According to the Non-Profit Organisations Directorate, as of October 2024 there are 295 052 registered organisations on record. That is a large number but what exactly does it mean? South Africa’s population is currently 64.3 million people. This equates to 1 registered Non-Profit Organisation for every 218 people in South Africa, which is grossly excessive. When one realises that this totally ignores the numerous unregistered Non-Profits that operate ungoverned, it compounds the overwhelming truth that our non-profit sector is congested and non-realistic.
By Gordon McDonald, Director of Community Chest
However, the NPO Directorate has declared that 167 103 of the registered Non-Profit organisations are non-compliant. This amounts to 56.6% i.e. more than half of the registered organisations do not have the applicable and current legislative compliances in place. This is not a healthy state of affairs for a vital civil society.
Encouraged by SARS and the Financial Action Task Force (FATF), there is a major impetus by government to remove South Africa from our current grey listing status, (one of the 22 action items which are required to be met by 2026) is to reduce the “risk of terror financing and money laundering through NPO’s”. While the value added to our society through the work of good Non-Profit Organisations is not in question, the Non-Profit Directorate has not, up to now, been active in ensuring good governance in the sector.
The Financial Action Task Force believes that failure to deregister non-complaint NPO’s increases the chances of these organisations being abused for money laundering and to finance terrorism. Reports of NPO’s being “captured” and used to siphon off money from funders for personal gain, abound in the press. This is corruption pure and simple, and sadly these are not isolated incidents.
In response, the NPO Directorate will reportedly commence deregistering non-compliant NPO’s over the next 12 months. In my opinion, it is long overdue, and a much-needed step in the direction of a fully regulated non-profit sector that can legitimately access the country’s funding sources.
SARS have recently recouped in excess of a staggering R1 billion claimed by taxpayers by way of fraudulent Section 18A certificates. Furthermore, in 2025 SARS will be enforcing the new requirements for Section 18A Tax receipts and the IT3(d) Third Party reporting submissions. Simply put, no donor identity number and no Income Tax Reference Number on Tax Receipts will equate to no Income Tax Deduction for donors. Repeated failure by NPOs to submit all required information on Section 18 receipts to SARS, can lead to fines and possibly imprisonment. Non-profit entities have been advised that SARS is serious and will insist on compliance - it is not optional.
If you currently operate an NPO and wish to continue doing so in 2025 and beyond, this is your wake-up call. Now is the time to get your house in order, if it is not already so. Use every resource on offer to assess and action your organisational compliance. Ensure that you get an NPO Status Report from the Department of Social Development, check to see that all your annual reports have been received and accepted by the Non-Profit Directorate since your registration with them. If any are missing, submit them immediately. Get up to speed with the recent SARS requirements around section 18A and ensure that you have systems in place to meet their requirements.
I know that these processes are neither simple nor easy to navigate. I am iterating that continued non-compliance and corruption will bring the sector into disrepute and severely dent the public trust. If organisations within the sector do not make concerted efforts to comply with legislation, it will just be a matter of time before the punitive effects of a reduction in funding, due to a lack of trust, will be felt.
It appears that the Non-Profit Sector will be a lot less congested by 2026…