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International Experience in Enhancing Philanthropy: Lessons from South Africa and Elsewhere

By John D. Gerhart, President, the American University in Cairo

The Conference on Indigenous Philanthropy
Islamabad, Pakistan - October 16-17, 2000

Introduction
It is a pleasure and an honour for me to be present at this important meeting and I am grateful to the Aga Khan Foundation for inviting me. Although I am now the President of the American University in Cairo, I am speaking primarily on the basis of a long experience with the Ford Foundation, in East Africa, in Egypt, and in South Africa. In particular, I think the South African experience may have useful parallels with the situation in Pakistan. Both countries possess vibrant private sectors, a rich array of community based organisations, and a strong tradition of religiously motivated giving to social causes. All three characteristics are important for the development of a healthy philanthropic sector.

The Case for Indigenous Philanthropy
The case for a healthy private philanthropic sector in every country is overwhelming. Governments are constantly hard-pressed to meet basic needs and to perform basic functions and will never have the resources to fully meet the needs of the disadvantaged in society. Moreover, local knowledge of problems and of resources is essential to the effective design, execution, and evaluation of successful programs. The high level of voluntary activity that goes along with indigenous philanthropy is often as important or more important than funding per se. Studies in North America indicate that Americans on average give two hours a week to voluntary causes and those that make financial gifts volunteer much more time. This is also borne out by the work of the Initiative on Indigenous Philanthropy here in Pakistan, which indicates that 58 percent of Pakistanis volunteer their time to needy individuals or worthy causes. The highly useful role of businessmen in advising charitable organisations is essential to their probity, legitimacy, and success. International donors usually have an uneven geographical distribution of effort and short, emergency-oriented approaches. Moreover, even where international donors are active, they seldom have the local knowledge, language, commitment or resources to make a lasting impact. Only a long-term sustained effort to address the causes as well as the consequences of poverty is likely to succeed.

The Infrastructure for Effective Indigenous Philanthropy
What types of institutions and policies are necessary to promote effective indigenous philanthropy? There has been a rapid growth in indigenous organised philanthropy in the developing countries in the past decade and some generalisations can be made about what enhances effective development of indigenous philanthropy. Country studies, such as the one being undertaken here in Pakistan by the Social Policy Development Centre with support from the Aga Khan Foundation and the Johns Hopkins University Comparative Nonprofit Sectors Project, indicate that between six and ten per cent of Gross Domestic Product may be attributed to the non-profit sector, which employs tens of thousands of people. National accounts in many countries are being modified to measure this "third sector." Tax policies have been recognised as an important stimulus to philanthropic giving, although personal motivation, especially religious motivation, lies at the root of all philanthropy. In some countries, including Mexico, Brazil, South Africa, and the Philippines, organisations of private foundations and donor agencies have played an important role in promoting beneficial public policies and improved giving among private donors. Following the growth of the Internet, information networks have grown up, such as WINGS, the Worldwide Initiative for Grantmaker Support, based at the American Council on Foundations (www.wingsweb.org). Geographically based community foundations are one example of a rapidly growing specialised form of philanthropy (www.community-fdn.ca/WINGS.htm), and community foundation networks exist in North America, Great Britain, South Africa, and Africa more generally. South Africa offers one example of how quickly a philanthropic infrastructure can develop, and the types of institutions that have grown along with it.

South Africa: A Case Study
Prior to l989, the independent or non-governmental sector in South Africa had experienced half a century of vigorous growth in spite of constant harassment from a government bent on racial separation and domination. Successive National Party governments neither recognised nor sought to provide for the basic social needs of the majority of the population, and South Africans of colour, whether of African, Asian, or mixed race origins, by and large sought to avoid government control. Foreign governments, voluntary organisations, and donors also refused to deal directly with the South African government, but provided considerable support to South African non-governmental organisations, mosques and churches directly. Precisely because of government attempts to control NGOs in general and foreign funding in particular, there was little transparency in the sector, rather limited sharing of experience, and few, if any, national organisations representing the non-governmental sector. The most important ones, the South African Council of Churches and the United Democratic Front, were accused by the government of being agents for the outlawed opposition political movements. Their leadership was frequently arrested and their offices were bombed. Moreover, because of the state of emergency that prevailed, external donors were reluctant to criticise NGO leaders or enforce strict reporting requirements on independent organisations.

All this changed abruptly after l989, when it became clear that the National Party government was prepared to reach a negotiated transition to democracy in South Africa. Constraints on external funding and internal organising were effectively dropped. While the move toward democratic government drew many NGO leaders into government ranks, the stage was opened for a flourishing of new organisations within the independent sector. Over the next few years a number of key local, regional, and national organisations developed, modelled in many cases on similar long-standing institutions in the United States. International donor agencies were able to support these organisations freely both with funding and ideas. (Four of the key organisations were assisted in their establishment by the Development Resources Centre, an independent NGO founded and headed at that time by David Bonbright, now with the Aga Khan Foundation.) It is these "infrastructure organisations" that I would like to focus on, and which may have relevance for the development of the independent sector in Pakistan.

Infrastructure Organisations for the Independent Sector
A number of national infrastructure organisations grew up, serving the voluntary sector in general and the philanthropic sector in particular. These included:

1. The Independent Study
Early on it became clear that the relationship between the state and the independent sector needed some formal definition. The South African State had established very narrow and controlling registration and taxation policies that were neither necessary nor sufficient for a healthy growth of the independent sector. An Independent Study into the Enabling Environment for NGOs was established by the Development Resources Centre, drawing on a very wide range of independent organisations and steered by a committee of eminent civic, religious, and business leaders. More than 2000 NGOs participated in the meetings of this commission, spread over two years. While almost every aspect of the commission's report and mandate were challenged by some element of the independent sector, nevertheless, the commission's report resulted eventually in a progressive reform of government registration policies. But perhaps its greatest contribution was to create a context in which NGOs, business and public officials (in waiting) could deepen their understanding of each other and come to see the pivotal role of the legal and fiscal framework.

2. The South African NGO Coalition
An early and intended outgrowth of the Independent Study process was a national organisation of NGOs, known by its acronym SANGOCO. SANGOCO has about 4000 member organisations, organised with nine provincial councils (some with several hundred member organisations) and some l9 functional or thematic councils (women, land, small enterprise, conservation, children, health, adult education, etc.). With this kind of open membership, SANGOCO has a breadth that makes it a legitimate voice for NGOs in speaking to the government, the public and the donor communities. SANGOCO also organises and negotiates low-cost travel, insurance, training, car rental and other services for member organisations. SANGOCO commissioned a study of tax policies relating to the independent sector that advocated more liberal tax treatment of donations along the lines made famous in the United States.

3. The Southern African Grantmakers Association
This organisation of donors has some 86 member organisations, including corporate grant makers, private foundations, and a few international donors who are represented in South Africa. SAGA, as it is known, promotes "best practice" among donors, shares information, has national seminars and training programs, and represents the donor community in dealings with the government and the public. It advocates transparency among donors, including the publication of annual reports and easy-to-use procedures for grant applicants. (This is a break with the past when many corporate donors sought to keep their grant making secret.) It has been sustained by membership contributions and grant funding from the Ford, Kellogg, and Mott foundations of the United States and the Liberty Life Foundation of South Africa. It has lobbied for better tax treatment for non-profits of all kinds.

4. The South African NGO Network
SANGONeT, as it is known, is an electronic network that provides low-cost services, including training, to South African labour and non-governmental organisations. It has about 1000 subscribers, about twenty per cent of whom are individuals. It began as a project of the Development Resources Centre and is now an independent organisation. While it was originally grant funded, it is now largely self-sustaining.

5. Prodder
Prodder is also an electronic news service that regularly publishes a list of meetings, conferences, seminars, training programs, publications, and resources for the independent sector. It typically makes a free weekly electronic mailing to all subscribers. It reports on major events and occasionally has editorial pieces about important issues.

6. The Non-Profit Partnership
This interesting organisation was set up jointly by SANGOCO, SAGA, and the Charities Aid Foundation of the United Kingdom to promote voluntary and corporate giving and the reform of tax structures to broaden the definition of organisations eligible to receive tax deductible gifts. It also provides financial services and investment advice to NGOs.

7. The Impumelelo Innovations Award Programme
Among the many interesting organisations that have developed in South Africa since the advent of democratic elections is this project to recognise innovative partnerships between government and the independent sector in the delivery of social services. Annual awards are made each year on the basis of a carefully conducted competition.

8. The Community Foundation Project
The Southern Africa Grantmaker's Association sponsors a service to assist the establishment of endowed community foundations in South Africa, again modelled on British and American experience, but driven by partnerships with local business leaders. With its tradition of the Islamic auqaf, Pakistan has a distinct advantage in having an indigenous philanthropic endowment template.

9. Regional Technical Assistance Organisations
In addition to the rich range of infrastructure organisations listed above, South Africa has a number of well-established regional technical assistance and training agencies that operate as NGOs serving smaller community based organisations. Olive (in Durban), the Community Development Resources Agency (in Cape Town), and the Development Resources Centre and Sedibeng (in Johannesburg) are all examples of such organisations. In addition, a justly famous network of human rights organisations (the Legal Resources Centre, the Black Sash, and others) provide legal advice to institutions in the independent sector.

10. Research Organisations
While there is as yet no established national research program dealing with the independent sector, several organisations undertake studies and monitoring of the sector. Most notable among these are the School of Public and Development Management of the University of the Witwatersrand, the Institute for Democracy in South Africa, and the Centre for Policy Studies, an independent research centre. Interfund, a consortium of foreign donor agencies, publishes an excellent annual review of the independent sector.

The above brief outline indicates the rich organisational structure that has developed to serve the independent sector in one country, South Africa, all in less than ten years. None of the above organisations were developed by government, and none were the creation of foreign bilateral donors. This largely indigenous development was fortunate, because it coincided with a substantial shift in international funding away from the independent sector toward the newly elected government, and in some cases away from South Africa itself. In particular, the European Community, which had been by far the largest donor (probably accounting for more than half of all funding to voluntary organisations), terminated its program abruptly after l994. Many other European governments and churches also reduced their aid programs in order to address pressing problems in south-eastern Europe, and other places. USAID, to its credit, sustained most of its independent sector funding. On balance, however, South Africa demonstrates clearly the dangers to the independent sector of an over-reliance on foreign funders. Pakistan has been through a similar experience of donor withdrawal after its first nuclear explosion in 1998.

Some General Principles for Funding the Voluntary Sector
How, then, can the independent sector establish a more robust and sustainable funding base? The Aga Khan Foundation has played a pioneering role in defining the enabling environment for indigenous philanthropy, going back to a landmark conference in Nairobi in l986. Drawing on the South African experience, I would suggest the following are important, though not exhaustive:

1. Maximise the diversity of funding sources
Organisations should seek funding from the widest possible range of sources: government, bilateral donors, corporations, patrons, membership organisations, professional associations, etc. For sustainability, the number of supporters may be more important than the amounts. Many donors also provide more sources of contacts and information.

2. Seek to build up self-generated funds
Developing fee-for-service schemes, property rental, consulting services, paid training programmes and the like can build a substantial base for independent organisations.

3. Build individual giving programmes
Although the amounts of membership fees, and annual fund donations may be initially small, they may lead to much more valuable contributions of ideas, voluntary time, connections to other donors, and eventually bequests.

4. Build corporate relations and giving
Organisations should be much more proactive in seeking corporate sponsorship. Some types of activities (sports, health programs, arts festivals, etc.) lend themselves nicely to corporate sponsorship and offer multiple opportunities for publicity for the donors. Voluntary, pro bono activities by corporate employees often lead to substantial funding as well.

5. Improve taxation policies
Non-profit organisations need to lobby for tax exemption for certain activities and for greater eligibility for tax deductible contributions. Corporations, individuals and estates should all be given established deductions (usually 7 to l0 percent of pre-tax profits for corporations and up to 50 percent for estates) for gifts to qualifying non-profit organisations and universities. Experience in the United States indicates that tax deductible donations have a substantial multiplier effect: the amounts given are at least four times the losses in tax revenue resulting from the donations. (In other words, government expenditures would have to be at least four times as effective as private donations to achieve the same results - a highly unlikely scenario.)

6. Endowments
Even small organisations should seek to build administrative and program endowments or reserve funds, adding to them earned interest, or unexpended funds, or one-time gifts as the donors permit. International donors are much more likely to give to organisations that have demonstrated a long-term commitment by establishing endowments for administrative costs. Tax exemption for bequests to qualified non-profit organisations are extremely important to the formation of endowments.

7. Community foundations
The fastest growing sector of philanthropy in the United States are area-based community foundations which pool gifts from many sources and share high quality professional staff and volunteers. Community foundations have also proved valuable intermediaries in solving communal disputes and they act as key planning agencies in most American cities. A community foundation movement has also succeeded in Great Britain and is under development in other countries.

8. Contracting with state agencies
Non-profits are far more effective than bureaucracies in delivering certain types of services to the community. Day-care, eldercare, school feeding, vocational training, counselling, and many other services can be provided more cheaply and sensitively through contracts between independent sector organisations and central, regional, and local governments. Though these relations take time to develop and to monitor, they are well worth the effort and can provide a significant income for many non-profits.

9. Direct government funding
Ironically, direct government funding is one of the least successful forms of support for non-profit organisations (as opposed to competitive contracting for the provision of services) and works well only in fields such as the arts where there are arms-length competitions. Government funding is subject to political pressures and often brings with it bureaucratic requirements that are hardly worth the effort.

10. Information sharing
One of the most cost-effective means for improving local philanthropy is sharing experience among private donors. Many donors have the means and the motivation to give but are reluctant to publicise their wealth or to take chances on having their funds misused. An environment of sharing of ideas among donors is often conducive to building confidence and increasing the reliability of grant making. A local Centre for Philanthropy can provide the core institution for information sharing and can encourage the formation of both family and corporate foundations.

11. Sharing training and services
Like anything else, grant making can be done well or badly. A grant makers association can help its members by promoting "best practice" and professionalism among donors, by pooling donor resources, and by training donors, their board members, and their employees. Moreover, the costs of feasibility studies, public education campaigns, and the like can be shared among like-minded donors.

12. Representing the disadvantaged
Donors, especially corporate donors, have considerable legitimacy in defending and articulating the needs of the disadvantaged. When someone is voluntarily contributing their own money to something, insiders and outsiders both are more likely to take their opinions seriously. When donors act or speak collectively, they can exercise enormous power for good in a given society. An association of grant makers, therefore, may be more effective in representing the needs of the poor than the poor are themselves. This is an important social responsibility for grant makers that should not be ignored.

13. Setting ethical standards
By acting together, grant makers can encourage the establishment of best practices and ethical standards among themselves and among recipient organisations. This can be done both by practice and by giving awards and recognition to innovative projects. Providing regular information about grant requirements and procedures can enhance the effectiveness of grant seekers, thereby saving time and promoting better project formulation.

These few recommendations can lead to enhanced indigenous philanthropy and, for they go together, to the creation of a healthier, more self-confident and more self-reliant independent sector.

I am honoured to be present at this watershed moment in the evolution of indigenous philanthropy in Pakistan. I wish you continued success in this endeavour.

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