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The business of welfare is everyone’s business

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A growing and unsustainable “welfare gap” that has widened during the Covid-19 pandemic has forced many non-profit organisations (NPOs) to make tough business decisions on survival over service – raising questions on the “business” of welfare.

At the same time that the pandemic-induced national state of disaster has seen the need for the social welfare and support services of NPOs increasing, their public and private sector funding sources are under pressure and their own fundraising activities have been curtailed by Covid-19 restrictions.

This puts strain on the social contract between the public, private and non-profit sectors, by which society’s most vulnerable and disenfranchised are cared for, and highlights the real extent of the “welfare gap”, the shortfall between government and private sector grants and subsidies and the actual cost of services to communities that NPOs have covered in the past.

Dr Armand Bam, Head of Social Impact and senior lecturer on Business in Society at the University of Stellenbosch Business School (USB) said the recent announcement by the Cape Peninsula Organisation for the Aged (CPOA) of closure of three of its welfare homes for the elderly, which was met with widespread outrage from the community and politicians, had drawn attention to the worsening state and plight of many non-profits.

“At the start of the pandemic and as we moved into strict lockdown, we expected that the survival of many NPOs would come under threat and the most disenfranchised would pay the greatest price. The CPOA closures are a clear example of this and have highlighted what has been hidden for a long time, the actual costs associated with running welfare homes,” he said.

Dr Bam said the CPOA’s reported loss of R33.5 million over the past five years should not come as a surprise, and that further losses would be compounded by the pandemic’s impact on business and government in terms of trade and tax collection.

“Operating welfare homes, or any NPO in fact, is not easy nor cheap and reliance on pensions and restricted government subsidies just does not go far enough.”

“Tough decisions have to be made and these include the closure of operations and service delivery to many communities in need. Operating welfare homes, or any NPO in fact, is not easy nor cheap and reliance on pensions and restricted government subsidies just does not go far enough.”

He said it could be asked how an organisation like the CPOA, that runs a profitable “business” on the one hand, can have its “welfare business” fail on the other.

“The simple answer is the power of privilege,” he said.

While approximately one million people of retirement age in South Africa receive private pensions and are “most likely willing and able to invest in ensuring they live in comfort in their aging years”, a further four million are reliant on government support through pensions and grants in their old age.

“At the top end of the CPOA offerings it provides life right retirement apartments at a cost of R2 million rand per unit. In simplistic terms, this is easy money in the sense that the facilities cater to a niche market, or selected privileged portion of our society, who can cover this cost.

“It can reasonably be accepted that an option like this is provided because there is a demand.”

The proceeds from re-sale of these life rights retirement options are meant to be used to “give back to society” in the form of five welfare homes run by the CPOA, but in practice, Dr Bam said, “it appears that the welfare gap to be covered in arears such as Bonteheuwel, Heideveld and Bishop Lavis has just got too wide to cover and resources are now limited”.

“Those in need now suffer, families are displaced and a disinvestment in these specific communities occurs,” he said.

Sustainability vs purpose to serve

Dr Bam said questions around the motivation and morality of closing homes in the three areas and relocating residents to other homes in the CPOA portfolio raised the issue of “the business of welfare” and the relationship between an NPO’s business of sustaining itself and its moral purpose to serve.

“Does an NPO’s social mission supersede its imperative to remain financially secure, and is it reasonable of stakeholders to hold this expectation? Is the CPOA in the business of sustaining itself or in the business of providing welfare to those in need in the communities in which they come from? Is it reasonable to expect that these two aspects are mutually exclusive when applied to non-profits, but not when applied to other organisations?”

Dr Bam said the question of “where morality, the good or bad, meets purpose” was relevant not only to NPOs but for business and government, because “it is all of our ‘business’ that those reliant on welfare can be taken care of.

He refers to NPOs as “the glue that binds society”, providing the social safety net and supporting advancement of social justice and socio-economic inclusion, to the benefit of all the role-players in the social contract – business, government and communities.

“Unless we want to see inequality grow, action must be taken by those in power.”

“Profit maximisation for shareholder benefit is self-serving when other sectors of society start to collapse. The reality is that the burden of covering the welfare gap that is becoming ever-more visible in 2021, will eventually shift towards the public and private sector. Unless we want to see inequality grow, action must be taken by those in power,” he said.

Dr Bam said while it was encouraging that the community had voiced their outrage at the planned closure of a community resource, he also called on citizens to get involved in serving and sustaining community organisations.

“There is another side to community-based organisations that we forget to cherish. These are our organisations and we have a responsibility to ensure they succeed, whether by volunteering our time, finances, or other resources. We should not let them fail.

“How often do we take the time to step inside of these organisations and ask what it is we can do to help? Whether they are faith-based, charitable or skills-directed, we must not only be ready to benefit from them but be ready to serve them before they disappear.”

Dr Bam said the CPOA’s offer to donate the vacant buildings of the three welfare homes would “hopefully bring about unique opportunities to contribute to the upliftment” of the affected communities, with emphasis on the care needed for the elderly and frail.

While it is not the sole responsibility of government to provide financial resources to sustain NPOs, Dr Bam said they could do better.

“While people’s lives are impacted, some politicians have attempted to utilise this opportunity to disparage each other. This is not the time.

“The reality is that the funds available to be distributed to do the work that non-profits do are not enough. It never was.”

“The reality is that the funds available to be distributed to do the work that non-profits do are not enough. It never was. On both sides of the aisle in power or opposition, at a national or provincial level, politicians should look to themselves as the guardians of the public purse and answer how this is the case.”

Impact of Covid-19 on non-profits’ durability

He said businesses needed to understand the impact of the pandemic on non-profits’ sustainability, with finances in a dire situation as few NPOs had been able to maintain fundraising activities under lockdown.

For both business and government, the ease and speed of accessing funding is critical and should be reviewed, he said, particularly where NPOs are encouraged by potential funders to spend time and resources on preparing funding applications, with cumbersome application protocols to be followed, only to be turned down.

Dr Bam said business also needed to reconsider its approach of not funding NPO salaries if the sector was not to sink further, close doors and shed jobs.

“Businesses don’t pay their employees with new computers or furniture; they pay them with money. Why then when considering support to NPOs is the approach any different? Corporate social investment initiatives need to accept this reality and release themselves of this constraint and address the funding shortage for posts before it is too late. The CPOA and other organisations will otherwise share this burden of not having staff to perform the services being funded.”


CPOA press statement, 26 January 2021. https://www.cpoa.co.za/update-regarding-the-closure-of-3-cpoa-welfare-homes/

CPOA press statement, 11 February 2021. https://www.cpoa.co.za/update-regarding-the-closure-of-3-cpoa-welfare-homes-2/

In the media

Cape Talk: The business of welfare: NPOs report losses of R35M in last three years (capetalk.co.za)