South African NGOs have to drop their ”cap-in-hand” approach and start working like businesses if they are to survive the economic crisis, a leading social entrepreneur said on Thursday.
Pat Pillai, the chief executive of Life College — a social entrepreneurship training organisation — said an enormous burden would be removed from taxpayers if just 20% of South Africa’s 100 000 registered NGOs adopted a business-like approach.
”South African NGOs are highly dependent on government grants and donors,” said Pillai.
”That 100 000 is a scary figure. When you register as a non-profit organisation it means that at some point you are expecting a handout. South Africans are very good at holding a cap in their hand.”
Deputy President Kgalema Motlanthe said in Parliament recently that the government was looking at scaling back on a number of projects as the budget deficit widened.
NGOs were likely to feel the pinch from this, Pillai said. Many were not likely to survive.
”I’m not suggesting that an organisation that supplies milk to six-month-old babies be run as a social enterprise. In some areas society needs to benefit the most vulnerable. There we simply give support.
”But many charities fall in the middle. Those that are not viable are not going to survive.”
The solution, Pillai said, is for NGOs to adopt a profit-making business model.
”The Tshwane Leadership Foundation, which repairs derelict city properties and lets them out, is a wonderful example of an NGO that has found a way to be financially viable.
”This is a viable no loss, no dividend business. The balance sheet is awesome. The NGO has negotiated low rates and the city benefits too from having its buildings repaired.
”All the profits are ploughed back into the NGO which does work for the community.”
The Automobile Association and National Geographic magazine were other examples of successful NGOs.
”National Geographic started out as a non-profit organisation. It went on to become one of the world’s best-known brands.”
When Pillai started Life College 12 years ago, his aim was to provide leadership and entrepreneurial training to children from poor communities. But he had no money.
”For the first seven years we didn’t get a single cent. We found all the money ourselves.
”Our aim was to do everything possible not to rely on donations and not to make a loss. When we had that right, that was 80% of the problem solved.”
Once the expenses were covered, the next step was to make a surplus that could be ploughed into the organisation.
Life College began finding beneficiaries ”worth investing in” and then ”traded its product” with the corporates.
Slowly the profits started to roll in.
Today Life College sold educational services and products to clients such as to Investec, the defence force and Ster Kinekor.
The college tried to instil a mindset in students that ”you can’t get everything for nothing”.
”The learners have to pay what they can to come on the course,” Pillai said.
”They pay R2,50 an hour, even thought the real cost is R100 an hour.”
Pillai said the approach of successful NGOs should be no different to the approach of a strategist at Anglo American or Engine.
When NGOs were profitable it was far easier to attract the interest of investors.
”It is only once you achieve growth and are able to build traction that you will draw interest to the work you are doing.
”The businesses get to know and respect you. They know that you can offer a valuable product. That makes your work as an NGO a lot easier.” — Sapa