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KZN nonprofits still battling late state subsidies, slam new payment system

KZN nonprofits still battling late state subsidies, slam new payment system
Amid budget cuts, NPOs end up relying on funds from donors, which can also create instability, they say. (Photo: EPA / Nic Bothma)
Takudzwa Pongweni
By Takudzwa Pongweni
17 Oct 2023
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The continuing late payment of critical government subsidies is crippling the KwaZulu-Natal nonprofit sector, with many organisations left struggling to provide services to some of the province’s most vulnerable people.

One of those NPOs is the Rehoboth Children’s Village, a home for orphaned or abandoned children who are either affected by or infected with HIV or Aids. It received its August subsidy payment late, said its childcare director, Yvonne van der Galiën. There are 80 beneficiaries and 43 staff members at the facility. 

A significant challenge that organisations have raised the alarm about for a while is that they are paid retrospectively.

As reported by Daily Maverick, Fiona Balgobind, the general manager of the Pietermaritzburg Children’s Home, said this creates a huge cash-flow problem in the NGO sector. According to their service-level agreement, payments can come between the first and the last day of the following month.

“That’s what the department binds you by; we can’t complain up until the very last day,” she said.

For some organisations with extra reserves and income, this was manageable, but impractical for others, forcing them to change salary pay dates for staff.

New system implemented but questions raised


In August 2023, the Social Development Department embarked on a roadshow to introduce a new payment method for subsidies. From October 2023 NPOs will receive payments in tranches, a consensus reached between the department and provincial treasury. The department’s chief financial officer, Senzo Zungu, said the quarterly payments are scheduled to be disbursed in April, July, October and January of each financial year.

However, Julie Todd, the director and CEO of the Pietermaritzburg Child and Family Welfare Society, has concerns about this: “They [the department] did have roadshows with regard to the tranche payments, but they hadn’t even thought that through properly.”

Since the department had been paying subsidies retrospectively, there would be arrears of one month for September, she said. 

Van der Galiën too has concerns about the tranche payments: “How are they going to pay all the NPOs three months? You are talking millions if they have to do three months in one go, all in one month?” 

KZN social development spokesperson Mhlaba Memela said the tranche payments mean the NPOs will not have to submit monthly claims for processing, eliminating the potential for delays in subsidy payments. 

By the time of publication Rehoboth Children’s Village had not received its tranche payments. 

Memela said payment of the tranche is scheduled in accordance with payment runs in October. “Some NPOs have already received their payments on October 6th, while others are scheduled to be paid in the next run of October 19 and the last batch is expected to receive payment by the end of October.” 

KZN nonprofits 'If you look at what NPOs are doing, they are caring for the vulnerable, the elderly, the orphans, people with disabilities, people dealing with addictions. If all these organisations have to close their doors, where will these people end up?' said one NPO worker. (Photo: EPA / Nic Bothma)


‘No transparency’


Many NPOs have said that communicating with the department is often a struggle. 

“There is no communication from the department, none. There is no chance for a dialogue, no transparency and it still hasn’t been clearly explained to us how these tranche payments will work,” said Van der Galiën.

There had been no official communication from the department to Rehoboth Children’s Village about why its August subsidy payment was delayed. 

“We receive 40% of funding from the department and the other 60% to keep running is from our own pocket. We have currently got the reserve funds to keep our doors open, but this isn’t the case for many other organisations,” she said. 

Memela said August subsidy payments were delayed due to budget cuts.

“The department, like all departments, is experiencing budget cuts. As a result there is a reduced allocation for the department to cover the cost of goods and services,” he said. 

“The department receives monthly funding from the provincial treasury, which is based on a limited budget. The subsidies for August were supposed to be paid by September 30th, but they couldn’t be paid because the funds allocated in September, like in other months, were insufficient. As a result, these subsidies were eventually paid in October”. 

Van der Galiën touched on the apparent miscommunication between the provincial department and the district office. “We were aware of the roadshow before the district was aware of it. It is all very disorganised and it is such a sad case.

“They don’t consult with us. It’s supposed to be a consultation with NPOs as we are in a partnership with [the department] and there is supposed to be a consultation on every aspect and not a dictation which is what we have been seeing.

“It’s dictating information when it is too late to be shared or even discussed and there is no chance for the NPO sector, which is actually dealing with the need of the country, to voice their opinions.”

Todd echoed those sentiments, saying that despite the roadshows about tranche payments, it remains unclear how this will be different in terms of late payments or what exactly the arrangement with treasury entails. 

“They haven’t given clarity on that at all. They just said we have an arrangement with treasury and we’ve no idea of how they’re going to straddle the two financial years, because when they get to the end of March [2024], again we will all be carrying one month in arrears,” she said.

Memela said engagements were held between the department and provincial treasury, including on the allocation of funds according to the new funding model. “According to the department’s system, the payments are for services rendered, meaning the March services will be paid in April 2023.” 
I think it’s a plan to get rid of more NPOs so that they don’t need to fund more.

Todd said that, regarding the subsidy payments for August that have not been received, there has been no official communication to the affected organisations or to the sector in general. 

Many organisations, including the Rehoboth Children’s Village, do not receive remittance advice and are forced to wait until the department notifies them that the money will be in their account. “We have a social worker that [the department] should be supporting, but they have not done so for years and are actually owing Rehoboth about R120,000 – they dragged their feet and eventually said since this happened last year, it is not budgeted for this year,” said Van der Galiën.

Memela said the department had captured a number of email addresses in the basic accounting system in September 2023 to ensure remittance advices are sent to NPOs. “The NPOs not receiving remittance are advised to submit their email addresses to the respective district office for capturing. Hard copies of the remittance are also obtainable from the district office.” 

‘Crucial’ work


Alfons van der Galiën, the managing director of Rehoboth Children’s Village, stressed the importance of NPOs doing the work they do, and how detrimental it would be if many organisations were forced to shut their doors due to financial constraints. 

“If you look at what NPOs are doing, they are caring for the vulnerable, the elderly, the orphans, people with disabilities, people dealing with addictions. If all these organisations have to close their doors, where will these people end up?

“NPOs are crucial for caring for vulnerable people, bringing them back on track and reintegrating them into society so they can build up the nation and not break it down.”

Statements vs reality


On Tuesday, 10 October, the department issued a statement clarifying the disbursement of monthly subsidies and reiterating its commitment to support NPOs. It said:

  • The department notes the growing number of NPOs receiving monthly payments;

  • The new payment system was transparently communicated to all NPOs;

  • The department has maintained open lines of communication with NPOs across the province. MEC Khoza and department management have engaged in numerous discussions to clarify the changes in the payment system and address any concerns raised by NPOs;

  • The department categorically refutes any reports suggesting that NPOs are facing difficulties due to our negligence;

  • The department maintains a robust service-level agreement with NPOs; and

  • The department deeply appreciates the dedication and hard work of NPOs as the department partners in our province, and remains dedicated to supporting their vital missions.


However, those working in the sector say this statement does not reflect their reality. 

“There is no formal communication sent to the sector regarding the lengthy delays in paying the August subsidy and this has been common practice for some time,” said Todd.

“How can they say that it is not true that NPOs are experiencing hardships because of [department] late cash transfers? How can they say that when you’re only paying the August subsidy in the middle of October? Some people haven’t had salaries for last month. That’s the reality,” she said.

The department, Todd continued, is not adhering to the terms of the service-level agreements which require subsidy payments to be made within 30 days, and numerous NPOs have yet to receive a signed copy of their service-level agreement – something which has been common practice over the years.
The department needs to understand that they do need the NPOs and they cannot bully the NPOs like they have been doing in the past.

Van der Galiën said the statement was “beautifully said but absolutely not true”. 

“There has been no training offered to organisations about how to fill in the forms for tranche payments or how to manage the tranche payments. We haven’t received the form yet, we just saw them on a slide at the roadshow and we haven’t had training on how to fill in the forms,” she said. 

“I just see it as a method of cutting off more NPOs if you don’t adhere to filling in the forms properly, even though we haven’t had training. I think it’s a plan to get rid of more NPOs so that they don’t need to fund more, because the CFO clearly stated that they are going to cut the funds of NPOs and anyone who is noncompliant will be taken off, so it is absolutely threatening and it is dictating.”

According to Memela, NPOs do not have to submit tranche claim forms. Instead they need to submit normal monthly claims for reconciliation after the funds have already been paid. 

Van der Galiën also stressed how crucial NPOs were to the nation’s most vulnerable. “The government is the body and the NPOs are the hands and the feet of the body. If you want the hands and feet to work, it needs blood flow, it needs money, it needs nutrition, it needs support.

“The department needs to understand that they do need the NPOs and they cannot bully the NPOs like they have been doing in the past. They need to understand that we are part of the body of government, doing the work of government.”

The KZN NPO Network has launched a petition to raise awareness about the plight of NPOs, and to submit to Parliament for their help on a number of issues. By 10 October 2023, more than 47 welfare organisations, 1,714 staff and 422,826 recipients (children, older persons and individuals with disabilities) were directly affected by the late payment of subsidies. DM

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