Donors give to people they like and trust, and who represent well-managed organisations that inspire confidence!
The COVID-19 pandemic, and the worldwide economic crisis that has followed, have put the financial livelihoods of many non-profit organisations (NPOs) in jeopardy, making it essential that they have a clear understanding of the potential donors they can reach out to.
This is according to Inyathelo, The South African Institute of Advancement, which supports NPOs and tertiary education institutions in their efforts to become more sustainable. Inyathelo, itself an NPO, advises a systematic and integrated approach to building and managing external relationships with key constituencies and stakeholders in order to attract support.
According to Inyathelo’s pocket guide Understanding the Donor World (click here to download a free copy) there are many different types of donors which fund NPOs. These include individuals, private and corporate foundations, international aid agencies and foundations, religious organisations, official international development agencies and government.
Individual donors are people who believe in particular causes and are prepared to support them financially. Individual donors could already know of the NPO, such as suppliers and service providers, clients, people who use the organisation’s facilities, staff, board members and their connections.
Many factors attract individual donors to particular organisations: the work that the NPO does, its reputation and leadership, the relationship built up between the donor and the NPO, and the fact that the NPO enables the individual to support his or her favourite cause and to give back to society.
How to connect? Examples include one-on-one meetings, open days, symposia about the work that is done, newsletters asking your contacts to make introductions and annual campaigns that can include mailshots, email requests and ways to give through social media involving digital fundraising and crowdfunding campaigns.
Many South African companies and multinationals operating in South Africa have established corporate social investment departments. The companies are motivated by a stable society in which to do business, happier and more productive staff, tax benefits, B-BBEE and corporate reputation ‒ people want to work for and invest in a company in good standing.
A corporate wants a connection between its business interests and the NPO it supports. For example, a pharmaceutical company is likely to support an NPO working in the health sector. The company will assess factors such as the NPOs governance, leadership, financial management and staff capacity to implement programmes.
A corporate foundation may be established by a company as part of its corporate social investment plan. A foundation will be more independent of company regulations than a social investment unit and will report to a board rather than company officials. It may even operate independently with its own guidelines. Some foundations are based on an endowment – a principal sum donated by the business to the foundation ‒ while others are financed by shares or an annual contribution.
Private foundations, sometimes known as charitable trusts, might be established by an individual who is passionate about a specific cause, or in terms of a person’s will. Generally, the founder allocates a principal sum as an endowment, which is invested prudently and a portion of the income is allocated to NPOs as grants. Many private foundations operate out of the public eye and are not readily accessible, requiring a personal introduction.
International fund organisations
Some of the world’s largest foundations have offices in South Africa or fund local organisations and projects. An NPO seeking a donation should first check the website and read the guidelines thoroughly. If the international foundation is interested, it will undertake a background check of the NPO. Foundations based in the United States, for example, operate under strict US Internal Revenue codes.
If all goes well, the NPO will sign a funding agreement. This will stipulate what the funds will be used for, the duration of the grant, reporting and accounting requirements, and more.
Global charities raise money to support projects in the developing world and provide relief in emergency situations. They increasingly run their own programmes, rather than making donations to other organisations.
International religious organisations
During the apartheid years, religious bodies supported anti-apartheid organisations generously. This funding has now been reduced. When grants are made, these usually support religious communities, relief programmes and poverty alleviation projects.
Government and quasi-government sources support NPOs, for example through national, provincial and local government departments and the National Lotteries Commission. These empower NPOs to deliver services in health, education, arts and culture, and more.
Official international development agencies
These are often established by governments to provide support for developing countries. It is important to understand that the guidelines to such grants are linked to those government’s foreign policy priorities and are an extension of their political strategies. This type of funding is not usually for general budgetary support for organisations, and it is essential that there is a synergy between the agency and the organisation it is supporting. Many NPOs, such as those dealing with HIV/AIDS and other health issues, are funded by such organisations in South Africa.
Inyathelo advises organisations not to be too dependent on one funding stream, and to approach both local and international donors.
“Relying on one donor or even one donor type is extremely risky,” says Inyathelo Finance Director Soraya Joonas.
“Whatever the source of your funding, it is essential to build and cultivate relationships with the people involved. This responsibility not only rests with the CEO of your organisation, but an organisational culture of donor respect and stewardship needs to be shared across the organisation with your employees in the various ways that they interact or play a role in the information chain that affects your organisation’s invested partners.
“Relationship-building is one of the building blocks of Advancement, which also includes leadership and governance; strategy and planning; financial management; fundraising; human capacity; monitoring and evaluation; and voice and visibility.
“If you focus on addressing these elements and getting your house in order, then when it comes to approaching donors, your chances of success will be far greater. Trust in your organisation, leadership, and systems will also attract support, and you may find that you will be the ones being approached for partnerships.”
To help NPOs get their organisations donor-ready, Inyathelo has produced numerous publications, training videos, toolkits and research reports, many of which can be accessed online, free, says Ms Joonas.
Inyathelo also has a Funding Finder that allows an NPO to search online for South African donors according to their sector, sub-sector, provinces in which they operate, and the kind of activities they fund. The cost is R1500 excl. VAT for a 12-month subscription. Subscribers can compare donors, keep a list of favourite donors and receive alerts every time donor information is updated.
“Donors give to people they like and trust, and who represent well-managed organisations that inspire confidence,” says Ms Joonas.
“We are here to help NPOs and others who need support in getting donor-ready. We encourage NPOs to make use of Inyathelo’s resources to help them navigate the current pandemic and to better position themselves to attract support in the longer term.”