Thousands of South African NPOs Face Deregistration Amid Compliance Crackdown

The department has warned that non-compliant NPOs face severe consequences, including losing privileges such as tax exemption, government funding, and donor support.

The Department of Social Development has announced that 41,787 notices of non-compliance have been issued to non-profit organisations (NPOs) across South Africa, with 6,221 NPOs already deregistered for failing to meet their obligations under the Non-Profit Organisations Act (Act No. 71 of 1997, as amended by the General Laws Amendment Act 22 of 2022).

A staggering 203,279 organisations, including non-profits, voluntary associations, and trusts, are at risk of deregistration due to their failure to submit annual reports as required by Section 18(1) of the NPO Act. The department has warned that non-compliant NPOs face severe consequences, including losing privileges such as tax exemption, government funding, and donor support.

Provincial Breakdown of Non-Compliant NPOs:

• Gauteng: 64,221
• KwaZulu-Natal: 36,605
• Western Cape: 20,371
• Limpopo: 19,982
• Eastern Cape: 19,202
• Mpumalanga: 15,102
• North West: 12,363
• Free State: 10,661
• Northern Cape: 4,770

These organisations offer vital services to vulnerable groups, including children, youth, persons with disabilities, and the elderly, as well as providing humanitarian relief. Despite acknowledging the important role NPOs play, the department emphasizes that the deregistration process is necessary to foster accountability and transparency within the sector.

Regulatory Context and International Compliance

The deregistration process aligns with international standards set by the Financial Action Task Force (FATF). FATF's Recommendation 8 highlights the susceptibility of NPOs to money laundering and terrorist financing. South Africa was grey-listed by FATF in February 2023 due to strategic deficiencies in its anti-money laundering and counter-terrorism financing regime.

In response, South Africa developed an Action Plan addressing 22 key areas. By November 2023, FATF acknowledged the country's significant progress in rectifying these issues. The department is urging all NPOs to comply promptly to help South Africa address the remaining deficiencies ahead of its fifth round mutual evaluation with FATF.

Support and Outreach Efforts

Following a formal notice in August 2023, the Department of Social Development conducted workshops and outreach programs across the country to support NPOs in meeting compliance requirements. These efforts included capacity-building initiatives and guidance on corrective measures.

To date, the department has:

• Processed over 18,000 email requests
• Handled 3,000 telephone inquiries
• Assisted 4,000 walk-in clients

Additionally, 3,450 NPOs have successfully updated their details on the NPO register.

Commitment to the Sector

The department reaffirmed its commitment to working with the NPO sector to protect the integrity of compliant organisations and ensure the continued delivery of essential services to vulnerable communities.

"Compliance is not just a regulatory requirement but a crucial step in safeguarding the trust and resources entrusted to NPOs. It ensures transparency, accountability, and the protection of the communities these organisations serve," the department stated.

Registered NPOs struggling with compliance are encouraged to reach out for assistance, as the department remains dedicated to supporting the sector through this transition.