 About the Author: Devon Concar has worked within a variety of roles within the responsible tourism industry; from managing high end accommodation establishments, coordinating marketing collections, managing pioneering community development projects in Mozambique, working on EU affiliated social enterprise programs and managing communications within highly respected volunteering organisations. He is South African, qualified with a degree in Tourism Development and Geography from the University of Johannesburg and with experience working in United Kingdom, Greece, Mozambique and South Africa. See more through his LinkedIn profile |
By Devon Concar, ECOCLUB.com Correspondent
When it comes to Responsible Tourism, South Africa and Cape Town in particular is of high significance: it was here, in 2002, that the globally recognised definition of the practice, the Cape Town Declaration on Responsible Tourism was agreed at a conference attended by 280 delegates from 20 countries:
'Responsible tourism is an approach to the management of tourism, aimed at maximising economic, social and environmental benefits and minimising costs to destinations. Simply put, responsible tourism is tourism that creates better places for people to live in, and better places to visit' (Cape Town Tourism, 2009)
South Africa, which was the first country to include "Responsible Tourism" in its legislation1, and the city of Cape Town in particular take great pride in this legacy. A citywide collaboration between five private sector organisations called Responsible Tourism Cape Town was created in 2009 to help the city on its journey to becoming a more responsible destination. The following promotional video tries to convey an image of commitment and pride about the city's responsible tourism policies:
A number of governmental initiatives were also put in place to promote responsible tourism development. The South African government recognised that "not for profit organisations play a significant role in society as they take a shared responsibility with government for the social development needs of the country"2. A detailed set of guidelines was developed by The Department of Environmental Affairs and Tourism in 20023 to assist its industry role-players, the 110% Green Initiative was established by the Western Cape Government in 2012 and more recently, in September 2014, amendments to the Environmental Act were made with the aim of imposing considerable penalties for corporate environmental offences and placing a "much more onerous duty of care upon corporate directors"4.
Other legislation provides incentives for organisations to operate in a socially and environmentally sustainable manner. Preferential tax treatment is designed to assist non-profit organisations by augmenting their financial resources.
Internationally, NPOs are granted some degree of preferential treatment, although the criteria and benefits vary from country to country. In South Africa, religious, charitable and educational institutions of a public character were formerly exempt from income and related taxes. However, in the absence of comprehensive case law and statutory definitions, the Commissioner of the South African Revenue Service was burdened with the problems of interpretation and implementation of these provisions, which often resulted in being unable to accommodate worthy organisations because their activities did not fall within the letter of the Act.
Following recommendations by the Katz Commission, the Minister in his 2000 Budget Speech, announced wide-ranging changes to the legislation. The objective of the new legislation was to cluster types of entities together to treat them uniformly in order to provide more certainty for taxpayers and the Commissioner on the qualifying requirements for tax-exempt entities. Thus the PBO was born. It is important to note that an organisation that has a non-profit motive or is registered as a non-profit organisation (NPO) or non-profit company (NPC) does not automatically qualify for preferential tax treatment. It must first apply for and be approved as a Public Benefit Organisation (PBO) by the Tax Exemption Unit. To qualify for approval as a PBO, organisations must have as their sole or principal objective, one or more 'public benefit activities'. These activities are listed in detail in the Ninth Schedule to the Income Tax Act, 1962 and fall into one of the following categories: Welfare and Humanitarian, Health Care, Land and Housing, Education and Development, Religion, Belief or Philosophy, Cultural, Conservation, Environment and Animal Welfare, Research and Consumer Rights, Sport, Providing of Funds, Assets or Other Resources, General.
Qualifying for the benefits of registering as a PBO is certainly not a frolicsome affair. Registered PBO's go through a fairly rigorous process to be registered. They are subsequently monitored by the South African Revenue Service (SARS) via economic audits, while occurrences of fraud would also discourage potential donors5. (To this day there have not been any notable occurrences of fraud). The strict monitoring of PBOs is not, however, the chiefly cumbersome factor in deciding to register or not. As with many responsible tourism initiatives worldwide an overriding factor is the lack of resources and governmental prioritisation: it takes a lot of time to register an organisation as a PBO while the shortlist for a new panel of arbitration was constructed with evidently not much effort or research.
To get an idea of responsible tourism operators satisfaction with PBO legislation and procedure we spoke with Greenpop, a new social enterprise focussed on planting trees, based in Cape Town and launched in 2010.
Greenpop's' innovative model accrues different sources of revenue for the purpose of repopulating indigenous trees in Cape Town and Southern Africa. They run a program that brings in volunteers from around the world to assist in their tree planting efforts. Greenpop have also created public awareness campaigns through corporate-funded tree-planting days at schools in and around Cape Town, run musically fuelled tree-planting festivals in alien-invaded and deforested areas in South Africa and Zambia and by getting individuals to sponsor tree-planting. The following video is taken from one of their tree planting festivals in 2013:
Lauren O'Donnell, a co-founder, explained that they started as a CC (social entreprise in 2010 because this allowed them "to generate [their] own income predominantly and not work with grant funding". In June 2013, Greenpop registered as a non-profit organisation while in June 2014 they applied for PBO status (in order to be recognised as a PBO, an organisation needs to be already registered as a NPO). According to O'Donnell some of the pros and cons of functioning as a non-profit organisation are:
Pros:
- Allows you to accept donations and grants for cause related work
- Allows your donors to get tax breaks under Section 18A certificates (if registered as a Public Benefit Organisation)
- Allows your donations not to be taxable (if registered as a Public Benefit Organisation)
- Allows you to apply for grants and international fundraising
Cons:
- Limit to the amount of revenue generating activity you can do (this is only a challenge if a large part of your model is based on generating your own revenue).
- Less option to diversify organisation and move into different activities
One of the challenges O'Donnell identified, in registering, was the time it takes for approval to be awarded. Greenpop submitted for registration as a PBO in June 2014 and are still waiting; they were told it could take up to 6 months. In addition, a relatively new tax ruling (effected in December 2013) states that 90% of profit derived from business activities must be directed towards the recovery of loss. Not abiding by this law "could result in the loss of their tax exemption". The change has caused confusion over some of the terminology and according to Piet Nel, project director for tax at the South African Institute of Chartered Accountants "the new percentage could take organisations unawares"6
Features like unpredictable timelines and confusing law changes play a role in organisations making the decision to go through the process of registering or not, it has for Greenpop; O'Donnell said: "the [new tax] ruling is a large part of all our structuring discussions – we are trying to work out the best way forward because we generate a lot of our own income through business-like activities and we also get donations for cause-related work. Finding the best method to have these two activities working side by side is what we are working on".
Mismanagement is another potential problem: a new Panel of Arbitration in terms of Section 9(3)(c) of the Non-Profit Organisations Act 71 of 1997 (The NPO Act) is being selected. They are responsible for influential decisions regarding Public Benefit Organisations. The selection process was publicly criticised by The South African Institute for Advancement, a well-respected institute specifically within the local tourism industry7 who pointed out that there is "very little relevant information pertaining to the individuals [the shortlisted nominees] and their involvement with the Non-profit Organisation (NPO) sector. Also disconcerting is [that] the information found casts the shortlisted individuals in a very negative light".
Since the inception of the Non-Profit Organisations Act, No 71 of 1997, there have been over 100,000 NPOs registered in South Africa8. Of these, 10,964 have been registered as PBOsiv and therefore qualify for the preferential tax benefit that come along with it. One does, however, wonder whether the time investment, unpredictable legislative changes and indications of mismanagement play a role. These should not be seen as eternally damning factors for the country. Laws are often amended and developed under the enthused eye of the betrothed public. An example of this is a concerted drive by the private sector of the South African tourism industry to engage government on proposed changes to visa regulations that is dominating tourism headlines in the country at the moment9.
In conclusion, it's clear that there is a definite propensity for South Africa and Cape Town in particular, to act as a prime example for responsible tourism. Some of the impacts Responsible Tourism has had on local communities can be seen on the Responsible Tourism Cape Town's website. The natural beauty is present, the population is engaged and the government is positively inclined towards the concept. A number of organisations are sprouting with the full intent to fulfil the significant roles identified by government: assisting with the development needs of the country. Incentive legislation is present but it takes second priority to preventative environmental and social laws (indeed as conservation and social justice should not be optional). But perhaps South Africa needs to develop more encouraging frameworks for social entrepreneurship which are not confusing and laborious. Until then organisations like Greenpop are going to have to multitask and batter through the whirlwind of legislative evolution ... evidence shows that they have the heart to persevere.
Notes:
1. "Cape Town's journey to become a responsible destination", Responsible Tourism Cape Town, 1 May 2010
2. "Tax exempt organisations", South African Revenue Service (SARS) website
3. "National Responsible Tourism Development Guidelines for South Africa", Department of Environmental Affairs and Tourism, March 2002
4. "Amendments to Environmental Act to take Effect" BizCommunity, 1st September 2014
5. "Non-Profit and Public Benefit Organisations", Exceed, 21 st June 2011
6. "Taxation of Public Benefit Organisations Changed", South African Tax Guide, 13th January 2014
7. "Open letter Re: Comment on the approved shortlist of nominees for the Panel of Arbitration in terms of Section 9(3)(c) of the Nonprofit Organisations Act 71 of 1997 (The NPO Act) as published by the Minister of Social Development in July 2014", The South African Institute of Advancement, 11th August 2014
8. Department of Social Development – home page, 10 September 2014
9. "Approved Section 18A PBO's", South African Revenue Service (SARS), September 2014
10. "DA to petition ministers over e-visas", The Citizen, 29th August 2014
Works Cited
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Department of Environmental Affairs and Tourism. (2001, March 1). National Responsible Tourism Development Guidelines for South Africa. Retrieved August 26, 2014, from City of Cape Town: https://www.capetown.gov.za/en/tourism/Documents/Responsible%20Tourism/Tourism_RT_SA_Responsible_Tourism_Guidelines_2002.pdf
Department of Social Development. (2014, September 10). Home Page. Retrieved September 10, 2014, from Department of Social Development: http://www.npo.gov.za/
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South African Revenue Service. (2014, September 10). Approved Section 18A PBO's. Retrieved September 10, 2014, from South African Revenue Service: http://www.sars.gov.za/ClientSegments/Businesses/TEO/Pages/Approved-Section18A-PBO's.aspx
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South African Revenue Service. (2014, January 1). South African Revenue Service - Tax Exempt Organisations. Retrieved September 3, 2014, from South African Revenue Service: http://www.sars.gov.za/ClientSegments/Businesses/TEO/Pages/default.aspx
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The Citizen. (2014, August 29). DA to petition ministers over e-visas. Retrieved September 10, 2014, from The Citizen: http://citizen.co.za/235714/da-petition-ministers-e-visas/
The South African Institute for Advancement. (2014, August 11). Open letter Re: Comment on the approved shortlist of nominees for the Panel of Arbitration in terms of Section 9(3)(c) of the Nonprofit Organisations Act 71 of 1997 (The NPO Act) as published by the Minister of Social Development in July 2014. Retrieved September 4, 2014, from The South African Institute for Advancement: http://www.inyathelo.org.za/images/docs/inyathelo_response_to_call_for_comment_on_npo_panel_of_arbitration.pdf