The reflections and recommendations of founder and impact economy advisor Reana Rossouw centre around how we can prepare for an unpredictable future by focusing on building capacity for adaptability and flexibility.
The full report will be available at the launch in Cape Town and Johannesburg.
The gradual but deliberate dismantling of global development aid is the new reality
The USA is the world’s largest provider of foreign aid, contributing 40% of global humanitarian funding. The executive order in January to halt USAID funding for 90 days has therefore had immediate and severe consequences for critical aid programmes worldwide, including in South Africa.
The Trump administration's action against USAID is not an isolated event. It is part of an ongoing pattern in the international development landscape whereby donor nations are systematically dismantling their aid architecture to better serve domestic ideological and economic interests. Several European nations have announced aid budget cuts since 2024, including the Netherlands (-30%), Belgium (-25%), France (-37%), the UK (-40%) and Germany (nearly €2bn). The scale of US aid, nevertheless, makes this one of the most extreme development aid developments.
The USAID funding freeze, combined with the USA’s withdrawal from the Paris Climate Agreement and the World Health Organization, will have an enormous impact on humanitarian budgeting across the globe, leaving critical needs unmet, organisations weakened and under-resourced, and persistent inequalities in access to basic services. For Trump's administration, this appears to be part of a larger push to diminish multilateralism and reduce state responsibility in global development.
Has South Africa’s social development sector been left in the lurch?
Development finance and aid play a particularly crucial role in South Africa’s social development. According to recent Organisation for Economic Cooperation and Development (OECD) data, South Africa received approximately $1,09bn in overseas development aid (ODA) in 2022; in 2023, $440m of South Africa’s development aid came from the USA, largely directed towards HIV/Aids programmes. Following the USAID stop order, the World Food Programme – which previously received 40% of its funding from the US – was already forced to shut down its SA office in March.
ODA is of course supplemented by several local financial resources for social development, including government financing (primarily via the Department of Social Development or DSD), development finance institutions, private capital and remittances. Government is however facing several of its own financial challenges, including a rising debt burden that is squeezing public funding and declining tax revenue.
In addition, instances of fraud and corruption in government agencies remain rife. One of the most recent cases that made headlines is the Gauteng DSD, which pays out almost R2bn annually to non-profit organisations in the province. In 2019, forensic reports providing evidence of irregular payments of at least R500m between 2016 and 2018 from NPOs to for-profit companies that have not gone through a tender process were finalised. These reports were buried by the department, re-emerging in 2024 only. Still, those implicated have not been held to account, even defying court orders and funding to several non-profits was delayed from 2024 and continuing in 2025. A fundamental problem with government funding is the lack of coordination: without a centralised record of which organisations receive funding or confirmation of their registration on the DSD database, there is little oversight or coordination, which compromises transparency, accountability and impact.
Destructive competition means funders are becoming fundraisers
As a result of the challenging global landscape and dwindling humanitarian funding, new competitors for funding are emerging in South Africa. It’s no longer only non-profit organisations competing against each other to raise funds, or social enterprises competing to attract investors. Funders are becoming fundraisers and competing against each other.
The South African government has become the greatest competitor for development funding, adopting two key strategies:
1) engaging the private sector to sustain economic activity and
2) expecting the non-profit sector to deliver essential services without financial compensation, requiring organisations to raise their own funds.
Yet, South Africa is not entirely facing a funding crisis, considering the range and depth of development financing sources. The DSD has been allocated R422,3 billion in the 2025/26 financial year; private capital allocations to social development exceeded R200bn per year between 2020 and 2024; and remittance inflows often exceed official ODA and amounted to $803m in 2022.
The challenges the sector experiences however highlight key questions:
- Are the available resources being used effectively and allocated equitably?
- How can government funding be managed and leveraged more effectively across the social sector?
- How can the sector be strengthened so that communities become more resilient and less dependent on aid and social welfare?
- How can organisations be strengthened so that the sector can operate, distribute, create and manage its own resources optimally?
Both reform and institutionalisation are therefore required to navigate the new world order. Philanthropy or social investment cannot replace government, but it can be a catalyst for innovation and creating alternatives to existing challenges in society.
The USAID collapse opens the door for transformative change
If there is a lesson in the collapse of USAID, it is this: the Western aid-industrial complex is inherently fragile, self-serving and unpredictable. Something entirely new is needed. Instead of focusing on whether Trump's actions are creating openings for China and other global powers to come to our rescue, we have the opportunity to create something entirely different and more transformative that builds a stronger, more sustainable local social economy.
This transformation must focus on:
- Prioritising quality support that aligns with the priorities of South Africa overall and of our communities and strengthens local institutions and organisations.
- Promoting collaboration among donors and organisations across the sector to reduce duplication and maximise impact.
- Incorporating social enterprises in SME initiatives such as incubators and accelerators so that they become investment-ready and leverage private capital.
- Encouraging and supporting more organisations to generate their own revenue and building organisational capacity to diversify income streams in order to become financially sustainable.
- Leveraging aligned development approaches and priorities across sectors to support national development priorities.
Ultimately, transformation hinges on recognising the social development sector’s contribution to the South African economy. Instead of waiting with bated breath for the next global funder to step in (and hoping their commitment lasts) or for government to get its finances in order, we should focus on building a stronger, more independent local social development sector: bolstering local operational capacity and developing the next generation of leaders, organisations and institutions to serve the country better in the future.
In a strange twist of irony, we can take a leaf out of the book of global donors who are prioritising domestic needs and become more self-serving ourselves: a South African social development sector for South Africa by South Africa. It will take time, require drastic innovation and demand clear priorities and unprecedented collaboration and coordination. But it can be done, and it must be done. After all, it won’t be the first time we’ve conquered the seemingly impossible.
For more information on the release of the 2025 Research Report on the Social Economy in South Africa, or to attend the research launch event in either Cape Town and Johannesburg in May, please send an email to az.oc.noitarenegtxen@ofni.
