private resources: We must also assume that the figures provided by Nedbank are from their own HNWI clients and the funds managed by their family office and which excludes any other bank’s family offices, for example Absa, Standard Bank, Investec etc. So, for the sake of not double counting – I just wanted to make these points very clear.
3. Additional impact funds:?And whilst the two reports focused on donor/grant-based funding, one cannot ignore the growth of impact investment funds. Whilst these funds are primarily directed at for profit and social/impact enterprises – they are also considered by not for profits wanting to diversify their income to achieve greater sustainability.?And here we can consider for instance the likes of the Green Outcomes Fund or the Graca Machel Trust’s Gender Lens Investment Fund or the Old Mutual Alternatives Education Investment Impact Fund.

The question should now be: ?Based on the two reports, Is this the only money in the sector and should we be despondent? And the answer is a resounding NO!.?

In my humble opinion, there are at least double the R14billion reported on by these two reports.?However, to find out where this money is, where it comes from or how it is spent is a mammoth task. Let me explain:

The sector is much bigger than you think:

1. What is not included in this research and what practitioners and fundraisers must be aware of are the contributions made by private and independent foundations and trusts.?The Independent Philanthropy Association of South Africa’s membership includes a substantial portion of the unreported money, for example: The Carl and Emily Fuchs Foundation, The Oppenheimer Memorial Trust, the Millenium Trust, The Mergon Foundation, etc.
2. Then there are the newcomers to the sector, like the Hollywood Foundation, the Merck Foundation, Amazon Web Services, Netflix and Google that are not being considered.
3. Then there are the smaller and medium sized unlisted companies that operate and contribute much more locally.?Consider for example the power of local, place-based investment in towns and cities like Stellenbosch and Durban where organisations like Ranyaka and the Do More Foundation are able to mobilize local medium and small businesses to invest in community initiatives as well as bring international donors on board.
4. Also not included are international company foundations operating in South Africa, but because these companies are not registered on the JSE, they go unnoticed, for example: the Lego Foundation, the Waitrose Foundation, the Albert Heijn Foundation, the Pepsico Foundation, GE Foundation, etc.
5. We should also pay special attention to personal Foundations and Trusts of celebrities and in this regard consider the Trever Noah Foundation, The Kholisi Foundation, The Charlize Theron Africa Outreach Project or the Princes Charlene of Monaco Foundation.
6. The funds being raised by local social organisations through their international fundraising offices and officers for example: The Comic Relief Fund, the Michael and Susan Dell Foundation, the Bill and Melinda Gates Foundation, and of course, McKenzie Scott who already funded three South African social organisations.
7. In addition, the function, value and contribution of intermediaries and the funds they raise and manage, the role they play between funders and communities are unaccounted.?For example: The Community Chest, The Social Change Assistance Trust, the Learning Trust, the Children’s Trust, the Peace Parks Foundation.
8. Very important new sector players includes the Community Foundations and Trusts that is being set up by the Independent Power Producers, similar to the Mining Sector (as part of their BBBEE, transformation initiatives and license to operate conditions), that makes an enormous contribution specifically in rural areas where their mines, solar and wind farms are located, for example – the Vredendal Solar Community Trust, the Kouga Wind Farm Community Development Trust, The Sibona Ilanga Trust, the Lefa La Rona Trust.
9. Then there is the company empowerment trusts for example: Nedbank Eyethu Community Trust, the Old Mutual Masisizane Fund, The Sishen Iron Ore Company-Community Development Trust (SIOC-CDT) to name a few.
10. One of the latest developments are collective funding and collaborative movements, and some of the organisations to be considered include for example the Impact Catalyst, the National Association of Social Change Entities in Education (Nascee).
11. One must also dig into specific development and investment portfolios and sub-categories – for example within education and specifically bursary funding – there is much to consider, as the Annual Survey of Philanthropy in Higher Education study (ASPIHE) issued by Inyathelo highlighted. For example the funds being raised by Advancement Offices from bilateral and multilateral, local and international funders like the The Moshal Scholarship Program, the Kregse Foundation, the Claude Leon Foundation, etc. Or for example specific portfolios such as health where funders like the Swedish Postcode Lottery, Charity Projects Ltd (Comic Relief), Oak Foundation, the Wellcome Foundation, Arcus Foundation, MasterCard Foundation, William & Flora Hewlett Foundation and Conrad N. Hilton Foundation that focus on health and reproductive health for instance.
12. Attention should also be paid to the contribution of overseas development aid (ODA) and development finance institutions (DFIs) which include for example aid from Japan, the UK, the US, Sweden, Norway, Denmark, Germany.?And whilst most of this money is directed to specific ?government departments, a lot gets spend on community-based projects through country embassies.
13. Lastly, consider the new categories of funding – for example ?– the Social Employment Fund, the Jobs Fund,?or theme related funding – for example the Africa Climate Foundation, or The Global Water Foundation.?Neither can we ignore performance and outcomes based or innovative and blended funding – think about the sterling work being done for example by the Standardbank Tutuwa Foundation or Innovation Edge which are impact-first investors focused on solving early childhood challenges in South Africa. And/or the funds being raised by impact entrepreneurs from the likes of the Co-Impact Fund, or E Squared also an impact first investor who provides capital and non-financial support to Allan Gray fellows, as well as other entrepreneurs through various funding programmes, The Draper Richards Kaplan Foundation or the innovation and challenge funds like the SAB Innovation Fund.

The sector requires much more sense-making:

So, what is my point with all the information shared above?

• From a funding perspective: Please do not think for one moment that the total size of the sector is just R14billion.?It is much bigger, and most of it is under the radar!
• From a development perspective:?Social purpose organisations must work very hard to find information, research, and insights to understand the complexity of the sector or where to find funding.?It requires extensive knowledge, large networks and many connections, a deep understanding of development practice ?as well as an enormous amount of capacity, competency, human and financial resources to raise funds!
• From a research perspective: Which in my opinion is the most critical aspect – we need much better information and much more research, we need to aggregate, triangulate and synthesize the information and data and more importantly, it has become critical that we start mapping our ecosystem! But to do this we will need capital, technology and resources.

And this last point is the most critical aspect and is the reason that I started with this serious of articles.?Whilst the reports being published is credible, and much needed - we need much more information.

Donors, grantmakers, philanthropists, investors and practitioners need more information to make better investment and development decisions.?And social purpose organisations need to know who to approach to implement better and more impactful interventions and ultimately serve their constituents better. And in this regard, a decline in giving and almost zero spent on research and monitoring and evaluation makes very little sense.

We need to start mapping our ecosystem, we need to know a) who the actors are, b) where and to whom the funding goes c) what is being funded d) what the money is used for e) any shifts in funding allocation f) broader trends regarding funding in the sector and most importantly, g) the impact and value the sector creates.?Our biggest challenge is - how much is the sector contributing to the GDP of the country. What power does the sector have and what impact do we create individually and collectively?

Clearly good work is being done, and an enormous amount of money is being spent – yet currently – we operate in the dark and in isolation. We cannot leverage, coordinate or collaborate, as there are far too many gaps in our information and knowledge systems that could potentially lead to efficient, effective, transformative, impactful, meaningful and sustainable development.

In conclusion:

In South Africa, and in a post-pandemic context, we are faced with a myriad of social challenges. We live with growing expectations and uncertainties. As we enter a new year, the humanitarian ecosystem will be called upon to play a bigger role in rebuilding our economy, to serve and support more communities, address growing challenges related to the climate challenge, food insecurity, education, welfare, health, unemployment, gender-based violence and a range of other social issues. And in this context, we cannot afford reduced cash spending on socio-economic issues, we need to focus relentlessly on better research data, more impact data, on growing the ecosystem and making it more sustainable, resilient and inclusive and ensure it is better resourced and equipped. And in this regard we cannot simply focus on program funding, we have to extend our resources to build the capacity of the sector – on all levels including institutional and organisational.

For this reason, it is no longer good enough just to do good, complying with minimum sector requirements, or promoting our brands and improving our reputation. In the words of Dr Taddy Belcher from the Trialogue Report:

We need to relentlessly focus on impact – measurable, repeatable, reliable, sustainable, scalable and low-cost impact. We need to seek it out, nurture it and scale it. We need to be smarter, with fiercer and sharper intellectual discrimination, with bold determination, alongside expanded hearts, to find entirely different ways of reimagining the world.

Reana Rossouw - Next Generation Consultants is a management consultant that has worked for more than twenty years in the socio investment and development sector.?For more information please visit our websites to find out more about our research, advisory, capacity building and impact management and measurement services:

Next Generation Consultants or Investment Impact Index

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