#BizTrends2025: New challenges, new opportunities for nonprofits

Feryal Domingo, acting executive director, Inyathelo

At the same time, the push for digital transformation, driven by advancements in artificial intelligence (AI) and an evolving technological landscape, will require investments in digital infrastructure and capacity building.

Adding to this complexity, new regulations will impact how NPOs operate, demanding agility and innovation to sustain their impact.

FATF requirements

Financial Action Task Force (FATF) regulations, specifically Recommendation 8, impose stringent anti-money laundering and counter-terrorism financing requirements on NPOs.

Organisations will face increased administrative and financial tasks as they work to enhance due diligence, governance, and risk management processes to prevent misuse of funds and meet compliance standards.

Consequently, some NPOs will need to invest in governance training for Boards, and systems upgrades. This will ensure greater transparency and compliance but could also be a burden for smaller organisations whose resources are already strained.

New tax regulations

The South African Revenue Service (Sars) has introduced important changes regarding Section 18A legislation, which governs tax-deductible donations. Updates include stricter reporting requirements and more detailed documentation to claim tax exemptions.

NPOs will need to align closely with updated guidelines from Sars and provide accurate, thorough records of all Section 18A donations, as well as clear information on how these funds are used.

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DSD compliance

Thousands of South African NPOs, registered under the Nonprofit Act as “NPOs”, are encouraged to ensure legal compliance, as the Department of Social Development (DSD) has begun a process to update its records.

Organisations that remain non-compliant may face deregistration from the NPO register. Those dependent on government funding may have challenges with contracts and partnerships, reduced capacity to deliver services, staff layoffs, and even closure.

Organisations will need to take advantage of assistance offered by the DSD, and get their affairs in order urgently.

Impact of AI

AI-powered tools can enable NPOs to automate routine tasks, analyse large data sets for insights into donor behaviour and programme effectiveness, and personalise communications.

By integrating AI thoughtfully, nonprofits can position themselves as agile, future-ready organisations.

Emphasis on ESG

Corporate and philanthropic funders are now applying environmental, social, and governance (ESG) criteria in their evaluations. This makes it essential for NPOs to adopt sustainable practices if they are to remain competitive in securing funding.

NPOs will also need to develop stronger skills in impact measurement, using frameworks that quantify and validate their contributions.

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Strong leadership

Effective leadership (a cornerstone of both King IV and the Independent Code of Good Governance) will be essential to drive strategic direction, foster a culture of innovation, and build strong relationships with stakeholders.

Leaders must possess a deep understanding of the NPO's mission, a clear vision for the future, and the ability to inspire and motivate their teams as they prioritise ethical leadership, transparency, and accountability.

Funding diversification

As traditional grant funding dwindles, NPOs must diversify their income streams to ensure long-term sustainability. Social enterprises offer a promising solution by blending business principles with social impact.

By identifying core competencies, developing robust business plans, securing funding and partnerships, building strong teams, and measuring social impact, NPOs can create sustainable revenue streams while addressing pressing social and environmental challenges.

A strong Board, equipped with business acumen and social impact expertise, can guide and support these initiatives.

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Civic engagement and accountability

Formation of the Government of National Unity has introduced both opportunities and challenges for NPOs. Civil society organisations are encouraged to engage with parliamentary committees and municipalities to press for accountability.

For example, the Democracy Development Program’s Local Governance and Advocacy Learning Network mobilises grassroots organisations to hold local municipalities accountable.

Impact through collaboration

Nonprofits with expertise in sectors prioritised for increased government support are positioned to drive meaningful impact. Their expertise and grassroots networks could enable them to strategically harness new resources, collaborate with public initiatives, and tackle urgent community challenges. We could see more partnerships across the nonprofit, corporate, and public sectors, around issues such as youth unemployment, climate resilience, and healthcare.

Conclusion

In conclusion, as new regulations take effect and compliance is enforced, misinterpretation of the legislation is likely and there could be unintended consequences for the sector.

It is vital that NPOs keep up to date and build capacity. The NPO Working Group, chaired by Inyathelo, works closely with bodies such as the DSD, Sars and specialist consultants to educate and support the sector as it navigates change.