Frequently Asked Questions
What is a NPO (Non-Profit Organisation?
An NPO (Non-Profit Organisation) is an entity that operates for purposes other than generating profit. NPOs are dedicated to furthering a particular social cause or advocating for a shared point of interest. Here are some critical characteristics of NPOs:
Purpose: The primary objective of an NPO is to serve the public interest or a specific cause, such as education, health, social services, environmental protection, or human rights.
Revenue: NPOs can generate revenue through donations, grants, membership fees, fundraising events, and other activities, but any surplus revenue is reinvested in the organization to support its mission and objectives rather than being distributed as profit.
Tax Status: NPOs often qualify for tax-exempt status, meaning they do not have to pay income tax on the money they raise for their charitable activities. In South Africa, NPOs can register with the Department of Social Development and may apply for tax-exempt status from the South African Revenue Service (SARS).
Governance: NPOs are typically governed by a board of directors or trustees who oversee the organization's operations and ensure it stays true to its mission. They are accountable to their donors, members, and the public.
Legal Framework: In South Africa, NPOs can be registered under various legal forms, including voluntary associations, non-profit trusts, and non-profit companies (NPCs).
Impact: NPOs play a crucial role in addressing social issues, providing services, advocating for change, and contributing to the well-being of communities. They often work alongside governments and private sector organizations to achieve their goals.
NPOs are vital in creating a positive social impact, fostering community development, and addressing unmet needs in society.
What is NPO vs NGO?
NPOs (Non-Profit Organisations) and NGOs (Non-Governmental Organisations) operate without the primary goal of making a profit, focusing instead on furthering a social cause or serving the public interest. However, there are distinctions between the two:
NPO (Non-Profit Organisation)
- Scope: NPOs can operate locally, nationally, or internationally, but they often have a more localised focus.
- Purpose: Their primary goal is to serve a social cause or provide services for the public good, such as education, healthcare, social services, or environmental conservation.
- Funding: NPOs can receive funding from donations, grants, membership fees, and fundraising activities. They may also generate income through services or products, but profits are reinvested in the organisation’s mission.
- Examples: Local charities, community service organisations, educational institutions, and cultural organisations.
NGO (Non-Governmental Organisation)
- Scope: NGOs typically have a broader, often international focus and may operate in multiple countries.
- Purpose: NGOs are usually focused on addressing global issues such as human rights, poverty alleviation, environmental protection, and humanitarian aid. They often engage in advocacy, policy work, and direct service provision.
- Funding: NGOs receive funding from various sources, including international donors, governments, private foundations, and corporate sponsorships. They may also run projects funded by specific grants.
- Examples: Amnesty International, Doctors Without Borders, World Wildlife Fund, and Oxfam.
Key Differences
Geographical Focus:
- NPOs: Often have a local or national focus.
- NGOs: Typically have an international focus and may work across multiple countries.
Activities:
- NPOs: May provide direct services, run programs, and engage in community development.
- NGOs: Often focus on advocacy, policy change, and international development work, in addition to providing direct services.
Recognition:
- NPOs: The term "NPO" is used broadly to describe any non-profit entity.
- NGOs: The term "NGO" is often used to describe organisations that operate independently of government influence and have a significant focus on global issues.
Commonalities
- NPOs and NGOs are dedicated to serving public or social interests without distributing profits to owners or shareholders.
- Both types of organisations rely on various forms of funding, including donations, grants, and fundraising activities.
- Both play critical roles in addressing societal needs, advocating for change, and providing services that benefit communities.
In summary, while all NGOs are non-profit organisations, not all NPOs are considered NGOs. The primary distinction lies in their scope, activities, and focus areas.
What is NPC (Non-Profit Company)?
An NPC (Non-Profit Company) is a specific type of non-profit organisation in South Africa, structured as a company but operating without the intention of making a profit. NPCs are regulated under the Companies Act, 2008. Here are some key characteristics of NPCs:
Key Characteristics of NPCs
Legal Structure:
- NPCs are registered as companies with the Companies and Intellectual Property Commission (CIPC) in South Africa.
- They have a formalised structure, similar to for-profit companies, with directors and members but do not distribute profits to shareholders or members.
Purpose:
- The primary objective of an NPC is to advance a public benefit, social cause, or other non-profit purposes such as charity, education, religion, or community development.
Income and Property:
- Any income or property the NPC receives must be used to promote its stated objectives.
- NPCs cannot distribute profits to members or directors; all funds must be reinvested into the organisation to further its mission.
Directors and Members:
- NPCs are managed by a board of directors who are responsible for governance and decision-making.
- Members of the NPC (if any) do not have ownership interests and cannot receive distributions of profits.
Funding:
- NPCs can receive funding from various sources, including donations, grants, sponsorships, and income generated from activities aligned with their mission.
- They may also engage in fundraising activities to support their operations and programs.
Tax Status:
- NPCs can apply for tax-exempt status with the South African Revenue Service (SARS) under Section 10(1)(cN) of the Income Tax Act.
- This status exempts them from paying income tax on funds used for public benefit activities.
Advantages of NPCs
- Credibility: Being registered as an NPC provides credibility and can enhance the organisation’s reputation, making it easier to attract donors, grants, and partnerships.
- Limited Liability: Directors and members typically have limited liability, protecting their personal assets from being used to settle the NPC's debts.
- Formal Governance: The structured governance model helps ensure accountability and transparency in the organisation’s operations.
- Tax Benefits: Tax-exempt status can provide significant financial advantages, allowing more resources to be directed towards achieving the organisation’s mission.
Registration Process
- Name Reservation: Reserve the company name with the CIPC.
- MOI (Memorandum of Incorporation): Draft and submit the MOI, outlining the NPC’s purpose, governance structure, and operational guidelines.
- Registration: Submit the required documents, including the name reservation, MOI, and application forms, to the CIPC.
- Approval: Once approved, the NPC will receive a registration certificate, allowing it to operate legally.
What is the NPO act?
The NPO Act, formally known as the Nonprofit Organisations Act, 1997 (Act No. 71 of 1997), is legislation in South Africa that provides a legal framework for registering and regulating non-profit organisations (NPOs). The primary objectives of the Act are to create an enabling environment for NPOs, establish an administrative and regulatory framework within which NPOs can conduct their affairs, and promote accountability and transparency among NPOs. Here are the key features of the NPO Act:
Key Features of the NPO Act
Definition of an NPO:
- The Act defines an NPO as a trust, company, or other association of persons established for a public purpose, and the income and property of which are not distributable to its members or office-bearers except as reasonable compensation for services rendered.
Voluntary Registration:
- Registration under the NPO Act is voluntary. However, many NPOs choose to register to gain formal recognition, access funding opportunities, and enhance their credibility.
Registration Requirements:
- To register, an NPO must submit its founding documents (constitution, trust deed, or memorandum and articles of association) to the Directorate for Nonprofit Organisations within the Department of Social Development.
- The founding documents must comply with the requirements specified in the Act, including provisions for a governing structure, non-distribution of profits, and accountability measures.
Directorate for Nonprofit Organisations:
- The Act establishes the Directorate for Nonprofit Organisations, which is responsible for the registration, administration, and regulation of NPOs.
- The Directorate maintains a public register of all registered NPOs and ensures compliance with the Act.
Compliance and Reporting:
- Registered NPOs must submit annual reports, including financial statements and activity reports, to the Directorate.
- The Act promotes transparency and accountability by requiring NPOs to keep proper records and make their financial statements available for public inspection.
Benefits of Registration:
- Registered NPOs gain legal recognition and can enter into contracts, own property, and receive funding from government and private sources.
- They may also qualify for tax exemptions and other benefits provided under South African law.
Public Accountability:
- The Act encourages public accountability by requiring NPOs to operate transparently and responsibly in managing their resources and conducting their activities.
Deregistration and Sanctions:
- The Act provides for the deregistration of NPOs that fail to comply with its requirements, such as failing to submit annual reports.
- Deregistered NPOs lose the benefits of registration and may face difficulties in accessing funding and conducting operations.
Objectives of the NPO Act
- Create an Enabling Environment: The Act aims to support the establishment and operation of NPOs by providing a clear legal framework and reducing administrative burdens.
- Enhance Public Confidence: The Act seeks to enhance public trust and confidence in the NPO sector by promoting accountability and transparency.
- Encourage Voluntary Participation: The Act encourages individuals and organisations to participate in voluntary activities that contribute to social development and the public good.
- Support NPO Sustainability: The Act aims to support the sustainability and effectiveness of NPOs by facilitating access to funding, resources, and capacity-building opportunities.
It is always best to obtain the latest documents and requirements from the respective government website.
What are the NPO registration requirements?
To register a Non-Profit Organisation (NPO) in South Africa under the Nonprofit Organisations Act, 1997 (Act No. 71 of 1997), the organisation must meet specific requirements and follow a defined process. Here are the key registration requirements and steps:
NPO Registration Requirements
Founding Documents:
- Constitution: For a voluntary association.
- Trust Deed: For a trust.
- Memorandum and Articles of Association: For a non-profit company (NPC). These documents must outline the organisation's objectives, governance structure, and operational guidelines and comply with the requirements specified in the NPO Act.
Objectives:
- The objectives of the NPO must be for a public purpose and cannot include profit distribution to its members or office-bearers.
Governing Structure:
- The founding documents must specify the governance structure, including the roles and responsibilities of office-bearers, directors, or trustees.
- They should also detail how meetings are conducted, decisions are made, and financial and other records are kept.
Accountability and Transparency:
- The founding documents must include provisions for financial accountability, such as keeping proper accounting records and preparing annual financial statements.
- They should also outline procedures for reporting to members and the public, including submitting annual reports to the Directorate for Nonprofit Organisations.
NPO Registration Process
Preparation of Founding Documents:
- Draft the appropriate founding documents (constitution, trust deed, or memorandum and articles of association) that comply with the NPO Act's requirements.
Application Form:
- Complete the NPO registration application form (Form NPO-001). This form is available from the Department of Social Development's website or offices.
Submission of Documents:
- Submit the completed application form and two copies of the founding documents to the Directorate for Nonprofit Organisations at the Department of Social Development.
Submission can be done via:
- Post: To the Directorate's postal address.
- In-person: At the Department of Social Development offices.
- Online: Through the Department of Social Development's online portal (if available).
Review and Processing:
- The Directorate will review the application and founding documents to ensure compliance with the NPO Act.
- If the application is complete and meets all requirements, the Directorate will register the NPO and issue a registration certificate.
Public Register:
- Once registered, the NPO's details will be added to the public register of NPOs maintained by the Directorate. This register is accessible to the public and helps promote transparency and accountability.
Post-Registration Requirements
Annual Reports:
- Registered NPOs must submit annual reports to the Directorate for Nonprofit Organisations, including financial statements and activity reports.
- These reports ensure ongoing compliance with the NPO Act and maintain the NPO's status on the public register.
Record Keeping:
- NPOs must keep accurate and up-to-date records of their activities, finances, and governance practices.
Compliance:
- NPOs must comply with all provisions of the NPO Act, including any changes to their founding documents, which must be reported to the Directorate.
Benefits of Registration
- Legal Recognition: Provides formal recognition of the NPO, enhancing credibility and trust.
- Funding Opportunities: Registered NPOs are more likely to access funding from donors, government grants, and other sources.
- Tax Exemptions: Registered NPOs may qualify for tax-exempt status and other financial benefits.
- Public Accountability: Being listed on the public register promotes transparency and accountability.
Please note the details may change without notice; this is only a summary of the process. Consult the respective government source for specific details.
Where to find the NPO registrations forms?
NPO registration forms in South Africa can be found through the Department of Social Development. Here are the steps to access these forms:
Online
Visit the Department of Social Development's Website:
- Go to the official website of the Department of Social Development: Department of Social Development.
Navigate to the NPO Section:
- Look for a section dedicated to Non-Profit Organisations (NPOs). This might be under "Services" or a similar heading.
Download Forms:
- Find the section for NPO registration forms. You should be able to download the NPO registration application form (Form NPO-001) and any other related documents.
Direct Links
In-Person
Visit the Nearest Department of Social Development Office:
- You can visit your local Department of Social Development office to request the NPO registration forms in person.
Contact Information:
Postal Address for Submitting Applications
- Directorate for Nonprofit Organisations
- Department of Social Development
- Private Bag X901
- Pretoria, 0001
- South Africa
By accessing the Department of Social Development's website or visiting their offices, you can obtain the necessary forms to register your NPO. If you encounter any difficulties, contacting the Directorate directly can provide further assistance.
Cost of consulting services?
The cost of consulting services can vary widely due to the variety of services offered and the complexity of each project. In South Africa, consulting fees typically range based on the type of consulting and the level of expertise required.
General Pricing Structure
Hourly Rates:
- Hourly rates for consultants can range from approximately R250 to R2500 per hour. This range depends on the consultant's experience, the industry, and the specific services provided.
Project-Based Fees:
- For specific projects with well-defined scope, consultants may offer a fixed project fee. For instance, a comprehensive business plan might cost between R10,000 and R25,000 for local businesses, while more complex plans for larger projects can exceed R25,000.
Retainer Agreements:
- Some consultants work on a retainer basis, providing ongoing support for a fixed monthly fee. This can benefit businesses needing continuous advisory services without negotiating separate contracts for each task.
Factors Affecting Cost
- Scope of Work: The complexity and duration of the project play significant roles in determining the cost. More extensive projects with broader scopes will naturally cost more.
- Consultant's Experience and Reputation: Highly experienced or specialised consultants tend to charge higher fees.
- Type of Consulting: Different types of consulting (e.g., management, IT, financial) have different pricing structures. IT consulting, for example, might range from R50 to R3000 per hour, depending on the service and expertise level.
In conclusion, providing a specific cost for consulting services is challenging without understanding the exact requirements and scope of the project. It’s advisable to contact consultants directly to obtain detailed quotes tailored to your specific needs.
How does the business model differ between a NPO and a for profit company?
The NPO (non-profit organisation) business model differs from a for-profit company in several key ways, as highlighted by the contexts provided:
Beneficiaries vs Customers: In a for-profit company, the customer who pays for the value is the same as the beneficiary. In an NPO, the beneficiary (e.g. the people or cause the NPO serves) often differs from the funder or donor who provides the revenue. The NPO has to consider both the “donor value proposition” and the “recipient value proposition”.
Funding Model vs Business Model: While a for-profit company’s “business model” incorporates choices about cost structure and value proposition to the customer, an NPO’s “funding model” focuses only on the funding, not the programs and services offered to the beneficiary.
Reliance on Donations/Grants: NPOs rely heavily on donations, grants, and other third-party funding sources, rather than revenue from customers paying for products/services. This affects the organisation’s resource acquisition, revenue streams, and overall business model.
Mission-Driven vs Profit-Driven: The primary goal of an NPO is to achieve its social mission, rather than maximise profits. This mission-driven focus shapes the NPO’s value proposition, key activities, and other business model components.
Stakeholder Value vs Shareholder Value: NPOs focus on creating value for a broader set of stakeholders (beneficiaries, donors, partners, etc.) rather than just maximising shareholder value.
Empowerment & Values-Driven Culture: NPOs often strive for more decentralised, empowered cultures driven by shared values, rather than top-down hierarchies. This can create challenges in aligning the organisation.
In summary, the NPO business model is fundamentally different from a for-profit company due to the separation of beneficiaries and funders, the mission-driven focus, the reliance on donations/grants, and the emphasis on stakeholder value and empowered, values-driven cultures. The business model canvas developed by Sanders provides a framework tailored specifically for visualising and understanding these unique aspects of NPO business models.