Good Governance – Every PBO’s North Star
A public benefit organisation (PBO) is an organisation (whether voluntary association, trust, non-profit company, or local branch of a foreign tax-exempt charitable organisation) that does not work for profit and is exempted from paying certain taxes because it undertakes public benefit activities (PBAs).
As a republic, our country is centred on the primacy of ‘the public’. The preamble to our Constitution explains that we are a country particularly encumbered by the legacy of an unjust past. I would argue that the primary benefit to our nation’s public are therefore those activities that:
- heal the divisions of the past and establish a society based on democratic values, social justice and fundamental human rights;
- improve the quality of life of all citizens and free the potential of each person;
- lay the foundations for a democratic and open society in which government is based on the will of the people, and in which every citizen is equally protected by law; and/or
- build a united and democratic South Africa that is able to take its rightful place as a sovereign state in the family of nations.
One should read the ninth schedule to the Income Tax Act No. 58 of 1962, which specifically sets out what can be considered PBAs, in the context of this constitutional injunction. The list of PBAs is quite extensive and is divided into sections covering humanitarian and welfare activities; health care; education; land and housing; environment conservation and animal welfare; religion and belief; cultural, research and consumer rights; sport; and the providing of funds, assets or other resources.
The schedule provides a further level of specificity as to what kinds of PBAs would be considered under each of these themes, and includes activities such as:
- The care or counselling of, or the provision of education programmes relating to, abandoned, abused, neglected, orphaned or homeless children (Welfare, under Part II);
- The advancement, promotion or preservation of the arts, culture or customs (Cultural, under Part I); or
- Building and equipping of clinics or crèches for the benefit of the poor and needy (Land and Housing under Part II).
It is quite easy to see how PBAs could directly contribute towards achieving the vision set out for us in the Constitution. Many do help improve the quality of life; others ensure that citizens are equally protected by law. Most PBAs chip away at inequality and steadily work towards social justice for all.
However, it is not sufficient to say that undertaking a PBA is the same as supporting the Constitutional imperative. That imperative is only achieved if these activities are carried out with the Constitution clearly in view – holding it as the North Star guiding the PBA implementer each step of the way. Only then can we expect to see a PBA meaningfully contribute to the primary project of nation building. Without this North Star, it will quickly become evident that the PBA is merely a mediocre ‘ticking of a box’; one that will eventually distract more than contribute towards the national goal. Indeed, a badly oriented PBA can be disruptive to the national effort, and even destroy that which has been built by others who are keeping the Constitution in their sights. Examples that we have witnessed include:
- a ‘nation building’ sports tournament that sets entry requirements so onerous that only wealthy children get to compete;
- building a clinic in a rural area that never gets used because no one checked with the local health authorities first to ensure they had the personnel and budget to run the clinic; and
- accepting mental health patients into your residential facility without first ensuring that you have the capacity and skill to care for them, or facilitate their treatment and reintegration into society.
This framing makes clear the moral imperative for the good governance of a PBO, in addition to the legal and compliance requirements for strong governance. Given the moral and legal imperatives, ensuring your PBO is well-governed is arguably more important than ensuring that the organisation ends the year in the black, or that it has submitted its annual Return of Earnings for Compensation for Occupational Injuries and Diseases!
A badly governed PBO will allow the trust placed in it by the public (and public officials at SARS, the Department of Social Development and numerous others) to slowly erode, and with it, the organisation’s relevance. Any irrelevant organisation, by choice or by circumstance, will eventually cease to exist.
In our next article, we will explore specific principles of good governance that your PBO can apply to every major decision it takes. In the third article in this series, we will also explore some of the legal blind spots that many PBOs are subject to.