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GoFundMe alternatives in South Africa: The bigger issue

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GoFundMe alternatives in South Africa: The bigger issue

There are many GoFundMe alternatives available in South Africa, but these alternatives have failed to break into the market for various reasons.

Everything is moving online these days, including the process of securing funding for a business venture or any other type of worthy cause. Though South Africa is not on the list for many international crowdfunding sites like GoFundMe and Kickstarter, we do have access to a wide variety of crowdfunding sites, including BackaBuddy, Click ‘n Donate, Thundafund, CrowdAfrica, and many others.

The problem with crowdfunding in South Africa

Crowdfunding is a great alternative for causes that cannot secure financing through the regular route of registered financial institutions. These campaigns can be very beneficial for new businesses and for non-profit organisations that need access to the incoming funds as quickly and as hassle-free as possible.

But although South Africans are certainly spoilt for choice when it comes to securing funding or finding worthy causes to donate to on these platforms – there is certainly something amiss, as BackaBuddy is still really the only well-known South Africa-based crowdfunding site. And sadly, even BackaBuddy pales in comparison to the popularity of alternative international crowdfunding platforms.

How popular are South Africa’s GoFundMe alternatives?

GoFundMe’s CEO, Tim Cadogan, announced in February 2024 that the business had delivered a whopping $30 billion (more than R500 billion) worth of help to about 150 million worthy causes all worldwide.

To put this into perspective, some of the GoFundMe alternatives have reported the following numbers:

Platform Funds Campaigns
BackaBuddy R400 million 52,735
Thundafund $5 million (around R90 million) 1,674

 

GoFundMe alternatives in South Africa: The bigger issue

The legality of it all

You may know by now that when technology advances with leaps and bounds, the world’s legal systems often struggle to keep the pace. And this is perhaps one of the main issues plaguing the crowdfunding movement in South Africa.

Crowdfunding is not currently explicitly regulated in South Africa, though crowdfunding activities can be subject to some of the legislation that already exists (this includes Banks Act 31 of 1990; the Companies Act 71 of 2008; Collective Investment Schemes Control Act 45 of 2002, National Credit Act 34 of 2005, and more).

This uncertain footing also applies to the tax element of things, where the funding received may be taxable in some instances when the funds can be classified as gross income, but not taxable in other instances when the funds are classified as exempt or when the campaign was debt-based. Not to mention the complicated system used when the funds are classified as donations.

And, while South Africa is certainly not the only country dragging its feet when it comes to implementing better regulations for crowdfunding campaigns and the funds which are generated through these campaigns, there is no denying that it is difficult to hand over your hard-earned cash when these legal processes have not been established.

South Africans are weary of scams

South Africa certainly has an overwhelming amount of worthy causes and up-and-coming businesses to support. But because crowdfunding campaigns do not need to go through all of the traditional investment-securing hoops (and there is so little legal regulation around the entire system) – there is a notable lack of transparency within most crowdfunding campaigns.

The Financial Sector Conduct Authority (FSCA) notably launched an investigation into the crowdfunding business, Livestock Wealth Financial Services, early in 2024.This was after reports surfaced that the business was providing financial services, despite not having a valid financial service provider (FSP) registration.

For instance, BackaBuddy, South Africa’s most popular crowdfunding platform, promises that you can “quickly and easily create a fundraiser”. However, while this business has attempted to maintain some kind of transparency by verifying campaigns – this information page reveals that they only require proof of identity, three references, and some supporting documentation to verify a campaign. Unfortunately, this is still not enough information to confirm how the funds will be used once they are paid out.

The road forward

Whether you have felt tempted to create a campaign or click on the “Donate” button over the last few years or not – it is clear that crowdfunding is still a long way from being a true, viable option to secure funding in South Africa.

And until the legislation and regulatory authorities catch up with this mostly digital form of independent fundraising, the majority of South Africans will continue to harbour some hesitation whenever they consider handing over their money to a cause on one of these platforms.

But South Africa is also faced with an incredible opportunity to become a trailblazer in the world of crowdfunding regulation, if we can just develop some legislation that specifically regulates this type of funding procurement without over-complicating the process.

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