South Africa

AMABHUNGANE OP-ED

The NPO Amendment Bill is a mess, awash with inconsistencies and clumsy provisions

(Photo: iStock)

For a bill so long in the making (consultations began in 2012), the Nonprofit Organisations Amendment Bill is a mess. Released without an explanatory memorandum and with clumsy, half-drafted and contradictory provisions, its true intent and impact is virtually incomprehensible to those who have noticed it.

The Nonprofit Organisations Amendment Bill, 2018, released for public comment in October 2021, has had a long and difficult gestation and now faces a storm of opposition and interrogation.

The seeming intentions of the bill, which seeks to amend the Nonprofit Organisations Act, 1997, include the following:

  • To re-align and capacitate the NPO Directorate (to be renamed the office of the Registrar of Nonprofit Organisations);
  • To make some quick fixes that will allow greater flexibility in required reporting standards (enabling, it is hoped, higher levels of compliance); and
  • To deal with some big issues like fraud, money laundering and multiple NPOs with identical names.

For a bill so long in the making (consultations began in 2012), it is a mess. Released without an explanatory memorandum and with clumsy, half-drafted and contradictory provisions, its true intent and impact is virtually incomprehensible to those who have noticed it.

The bill also seems to be constructed with little or no awareness of other relevant legislation or practical implementation considerations. Bubbling beneath all of the other concerns is this one: the directorate is established to support, enable and serve nonprofits in their vital work, but does it have any idea of the reality of governing, leading and making a real impact as a nonprofit?

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Some examples of ineptitude, mysteries and missteps in the bill include:

  1. The header to the bill, which indicates that it will “provide for the Arbitration Tribunal for the disputes resolution”’. Poor grammar and also the only mention in the bill of the promised “Arbitration Tribunal”; and
  2. The proposed amendment to section 2 of the Act, which mentions “compulsory registration of foreign organisations operating within the borders of the Republic of South Africa”.

A storm has erupted over this provision, which:

  • is an utter departure from the principle of voluntary registration so far enshrined in the NPO Act;
  • is not accompanied by any definitions of or clarity on the crucial word “operating”. Do they mean international donors? Or organisations doing public work here? Or just “foreign organisations” raising funds locally?
  • does not refer to the perfectly good, useful and detailed provisions of section 23 of the Companies Act, section 8 of the Trust Property Control Act or section 21B of the FICA Act, which regulate local registrations of foreign entities. In particular, section 23 of the Companies Act already provides that any external nonprofit organisation must register with CIPC within 20 business days after it first began to conduct nonprofit activities in South Africa. Section 23 goes on to provide clear instruction on the point at which registration will be required. A legal mechanism therefore already exists for local registration (and inclusion in the SA tax system, which happens on registration with CIPC) for foreign entities which cross the lines;
  • is followed up by a patently incomplete proposed amendment to section 12 of the NPO Act, suggesting the addition of a subsection (s) to read:

Any nonprofit organisation, including foreign nonprofit organisations that intend to operate business within the Republic must be registered in terms of this Act before operate and shall be subjected to the provisions of this Act and other laws of’ 

It really does end like that. It also (apparently inadvertently) throws in a major curveball in seeming to require the compulsory registration of any nonprofit, ie including local ones.

  1. One last example: a proposed additional subsection (4) in section 12 which bans the registration of any nonprofit whose name is “similar or identical to” or “likely to cause confusion with” any organisation or person.

Now this one sounds like a good idea – until one considers:

  • the multitude of existing NPO registration already in place with the same or similar names;
  • that the current system for applications has no inbuilt check on existing names, so delays are certain;
  • that there is no searchable consolidated database of all nonprofits, who may be on the CIPC database (if registered as NPCs) or registered with the (paper-based) system of any one of the (not connected) Masters of the High Court, or else just established under common law;
  • that NPO registration is not fundamental to legal existence, but is a voluntary add-on registration for existing legal entities (voluntary associations, trusts, nonprofit companies) which will already have been legally established under a certain name. The bill does refer to an exception for organisations which are already legally entitled to their name (NPCS and trusts), but for the NPO Directorate to refuse to register a voluntary association because its name is similar to that of another, is like a bank refusing to open a bank account, or the education department refusing to register a school, for the same reason.

Much more thought and some real understanding of the legal issues are clearly required.

Once alerted to the existence of the bill, the nonprofit sector’s response has not been positive and is divided into:

  • those who think it is a poisoned chalice which takes big issues too lightly or which might be serving a hidden political agenda, and which needs to be paused while a proper, well-informed policy is developed in conjunction with the sector it is supposed to serve;
  • those who see an opportunity in the current forward-impetus of the Directorate to get some quick fixes and possibly support a move by the NPO Directorate to extricate itself from the lumbering monstrosity of the Department of Social Development; and
  • those who do not know about it or, if they do know, do not care.

The last category mentioned, of those who no longer care, points to a central concern: after almost a decade of failure to update and clean up the register of Nonprofit Organisations, NPO registration (which is a voluntary status) has steadily lost credibility and meaning, both within the sector and with donors (the ones it is meant to satisfy and impress).

Organisations that do have NPO status have, understandably, become nonchalant about filing their required annual reports, as there has been no real consequence for non-compliance. And I am increasingly meeting new nonprofits who see no real value in obtaining NPO status at all.

When the long-delayed clean-up of the NPO list/Register commences, my prediction is that many organisations will be unable to catch up the many years of required reports or will weigh up the administrative work of so doing and, instead, let their old NPO registration number lapse and simply apply for a new one.

That the registration system is one that permits (indeed, seems not to notice), fresh registration applications by organisations which are in arrears with reports, is just one clear indicator of the current lack in both systems and capacity at the NPO Directorate.

As the examples have shown, this lack of capacity is borne out by the bill itself, which is awash with inconsistencies and clumsy attempts.

The nonprofit sector is irritated and offended. 

The timing could not have been worse, coming on the back of two hard Covid years which saw the nonprofit sector – underfunded and on the brink of collapse – working harder than ever before.

Nonprofits have banded together across the country to debate the bill and coordinate responses. The grouping that ngoLAW has been working with (coordinated by Inyathelo) represents over 180 organisations doing a wide range of work (some examples: Equal Education, Media Monitoring Africa, Milk Matters, National Coalition for Social Services, Kagiso Trust, Scouting SA, Community Chest of the Western Cape, Pietermaritzburg Child Welfare).

This large group has set up a Working Group to coordinate a broad sector-backed response to the bill and has articulated a strong response to the bill during their online engagement forums and in written communications.

Early outrage at the short deadline given for comments (just four working days between the eventual issuing of the “explanatory” memorandum to the bill and the closing date for comments) has pushed the Directorate into participating in and hosting some online events to allow for discussion of the details.

In the online sessions, the Directorate has given verbal assurances that some of the more alarming (and, it seems, unintentional) clauses will be removed, though the need for a concerted effort by NPOs to ensure that this happens – and a fit-for-purpose version of the bill be taken forward – remains.

In response to demands from the nonprofit sector, the deadline for submissions has been extended to 30 April 2022. Submissions may be made via email to: [email protected]; [email protected] or [email protected] .

For a copy of the bill, see https://pmg.org.za/bill/1041/ and for the ngoLAW summary of all the submissions so far made (including our own made in conjunction with other nonprofit professionals) email us at [email protected].

ngoLAW has also produced and Inyathelo will make available on their website a submission format, which refers to the provisions which are contentious and provides for submissions and comments to be made. DM

A specialist legal consultant to the non-profit sector for close on 30 years, Nicole Copley (BA, LLB, LLM-Tax) is a Master Tax Practitioner, lawyer, author and publisher of the ngoMATTERS series of practical guides for nonprofits. She is passionate about building and supporting sustainable and credible nonprofits. Copley is founder of ngoLAW: a one-stop, experienced, efficient support team for NGOs. She represents ngoLAW on a working group of concerned NPOs responding to the bill in a process in which amaBhungane is also involved by providing inputs and suggested amendments.

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