PROGRESS REPORT ON DSD’S EFFORTS TO ADDRESS NON-COMPLIANCE FROM NPOS

By Precious Mupenzi

• The Department of Social Development remains focused on strengthening the compliance framework to ensure non-profit organisations (NPOs) operate effectively within South Africa’s regulatory environment.
• The department is enforcing compliance with the Nonprofit Organisations Act, which requires NPOs to submit annual reports and financial statements.
• Such action is imperative as South Africa acts to comply with the recommendations of the international Financial Action Task Team, which grey-listed the country.

South Africa is currently implementing an extensive action plan developed in response to the country’s grey-listing by the Financial Action Task Force (FATF), with 20 of the 22 actions already largely addressed.

Two items remain that must be completed by June 2025. If these are done successfully, South Africa could be eligible for removal from the grey-list by October 2025.

The FATF is an international organisation that monitors global money laundering and the financing of terrorism, setting standards to prevent illegal activities and the harmful impact they cause.

One of the action plans relates to non-profit organisations (NPOs) that may be at risk of being party to such actions. The action plan categorises NPOs into high, medium, and low-risk groups.

To mitigate the risks associated with low-risk NPOs, the department is enforcing compliance with Section 18(1) of the Nonprofit Organisations Act. Section 18(1) requires NPOs to submit annual reports and financial statements.

NPOs that fail to comply with this requirement face deregistration. In this regard, South Africa is making progress towards compliance with FATF recommendations, a MinMEC (minister and MECs) meeting was told.

The MinMEC session, held at the Western Cape Provincial Legislature in Cape Town on 21 February 2025, was convened by the Minister of Social Development, Nokuzola Tolashe.

Mpho Mngxitama, the Acting Deputy Director-General: Community Development at the Department of Social Development, provided a detailed progress report on the deregistration and funding coordination efforts aimed at tackling the noncompliance of NPOs.

She reported that, as of 3 February 2025, more than half of the country’s registered NPOs are noncompliant, despite ongoing interventions.

Noncompliance challenges among NPOs

“Out of 287 467 registered NPOs, only 38% (111 996) are compliant, while 52% (151 094) are non-compliant. In addition, 168 938 organisations are due for reporting,” she said.

The data showed provincial disparities in compliance: Gauteng has the highest number of registered NPOs (89 213), and the largest share of non-compliant entities (47 478); KwaZulu-Natal follows, with 50 516 registered NPOs; and the Western Cape has 29 869, of which nearly half are non-compliant.

Deregistration efforts and impact across sectors

Mngxitama highlighted the efforts being made in deregistering non-compliant organisations. Phase 1 of the process saw a total of 41 787 compliance notices delivered, resulting in 6 221 NPOs being deregistered.

Furthermore, since 1 April 2024, 55 230 reports were received, with 4 350 organisations submitting annual reports. Despite these advances, 15 220 emails were sent containing submissions and queries about deregistration, indicating the continued complexity of ensuring compliance.

The social services sector was the most affected, with 2 700 NPOs deregistered.

Other sectors impacted include religion (904 deregistered NPOs), development and housing (1 467), and education and research (230).

“Ensuring compliance in these sectors is critical, as they provide essential services to communities,” Mngxitama emphasised.

Provincially, Gauteng had 2 300 deregistered NPOs, followed by KwaZulu-Natal with 1 540, the Western Cape with 619, and Limpopo with 430.

Strengthening compliance and future interventions

To improve compliance, Mngxitama called on MinMEC members to amplify awareness about compliance requirements and reporting obligations.

“Sustained outreach efforts at the provincial level are essential. We need MECs to champion compliance campaigns that help NPOs understand their responsibilities,” she urged.

She also recommended equipping officials with better tools such as laptops, 3G networks, scanners, and printers to enhance support for the NPOs.

MinMEC members weigh In

The MinMEC members supported the recommendations and requested a quarterly report tracking provincial performance in addressing non-compliance.

They also emphasised the importance of monitoring NPOs to prevent abuse linked to terrorist financing.

“This process is not about shutting down organisations; it is about ensuring transparency and accountability,” a MINMEC member stated.

“The data proves that government is funding NPOs responsibly and working to maintain compliance. This dispels the misconception that funding is not being provided.”

Minister Tolashe reiterated the importance of these efforts: “We are committed to ensuring that NPOs meet compliance requirements while continuing to serve communities effectively. The deregistration process is not punitive but necessary to safeguard the sector’s integrity.”

With ongoing interventions and support from provincial governments, the Department of Social Development remains focused on strengthening the compliance framework to ensure that NPOs operate effectively within South Africa’s regulatory environment.