Transitional National Development Trust: briefing

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Trade, Industry and Competition

28 July 1998
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Meeting report

RECONSTRUCTION & DEVELOPMENT PROGRAMME PORTFOLIO COMMITTEE

29 July 1998

TRANSITIONAL NATIONAL DEVELOPMENT TRUST (TNDT): BRIEFING

Documents handed out:

Transitional National Development Trust progress report (see Appendix)

Mr Paul Jackson, a representative of the Transitional National Development Trust (TNDT), gave a presentation on the background, programmes and challenges facing TNDT. The Trust was established within the broad framework of the Reconstruction and Development Programme (RDP) Policy. It recognises the role of civil society and organisations dealing with long term development; particularly those dealing with poverty alleviation and causes of poverty.

The Trust was established on 11 April 1996 as an interim funding mechanism by Mr J. Naidoo, Minister of Telecommunications and was given funding during June 1996. This funding was a partnership between the South African Government and the European Union. The Trust was given 125 million; 50 million from the Government and 75 million from the European Union.

The Trust is designed to empower programmes and initiatives within the country. This includes empowerment for education and training, health services and support, unemployment and lack of economic opportunities, especially in the disadvantaged communities. It's priorities are women, children and the disabled.

The original concept of the TNDT was to have its operational source from Independent Development Trust and Kagiso Trust. Its offices would serve as a secretariat and management information function. However this concept was too difficult to implement and the Trust was forced to review its operational strategy in November 1996.

The TNDT's funding role is one of a crisis funder and protector of existing capacities in sectors. It does not fund retrenchment expenses, retrospective funding, workshops, conferences and programmes which the Government is responsible for. Their main priority is community-based projects, especially those which occur in the rural areas. The biggest contribution made was R4 million to the Kwazulu Natal projects in areas like Umhlathuzi and Umfolozi Valley.

For publicity, the TNDT advertise on radios, in newspapers and project officers inform other NGOs about their programmes.

Actions undertaken by the Trust since the adoption of the risk management framework included a formalised monitoring process and the appointment of CASE (Community Agency for Social Enquiry) to do independent monitoring reviews. The appointment of Ngidi and Partners was made to do the financial review of the Trust's funding.

The committee members asked about the use of freelance consultancy. Mr Jackson said that their structured inputs and skilled projects were required. He was also asked whether TNDT has done any presentation to anybody else for transparency reasons. He replied that no other presentation has been made.

Mr Jackson ended his presentation by informing the committee that TNDT has run out of funds. The Trust's future challenges included support, the role of civil society in development and an overview of the sector.

The committee members agreed that it was a good presentation and no other comments were made.

Appendix: Transitional National Development Trust progress report

Extract:

TNDT PROGRESS REPORT JULY 1998

PRESENTATION TO THE RECONSTRUCTION & DEVELOPMENT PROGRAMME PORTFOLIO COMMITTEE

The Transitional National Development Trust was announced in September 1995 by the then Minister Without Portfolio, Jay Naidoo, as an interim funding mechanism to address the short term and crisis funding needs of civil society. Minister Naidoo developed the concept of this interim structure in collaboration with key stakeholders in the sector. These include the S.A. National NGO Coalition, the CBO Network, the Development Chamber of Nedlac and the two main grant funders at the time, Kagiso Trust (KT) and the Independent Development Trust (IDT). The Trust was formally established on the 11 April1996 and received its funding during June 1996; this funding represented a partnership between Government and the European Union and each contributed R50 million and R70.06 million respectively. Its Board of Trustees consists of representatives of the constituencies with four Trustees from KT and IDT, three representatives from the NGO Coalition and Nedlac, two from the CBO Network and one from Government (17 in total).

The overall program implemented by the TNDT requires funding to organisations of civil society (CSOs) be applied within the policy framework of the Reconstruction and Development Program and the Multi year Indicative Program Framework. (The bilateral agreement between Government and the European Union)

Notwithstanding its peculiar crisis funding role, the TNDT Trust deed specifies the broad focus of the activities, projects and programs to be supported by its funding processes. The trust deed empowers the TNDT to: -

"Support programs and initiatives within the Republic, directed to the relief of poverty, deprivation, unemployment, educational disadvantage, lawlessness, and the lack of economic opportunity and basic social infrastructure; and

To undertake the range of activities envisaged in respect of independent developmental organisations committed to the goals and objectives of the RDP."

MISSION STATEMENT

"The Transitional National Development Trust is an interim development finance agency which works as part of the national development strategy toward the alleviation of poverty and its causes. It does this by supporting organisations of civil society in their efforts to promote sustainable, people-centred development.

These services are intended to build the capacity of local groups to make effective, sustainable use of limited resources, and to create an environment which enables ordinary people to assume greater control over their lives."

It is important to reflect on the original deliberations by the Trustees and management of TNDT on the nature and method of its funding practice. The operational strategy adopted was based on the fast track, bridging finance mandate of the TNDT and was extremely successful. (Refer appendix on progress to date). However, this fast track mandate permeates everything the TNDT does, the way it works, its development and operational policies, its decision making processes and its business style.

The situation resulting in the adoption of the operational strategy is best articulated from an extract from the TNDT general policy, which was formally adopted by the Trustees. This extract is as follows:

"The original concept of the TNDT was that its operational capacity would be sourced from the IDT (Independent Development Trust) and KT (Kagiso Trust) and that its offices would serve as a secretariat and management information function. This concept proved too difficult to implement and the Trust was forced to review its operational strategy in November 1996. As a result, it substantially increased its own core capacity for operational and administrative responsibilities.

The Trust constantly sought to balance its crisis funding/fast track funding with that of good development practice. The strategic decision on balance substantially gives content to its crisis funding mandate while attending to issues of good financial practice. It has significantly influenced both its funding policies as well as its operational processes and strategies."

During the first part of 1997, the operations of the Trust were primarily occupied with the commitment of the capital fund it held. In the later part of 1997 and in 1998, the emphasis shifted to the implementation of projects. In addition, a risk management framework was developed and implemented to mitigate against adverse consequences of the strategic fast track funding decision taken by the Trustees. (See Risk Management)

Details in this information pack include analysis of beneficiaries, geographical location, size of grants made and a sector and sub-sector analysis of funds committed. A short synopsis of the progress to date is as follows:

• The capital fund of R120.06 million projects has been fully committed to 480 projects.

• An additional R9.2 million recently granted to the TNDT by the EU (the interest accumulated on EU funds held) is being committed to a number of projects primarily in the Eastern Cape.

• TNDT Disbursements to projects is currently between R5 and R6.1 million a month.

• Most of TNDT responsibilities will be discharged by December this year where upon the TNDT will close.

ACTIONS TAKEN TO REDUCE RISK OF FUNDING STRATEGY

A number of the actions undertaken by the Trust since the adoption of the risk management framework merit additional discussion. These are a number of parallel actions, which include:

1.1. Formalised monitoring process. The Trust has instituted a formalised monitoring procedure. This is also yielding a number of benefits particularly in the early detection of problems to which assistance can be given. The monitoring component of the Trusts activities culminates in a formal feedback loop where experiences are shared and solutions to common problems discussed and worked on.

1.2. The Trust has formally appointed the Community Agency for Social Enquiry to do an independent monitoring review chiefly of the development impact of the TNDT's funding. This is essentially a midterm review. The lessons of experience and the external critique from this process are formally and regularly introduced into the Trusts operations. In addition these will be recorded and passed to the NDA.

1.3. Appointment of NGIDI Incorporated to undertake a financial review of the Trust's funding. This will chiefly be at project level but also include the manner and appropriateness of the Trusts funding. As with the C A S E study, the results will be introduced into the Trust's operations and handed to the NDA.

1.4. Funding compliance report and related actions. This report is tabled at the Audit and Finance Committee and the Trustee meetings. This report formally tracks cases of severe funding compliance deviations and the resulting actions taken.

1.5. Capacity building fund. The Board of Trustees formally approved the capacity building fund of R2 million. The process of assisting projects where there was an under assessment of capacity building requirements initially is underway and yielding important benefits.

THE FUNDING GAP

The funding gap to the sector is already large and growing. The reasons for this are two fold:

• The TNDT has a restrictive funding policy in some respects. Thus it could not fund new initiatives, expansions or infrastructure projects. As a result, many good projects were rejected for these reasons by the TNDT. This took place when many CSOs were repositioning themselves in a new development environment.

• Projects which initially received funds from the TNDT have completed their funding cycle. The TNDT was restricted to provide funding for one year and this funding cycle started being completed in September 1997.

The TNDT currently holds approximately 600 unsolicited applications requesting approximately R300 million. The office is increasingly getting calls for information and expressing concern on the funding situation. Thus the practical reality of the funding gap is apparent. This is exacerbated by the decreased performance of the IDT.

The record of Government support to organisations of civil society over the last four years is not good if one considers the role ascribed to these organisations in the RDP policy. The urgency for the establishment of the National Development Agency is emphasised. However, even if the legislation is approved in September this year (15 months behind schedule), the time for it to become operational is expected to be June 1999 and will further exacerbate the funding gap. The option to use the instrument of the TNDT as a further bridging mechanism can be considered because it is a public resource. This option will be available until September 1998 after which the close down processes and loss of staff will preclude its use.

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