Barry Streek
An NGO, Project Literacy, has been told that in terms of new regulations it will no longer qualify for state tenders because it is not a company with shareholders. Government tenders are awarded on a points system that favours ownership by previously disadvantaged groups, women and the disabled. The proposed qualifications will effectively exclude NGOs from tendering for government contracts because they will not qualify for additional points granted for “equi-ty ownership”. “It seems ironic that while all government white papers talk about partnering NGOs as delivery agents, the State Tender Board is favouring small ‘newborn’ providers that may have two black shareholders, whereas NGOs, who have 80% to 90% black staff and board members and a track record, fail to gain points in a tender process,” says Project Literacy’s chief executive officer Andrew Miller. After an urgent meeting with the director of the State Tender Board, Jan Bedford, who confirmed that in terms of the proposed regulations NGOs would not qualify for additional points on the basis of equity ownership, Project Literacy has submitted an urgent appeal to Minister of Finance Trevor Manuel to delay finalisation of the regulations. “We are of the opinion that we have lost certain tenders to small entities, such as close corporations, solely on the basis that they have achieved points for equity ownership,” the organisation’s client relations executive, Regina Mokgokong, said in the appeal to Manuel. “In our view certain of these entities do not have the skills and capacity to deliver. We are concerned that certain entities are established as ‘front’ entities solely for the purposes of obtaining additional points for equity ownership in submitting tenders,” Mokgokong wrote.
Mokgokong argues that the new regulations are not only unfair but unconstitutional. Accordingly, these regulations should be changed to allow a bona fide NGO, whether a Section 21 company or trust, to participate in tenders and to receive the same number of additional points awarded for equity ownership. Meanwhile, representatives of NGOs have met in Johannesburg and Cape Town to consider the list of public-benefit activities drafted by the South African Revenue Service to provide tax-exempt status to stipulated NGOs and have expressed concerns about the “shortcomings” of the draft lists.
Eugene Saldanah, the director of the Non-Profit Partnership (NPP), which is spearheading the NGO lobbying of the government and the South African Revenue Service on the issue, says: “We are sensitive to not handing out tax-exempt status willy-nilly, but the NPP believes that, in principle, all [NGOs] should qualify for tax-exempt status.” A number of NGO representatives have called for Section 18a of the Income Tax Act, which grants tax breaks to individuals and companies, to make tax-deductible donations with specific sectors to be expanded across the non-profit sector. “Currently 47% of all corporate funding is going into education, because the bulk of the 18a tax breaks are granted to educational institutions.
By further widening the scope beyond Manuel’s announcements in last year’s budget speech, we will change the patterns of corporate donations to a broader range of deserving causes,” says the NPP’s Laura Maxwell Stuart.