Components of working capital and their level of importance in South African welfare non-profit organisations

Working capital is the lifeblood of any organisation, whether for-profit or non-profit (NPO). Over the years, for-profit organisations across different industries and sectors have been studied to determine optimal working capital levels given the availability of funding within those sectors. However, studies of NPOs have been limited. According to the South African National Treasury in 2025, at least 45% of South Africa’s population is reliant on the social welfare sector. However, organisations in this sector reduced their available funding by 15% from 2021 to 2024 according to Trialogue, 2024 research. One of the core reasons for NPO closure is the lack of availability and inappropriate utilisation of funds. The sector is not well equipped to understand all its problems but one of the foremost is the management of its working capital finance. As the incorrect prioritisation of working capital components fails to focus on areas of propriety, the correct hierarchy of importance needs to be established. This study addresses and tests the components of NPOs' working capital through its hypotheses and objectives, providing better guidance to NPOs. The analysis shows that the hierarchy of the working capital components in NPOs differs from that of profit organisations. It also reveals that NPOs face higher levels of liquidity problems, associated with shortcomings in their working capital management. A revised model for NPOs, compared with that for for-profit organisations, is proposed to address the research problem.