Is CSI grant funding broken?

At the Trialogue 2015 CSI Conference, a debate on whether or not CSI should focus on grant funding animated the audience and provided a space for frank conversations on funding models.

The question of whether or not CSI should focus on grant funding proved polarising.

Defending grant funding, Anne Bown, NPO Consultant at Charisma Consulting, said, “It aint broke, so why fiddle?”

Bown believes there’s room for fine-tuning, but says evidence-based impact assessment shows the NPO sector is making a difference, working smarter, providing social services, developing the nation and is more businesslike when in partnership with companies. For this reason, grant funding should stay.

“NPOs engage with corporates and speak the same language because grant guidelines direct programmes/projects and new ideas into a logical format, jointly finding solutions to local problems,” she says. “Grant funding ensures programmes and projects are measured against set objectives and keeps the relationship professional and focused on achieving success. It adds points to BBBEE score cards, gives value to the National Development Plan, and builds our profile as a nation in the global Social Progress Index – South Africa is now 63 out of 133 countries. Grant funding assists NPOs to secure mid-term income (three to five years).”

Bown cites the 2014 McKinsey Global Survey, which says CSI creates value and benefit to businesses and their reputation; improves operational efficiency and shareholder value; assists in retaining and attracting talented employees; creates new business streams and improves compliance.

She sees loan and venture capital funding as risky: “The NPO will have to ‘pay back the money’ plus interest. Donation tax via Section 18a certificates won’t be possible, the budget for CSI will become venture capital and not targeted at development and there might be infringement on the Financial Services Act. The middle man will take a slice of the budget – why would an NPO risk debt? The demands of due diligence would also be beyond the current grant system of project assessment.”

In response, Aunnie Patton, Innovative Finance Lead at the Bertha Centre for Social Innovation at UCT, insisted that grant funding is broken. She gave an example cited in an earlier conference session of two organisations that spent R180million before determining they hadn’t made any impact.

“South Africa has the resources to be higher on global indexes than we are,” she stressed. “There are multiple funding options available. We need to embed outcomes and accountability into funding. Money should not change hands until protocols and outcomes have been set.”

She touched on debt funding and venture capital as possible alternatives to grants. While she admitted impact funding has failed to attract funders over the last decade, she attributes this partly to skills sets required. “There needs to be a migration of skills. CSI has more recently been taking on young bankers and consultants with traditional finance skills. They’ve been learning from people with CSI skills. We need blended skills sets. Knowledge and training is accessible and we should see increased appetite for this type of funding.”

Comments from the audience were varied. Some noted that grant funding often specifies how funds are allocated. “Of the R400,000 funding we got, we were told we needed to spend R60,000 on training,” said one woman. “There are two of us. Do you know how many courses we had to do over six months to reach R60,000? It took time we should’ve been spending on our core mission. I almost wish we’d said no to the funds.”

Others pointed out pitfalls of impact funding. “It’s difficult to agree what an outcome is worth,” said one person. “And what happens if an NPO only achieves 70% of the outcome, not 100%?”

“How do we measure the value of things that are difficult to measure?” asked another. “How do you measure compassion to a dying child or support to a rape survivor?”

Patton responded that just because it’s difficult to measure something, doesn’t mean we shouldn’t try. “By putting a number to it, we’re not taking away the heart. Putting value on it means others begin to value it and more money flows towards it.”

Regarding funding innovation, she quoted Henry Ford, who said if he’d asked people what they wanted, they would’ve answered, “A faster horse.”

“We need a car, not a horse,” she urged. “We can’t address societal issues with one percent of revenue after tax. We want to work with financial instruments that are big enough and that pull in funds from different places. CSI is an amazing place to experiment with how to put money to better social use.”

While there was no consensus on whether grant funding should remain the focus of CSI, there was agreement that more discussions need to take place between all stakeholders to start “making it different”.

Written by Tamara Oberholster

2017-12-04T18:38:44+00:00 May 20th, 2015|CSI|