How Non Governmental Organisations can be funded through lottery

One promise of the new law that will regulate all NGOs in Kenya – the Public Benefit Organisations Act 2013, is the freedom it gives Public Benefit Organisations (PBOs) "to engage in lawful economic activities as long as the income is used to support the public benefit purposes for which the organisation was established" (Section 65).

It lists "income generated from any lawful activities undertaken by the PBO with its property and resources" as one of the sources of income for these organisations.

The Second Schedule of the PBO Act lists benefits of registering under the new law. Registered organisations will be exempted from paying income tax on income received from membership subscriptions and any donations or grants.

They will also be exempted from paying income tax on income acquired from income-generating activities; tax on interest and dividends on investments and gains earned on assets or the sale of assets.

With foreign donor funding dwindling by the day, countries that have appreciated the benefits of not-for-profit organisations have devised ways and means of generating funds locally that are in turn given as grants to public benefits initiatives.

A study conducted by the Kenya Community Development Foundation (KCDF), a public philanthropic foundation supporting sustainable community-driven development, jointly with Strathmore Tax Research Centre, found that many PBOs in Kenya "would not be able to run their programmes at all if all their foreign-sourced funding was suddenly withdrawn".

This partly explains the panic that local and foreign PBOs found themselves in when the Jubilee government unsuccessfully attempted to introduce a ceiling of 15 per cent on foreign funding to PBOs working in Kenya.

But even if PBOs were to embark on income-generating activities and derive all the benefits that will come with the new law, it will take a while before these initiatives pick up to levels that can sustain the financial commitments of these organisations.

This calls for other innovative approaches to raising funds locally for the voluntary organisations. In South Africa, the government has through progressive policies and legislation, made it possible for Not-for-Profit Organisations (NPOs) to sustain their programmes and activities without having to over-rely on foreign funding.

The National Lottery Board (NLB) and the National Lottery Distribution Trust Fund (NLDTF) are established in terms of the Lotteries Act (No 57 of 1997).

NLB regulates the National Lottery as well as other lotteries, including society lotteries to raise funds mainly through promotional competitions.

At least 34 per cent of revenue that NLB generates through lotteries and promotional competitions is transferred to the National Lottery Distribution Trust Fund (NLDTF) each week.

In the 2012/13 financial year, the amount raised through this arrangement amounted to R1.7 billion. Each year, the amount so raised is channelled to supporting three main sectors - Arts, Culture and National Heritage; Charities; and Sports and Recreation.

Under the Arts, Culture and National Heritage Sector, the fund supports non-profit organisations that work in the development of the arts and the preservation of South African culture and national heritage.

Half of funds in this sector are dedicated to programmes protecting and promoting traditional knowledge and cultural expressions; arts and crafts produced by women groups and people with disabilities. The funds are also used to develop and preserve cultural heritage sites and providing training and support for women farmers.

The Charities Sector receives the largest share of funds under this arrangement, 50 per cent of which goes to organisations involved in expanding home-based care services for old people, sick people and vulnerable groups like orphaned children.