Recognising the value that social enterprises and non-profits add in building the economy and the nation, South Africa's Economic Development Department took steps in 2017 to develop the 'social economy' with technical assistance from the International Labour Organisation (ILO).
Globally, the social economy has been credited for its inclusive entrepreneurial approach in often deprived and under-served communities. In Europe there are over 2 million social economy enterprises, making up 10% of all businesses and employing over 11 million people. In the United Kingdom social enterprises make up over 9% of small businesses , with a turnover of GBP33 billion in 2011 and employment figures of above 230,000.
The social economy in South Africa brings enormous advantage by stimulating socio-economic activity, particularly outside of the urban centres. The focus in South Africa is to catalyse employment among young people, while growing the breadth and depth of services and opportunity to communities. We see organisations thriving, delivering goods and services that add value to society, for instance low-cost, high-quality clinics such as those run by Dulcy Rakamakoe at U-Care, or Muthi Futhi, a community business in Zululand that grows medicinal plants, or the re-imagination of housing by the team at Hustlenomics.
The Economic Development Department (EDD), the International Labour Organisation (ILO), the Industrial Development Corporation (IDC) and the Government of Flanders have held a series of discussions, consultations and focus groups over 18 months to understand what is required to stimulate the social economy eco-system. In each of our consultations, we asked participants different questions on the same topic: what questions do they have, what would they like the policy to achieve? Where did they identify gaps? It gave us insights into what is and isn’t working in the social economy in South Africa. Here are the top five insights:
The need for clarity. What is the social economy and why is it important?
There is a strong call to have an agreed definition on what the social economy is and to use this as the springboard to the broader national conversation on why it is important and the value it brings. In the National Consultation in February 2019, a definition was put forward that has been included in the draft Green Paper. It is a reminder that the policy development process is as important as the final policy recommendation. These discussions create consensus, legitimacy and clarity. We understand what it means when we use the phrase social economy, its partnership with the green economy and how we can incentivise and stimulate these new growth sectors.
Policy cohesion – to regulate or not to regulate?
The social economy is a highly inclusive and hybrid concept because it operates across social and economic spheres. Our research shows a growing call for policy cohesion, recognising that South Africa has great frameworks that focus on social change, transformation and upliftment.
Practitioners are frustrated by the need to work across policies that are contradictory to each other, each requiring different sets of paperwork and institutional requirements, such as contradictions in South Africa’s industrialisation versus its green-growth goals, or the burden for small enterprises of complying with B-BBEE, and non-profit and public benefit requirements. The policy development process is an opportunity to integrate existing policies, aligning the country’s inclusive and transformation agenda.
More funding? No thanks, we would rather have packages of support that stimulate the eco-system.
Our analysis shows that there is not a singular focus on funding. Instead, there is a call for sector stimulation and a broad series of recommendations on how this can happen.
This tackles the long-held assumption that more funding equals growth, which minimises the package of support that is required to support individual businesses to be sustainable. The calls from the consultation sessions are for stimulation and support. Yes, some of these are financial, such as incentive schemes, subsidies, tax breaks, and additional resources within the support agencies, but these are put forward together with recommendations for capacity building and training, and interestingly, networks. The call for partnerships and networks dominates, providing insight into the entrepreneurial nature of the social economy and its need to create an identity through togetherness. This could also be a sign of one of the strengths of the social economy, with its inherent focus on collaboration over competition.
Access to markets and impact investing
Following on from the above is the call to strengthen access to markets – making it easier for smaller players to participate and collaborate equally in the procurement systems of the bigger organisations. This call must be seen against the growing conversation in impact investing which is re-shaping how investors invest: shifting the focus from financial returns to include social and environmental returns. These shifts have profound consequences as they reshape and revalue our concept of what a successful business looks like. South Africa has a good track record here, with a number of companies listing Green Bonds, and the launch of the first social impact bond in 2018.
This shows that there is a growing movement away from traditional models of funding social services, which is typically done through subsidies, grants, gifts and philanthropy. We are starting to see innovation in the system, patient capital and a change in what constitutes risk. In the long term it allows our organisations that focus on doing good to access funds that are suited to both their impact and income needs.
Framework – guiding document and principles
Almost returning full circle to the call for clarity, is the call for a framework serving as a set of guiding principles, goals and values that maps out the social economy in South Africa. By naming it, we legitimise the model that social and economic value can be created simultaneously as functions of for-profit and not-for-profit companies. The framework also allows us to measure – a notoriously difficult exercise when our concept of ‘what is good?’ is so individually defined. By creating the conversation and agreeing upon simple measures that allow us to name and frame social development and its purpose, we can track and measure our progress and deepen our understanding of our context.
By understanding how to stimulate and support the social economy, we see a long-term picture where businesses exist to deliver high social value, together with financial returns. It is a vital step in our goal of achieving an inclusive society and an economy for all.
With technical assistance from the ILO, the Social Economy Policy project is committed to the conversation on what the sector could and should look like. The Green Paper has been widely shared during the last half of 2019 and forms the heart of rich consultations, debate, disagreement and consensus across the country.
If you’d like to know more, or would like a copy of the Green Paper, please get in touch with the social economy policy team at: .
Join the Nation Builder community at no cost. Learn how collaboration opportunities improve corporates’ social impact through shared learning. Start by completing an online social impact assessment to benchmark your own CSI strategy.
Kerryn Krige is the co-author of Disruptors: Social entrepreneurs reinventing business anda society. She is Chief Technical Adviser to the International Labour Organisation on the Social Economy Policy and formerly led the Network for Social Entrepreneurs at the Gordon Institute of Business Science. She is part of the Nation Builder collaborative network.
Nation Builder is a platform that equips and inspires businesses to have a positive social impact in South Africa. As part of the Mergon Group, the team collaborates across sectors to co-create resources that assist businesses in their social development work. Nation Builder hosts regular events that bring together people who are committed to using their business as a force for good. Continuous research is aimed at supporting business to partner well with non-profit organisations and the government, in order to build a prosperous South Africa. Nation Builder for more information.
LEGAL DISCLAIMER: This Message Board accepts no liability of legal consequences that arise from the Message Boards (e.g. defamation, slander, or other such crimes). All posted messages are the sole property of their respective authors. The maintainer does retain the right to remove any message posts for whatever reasons. People that post messages to this forum are not to libel/slander nor in any other way depict a company, entity, individual(s), or service in a false light; should they do so, the legal consequences are theirs alone. Bizcommunity.com will disclose authors' IP addresses to authorities if compelled to do so by a court of law.