Charities at risk from BEE changes

If the Department of Trade and Industry (dti) has its way and codes for broad-based black economic empowerment (BEE) are revised in line with draft recommendations, then LifeLine will have to start asking the people who seek its services what colour they are.

That is of course a ridiculous notion and is presumably an outcome that not even the most sinister of department bureaucrats would want to see implemented.

But this could be representative of the nightmarish legal reality that will face non-profit organisations (NPOs) if the draft codes are implemented without important crucial changes. Indeed, as they stand, the draft codes would likely freeze critical organisations such as LifeLine out of the corporate funding pool.

While there are many issues in the draft codes that need to be addressed, the two that will have a huge negative impact upon the functioning of the NPO community are contained in section 3.2 of the draft codes. In terms of this section, companies will only be able to score broad-based BEE points when contributing to NPOs if those NPOs are involved in “facilitating income generating activities for targeted beneficiaries” and if 100 percent of those targeted beneficiaries are black.

The codes does not specify income-generating activities, they merely refer to “socio-economic development” and only require that 75 percent of the beneficiaries are black. It is inevitable given the country’s demographics and history that well over 75 percent of beneficiaries are black.

Is there anybody in South Africa who still does not realise how important a role NPOs play in holding families and communities together and empowering them?

According to the National Coalition for Social Services, 70 percent of welfare services are delivered by NPOs.

Inyathelo executive director Shelagh Gastrow says if the draft codes are implemented, the government could be sinking the very organisations it relies upon to deliver critical basic services.

“NPOs help [the] government to meet their constitutional obligations to those vulnerable members of our society who cannot support themselves. The amendments are against the spirit of our democracy and the pillars on which our constitution is built,” Gastrow said.

In its submission on the draft codes, the Charities Aid Foundation of Southern Africa (CAF) pointed out that much of the critical welfare and social development functions provided by NPOs, to millions of poor and marginalised people, was done in partnership with the government. Most NGOs are involved in critical poverty alleviation and developmental areas such as health, home-based care, education, childcare, child-headed households, care for the aged and disability.

“They help to build social capital and facilitate social cohesion. Without the contributions of these organisations of civil society, [the] government’s developmental programmes would be very significantly compromised,” the CAF said.

The 85 000 registered NPOs depend substantially on funding from the corporate sector, which is encouraged to provide the funds because of the broad-based BEE points companies can score. In the previous financial year they provided about R7 billion for NPOs.

About 40 percent of NPOs have had up to half of their funding cut. This has inevitably resulted in significant cuts to services and in widespread staff retrenchments. The staff cutbacks are significant given the country’s dire employment situation. Surely it is time for the dti to assist NPOs rather than choke off their funding?