Originally posted on Wings: https://members.wingsweb.org/news/651286
By Tendai Murisa and Shelly Satuku at SIVIO Institute
The past decade has seen a nascent philanthropy/giving/solidarity movement in Southern Africa, like many other parts of the continent. There has been an increase in institutionalised forms of giving across the region through foundations led by High-Net-Worth Individuals (HNWI), community-based forms of solidarity and intermediaries engaged in regranting.
Approximately USD 1 billion is given through new grants and regranting from sources outside the continent. Furthermore, HNWI-led or owned foundations spend more than 60% of their budget on direct programme interventions. However, the tendency towards institutionalised and formal forms of philanthropy is under threat. The threat of global terror and increasing risks of money laundering have led to several governments in the sub-region passing financial regulation laws and establishing new compliance measures for the non-profit sector. The combined effects of these measures have served to inhibit the growth of formal philanthropy.
The Financial Action Task Force
The Financial Action Task Force (FATF) leads global action to tackle money laundering, terrorist and proliferation financing by ranking countries according to measures in place to combat money laundering and possibilities of financing terrorism[1]. Several African countries have responded positively to comply with FATF recommendations. In 2023 alone, at least three Southern African countries (Mozambique, South Africa and Tanzania) were grey-listed by the FATF. The listed Southern African countries made high-level political commitments to work with the FATF in strengthening their policies and measures. Mozambique and Tanzania have put tight measures through their financial intelligence unit and are enhancing terrorism financing risk assessment for NPOs in line with the FATF standards which may decrease the movement of philanthropic funds.
However, in some instances, governments have been hiding behind the recommendations of the FATF, by deliberately putting stringent measures in place that negatively affect the mobility of funds thereby constraining philanthropy.
The dark clouds ahead
Several Southern African countries are proposing or enacting new laws such as the Private Voluntary Organisations (PVO) Amendment Bill of 2021 of Zimbabwe. The proposed bill, if passed will hinder the growth of formal philanthropy as it requires all non-profit organisations that wish to fundraise to be registered as PVOs which involves a very costly and lengthy process. Another clause states the prohibition of organisations from “political activities”, a clause that seems vaguely constructed as it does not explain what political activities are thus leaving room for restrictive measures to be imposed especially for those engaged in governance, accountability, and human rights work.
On the surface, Tanzania does not seem to have restrictions on fundraising. However, an organisation is expected to declare its source of funds and submit sufficient documentation to the Registrar of NGOs to obtain approval for any funding agreement that exceeds twenty million Tanzanian Shillings (approximately USD 8,340). New administrative hurdles, like the one mentioned above, tend to increase state oversight on organisations and in the process impede the movement of funds for philanthropy work.
The SADC Ease of Doing Philanthropy Index
The SADC Ease of Doing Philanthropy Index was developed to track and compare the extent to which national legal environments support or restrict the growth of the philanthropy sector. The index, initially focusing on 10 Southern African Development Community (SADC) countries, was built from the assessment of laws and policies that affect philanthropy in the areas of registration, compliance, taxation, incentives for philanthropy in national development, movement of monetary resources and the ease of supporting governance and human rights advocacy work. There are at least 75 laws that have a bearing on philanthropy in the areas stated above spread across the countries. Each law is scored out of 5 based on how that law affects the ease of doing philanthropy.
In Malawi, 13 laws affect philanthropy, and the country scores the highest (3.75) because it has the highest number of laws (5) that make provision for incentives for philanthropy’s role in national development. It also has 4 laws that guide the formation/registration of philanthropy entities and the compliance processes and procedures of the entities to remain registered. The guiding laws make it easier for entities to register and operate in the country.
Mozambique scores the lowest on the index at 2.42 and has the lowest number of laws (5). There is an increase in state oversight of entities in Mozambique. Decree number 2 of 2006 is the only law found to govern the registration of philanthropy entities. The law restricts the right to freedom of association yet at some point philanthropy initiatives involve bringing people together in gatherings.
The index is a game changer. It will significantly contribute to evidence-based advocacy for an enabling environment. In the past, there was limited information on how new laws were affecting philanthropy. Potentially the index will lead to poorly ranked governments borrowing best practices from those ranked as supportive of philanthropy. We expect that there will be more people talking about the freedom to do with philanthropy.
Moving forward
Many studies (Murisa, 2018) have demonstrated that the growth of the formal philanthropy sector is dependent on a conducive and predictable operating environment. In our report (Murisa and Satuku, 2023) we identify the need for legally established incentives such as tax exemptions for giving, and legal frameworks that reduce the bureaucratic red tape in the registration and operations of philanthropy organisations.
There is no better time for a conversation on regulations to do with philanthropy than now. There is a need for peer-led and government-supported stakeholder consultations on the preferred regulatory mechanisms to grow philanthropy in the sub-region. The proposed consultations should also take on an awareness-raising approach, especially amongst those working in the sector. Our study noted that most practitioners in the philanthropic sector have inadequate knowledge about the legal operating environment in which they work and the sector is characterised by limited advocacy initiatives.
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