Individual and collective work in the formal and informal sectors are the basis for human well-being and development of the world. Private sector investments and public expenditures are two key sources for funding such development, the third being donation-based input for programmes and projects.
More than 260,000 foundations in 39 countries have been identified by the Global Philanthropy Report, however, there are certainly more. Most foundations exist in Europe (60%) and North America (35%), but the foundation sector in Africa, China and India is fast growing. The trends heavily depend on philanthropy and NGO legislation, tax deductibility, encouragement or limitation of private initiatives and Corporate Social Responsibility (CSR) legislation. For instance, in India the two percent law obliges large companies to spend two percent of net income on CSR programs.
Foundation assets globally exceeded 1,5 trillion USD in 2018 which corresponds to 5% of the U.S.’ GDP. Of these assets, an average percent of 10% (150 billion USD) is spent annually. The ownership of foundations varies drastically. In Europe and America, the majority of foundations are independent though monitored by governmental supervisory authorities. In Latin America, corporate foundations represent half of all foundations. In China, Russia and some Arab countries, government led or linked foundations make up the majority; whereas in Africa, family foundations represent over one third of all foundations. Notably, not all philanthropy goes through foundations. There are various forms of legal structures for philanthropy.
Statistics on giving and charity globally and by country are important to recognize the different giving cultures. The World Giving Index is based on three criteria: “helping a stranger, donating money, volunteer time”. Yet such figures can be misleading and need contextualisation: in countries like Europe, which has a strong social welfare state, much of the social needs are covered by state expenditures based on tax collection. Therefore, taxes are part of “social giving” in terms of institutionalized solidarity. Education is primarily done in public schools, funded again by tax income from companies and citizens. The US has a comparable weak health care system, poor public schools and strong private education system. Therefore, supporting a public school or public university is seen as philanthropy, but the benefit for the population may not be better than in Europe, where these expenses are covered by taxes. In Africa, where many countries have fragile social welfare programs, the largest contribution to “charity” and solidarity is done by unspectacular daily and intense support of the enlarged families. This is performed in various forms including hosting children of brothers and sisters in the own family, paying scholarships or medical bills for relatives etc.
Volunteering in many countries is described as voluntary contribution of time to society outside of one’s job and without remuneration. But then again if the family is not defined as the small core family of 3-5 people as in Western countries but as the enlarged clan of 10-30 people with mutual responsibilities of caring, and if work is not defined by formal employment, in societies where 50%-80% are active in the informal sector, what does volunteering then mean? For hundreds of millions of people, the daily survival struggle is a mixture of small business, helping, caring which is not counted in statistics. Even in countries like Switzerland, with highly developed social security schemes and one of the highest number of philanthropic foundations per capita worldwide (over 20,000 foundations with a population of 8 million people), domestic labour is still not counted as work in official labour statistics and all the work of women, children, grandparents at home is still almost invisible. As such, extensive “philanthropy” and “charity” is not counted in international statistics.
I dare the hypothesis: Africans may be the most generous people in the world. Exhibiting “natural” support without speaking about it or publishing it, Africans tend to give as an obvious cultural, religious and human obligation. In addition, a large part of the capital of African High Net-Worth Individuals (HNIs) is in foundations in Europe and U.S., therefore counted as “European” or “American” philanthropy even though coming from Africans.
Quite a large percentage of African giving errs on the side of indigenous perspectives of philanthropy, this includes a complete continuum of remittances to extended family, hometown projects, grassroot practices such as grassroot practices, volunteer support, knowledge exchange networks as well as institutionalized giving. African giving practices do not fit neatly into established philanthropy definitions and theories and instead of retrofitting these giving patterns into these approaches, it is my suggestion that we work collaboratively in refining models to accommodate these practices. Although the inequitable distribution and development impact are recognized, these practices such as remittances are thought to be more effective than either international aid or foundation grants in lifting people out of poverty. Dismissing them as “un-philanthropic” discounts African perspectives and inhibits our ability to promote their role in equitable development. The time for the action is now because it’s the little things citizens do that will make the difference. To help fully unleash African diaspora giving’s potential, we must remove the blinders created by narrow, ethnocentric approaches that underestimate or dismiss remittances or non-institutional forms, realizing that almost by definition, philanthropy in a global age knows few boundaries.
Grantmaking in Practice
Case Study: The Rockefeller Foundation Demand Driven Training (DDT)
Recognizing the challenge of youth unemployment, and particularly in Africa, the Rockefeller Foundation launched its Digital Jobs Africa (DJA) initiative in 2013. DJA’s goal was to influence systemic change, bringing together the demand and supply sides of the labor market to significantly increase employment opportunities for high potential but disadvantaged youth. Thus, the foundation called for proposals for the Demand Driven Training (DDT), a program that would foster skills development initiatives that are customized to respond directly to the specific requirements of a job role, for an employer or a group of employers, and lead to placement in employment or self-employment. Demand-Driven programs develop and prepare youth for specific job roles.
Through a Call for Proposal application process, Making Cents International was awarded the grant of $649,742 to implement this program, ensuring that it is applicable across all sectors because it seeks to develop a strong link between formal training and actual industry requirements. It is a methodology, a systemic approach to linking skills to demand. Since the start of the initiative, more than 150, 000 youth have been trained, with more than 45,000 successfully placed in jobs.
Upon completion of the grant, the Rockefeller Foundation and Making Cents International launched the Demand-Driven Training (DDT) Toolkit, which brings together lessons learned from the work done with grantees and partners under DJA since the beginning, on how to better link youth with jobs, with both them and their employers reaping optimally.
Making Cents International created the toolkit by collecting information through a literature review, and site visits with five leading South African DDT providers, and five leading global DDT organizations operating in various markets. It also input by development investors such as Accenture, JP Morgan Chase, the MasterCard Foundation, Prudential, and USAID among others. Eight public and private South African technical and vocation education and training organizations also provided important background and context to their own.
DDT is a proven model that shows significant results in transitioning disadvantaged youth to sustainable livelihoods.
The Legal Implication Of Giving
The legal implication of giving is largely tied to tax laws. In the United States, grant makers are often given a tax exemption known as 501 (c) 3 status. This tax exemption comes with stipulations, one of which being that grant making resources cannot be used for lobbying purposes to influence legislation. Similarly, in Canada, under the Income Tax Act, registered charities (grant makers) can only use their resources for their own activities or to registered grantees, which are for the most part exclusively Canadian. For non-Canadian grantees, the funding organization must have direction and control of the resources allocated, failure of
this may lead to a 105% penalty on the amount transferred and/or revoking of charitable status.
Grant making efforts can sometimes be impacted by sanctions and government policies. Grant makers within the European Union for example are required to follow strict regulations where funds are directed to grantees in countries facing sanctions. Similarly, the reverse situation applies in some countries. For example, In Algeria, organizations are not allowed to receive donations from foreign grant makers without prior approval from the government.
Lastly, grant makers must strive to address the topic of governance thoroughly. Given that most grant makers particularly philanthropies are solely accountable to their Board of trustees (versus shareholders, donors, tax payers etc.), strong efforts must be made to ensure that potential conflicts of interest are addressed well in advance of grants being awarded. Conflict of interest can come in the form of a grant makers staff, board members or their relatives benefiting financially from a grant.
In conclusion, grants provide the means to transfer money, technical assistance, and expertise to partners, organizations and stakeholders in exchange for their contributions to set objectives and goals. In seeking the recipient organization to work with grant making organizations are expected to go through a competitive process as highlighted above and but intro consideration the legal implications as well as the roles of stakeholders and methods for managing communication.