Social enterprise in South Africa: reflection on trends in 2016

Every December I reflect on the trends among social enterprises in South Africa. I find this exercise very valuable. This year I’ve decided to share my reflection with you.

This has been an extremely busy year for local social enterprises. In addition to mentoring social entrepreneurs, I’ve been fortunate to work on several big and exiting strategic projects for clients such as the International Labour Organization, Southern Africa Trust, DG Murray Trust and REDISA. These projects are set to have a significant social and economic impact.

I’ve worked primarily in partnership with the Imani Development, the Bertha Centre for Social Innovation and Entrepreneurship, Social Enterprise Academy and Citizen Surveys. It has become painfully obvious that one cannot do great things alone, but only in partnership with competent teams of people.

Here are the top 10 interesting issues or trends I’ve observed in 2016. Note that this is a personal reflection of my experiences; not an unbiased and objective analysis of the sector.

One, progressive social enterprises have used technology to enhance their business processes (e.g. streamline operations, manage projects and communication). A number have setup online platforms for clients and partners to interact with. The usage of tablets and smartphones for data collection has also increased. While some enterprises have done this in-house, others have relied on business analysts and software developers.

Two, impact assessment has been firmly on the agenda. Conversations have moved from measuring outputs to measuring outcomes. Proactive social enterprises have developed monitoring and evaluation frameworks, which integrate various research methodologies, indicators and data sources. Frameworks such as the Logic Model, Poverty Stoplight and Sustainable Livelihoods Assessment have been popular.

Three, there has been both a demand for, and shortage of, strong business skills. I’ve worked with social enterprises that have actively recruited business skills from the private sector. Fortunately, there are sufficient business men and women looking for jobs that have more meaning. These people are needed to lead social enterprise activities and ensure that appropriate business practices and models are adopted. This trend has kept us very busy this year.

Four, there has been a noticeable increase in the number of businesses and non-profits seeking to mix business thinking with a social (or environmental) purpose. This is a trend I’ve looked forward to for over a decade. This convergence between businesses and non-profit organizations is outlined in my Journey to Social Enterprise presentation. I was also pleased to see the launch of the B-Corp accreditation in South Africa, which bodes well for businesses seeking to cultivate a social purpose.

Five, I’ve worked on a handful of large projects involving cross-sector partnerships. It appears that forward-looking government departments and non-profit organizations are increasingly willing to partner with businesses to strengthen social enterprises.

Six, the obsession with scale has continued into 2016. Too many of my clients have wanted to franchise their models before the base model has been perfected. My advice has been consistent. Spend Year 1 (and maybe more) setting up and perfecting the base model, Year 2 branching to one other location, and Year 3 opening the first franchise. The Bertha Centre’s Insights into Social Franchising presentation is a useful resource for organizations looking to scale in this manner.

Seven, I’ve continued to receive weekly queries about legal forms and hybrid models for social enterprises. This led me to develop “Social Enterprises: Don’t Let Legal Forms get in the Way” to clear up common confusions. My other resources on this topic are “Choosing a Legal Form for Your Social Enterprise” and “Setting up a Hybrid Social Enterprise”. I’ve also worked very closely with Nicole Copley from NGOLawSA to help social enterprises resolve the dynamics associated with complex hybrid organizations, investment funds, property and land usage, social franchise arrangements etc.

Eight, interest in the revised B-BBEE codes, primarily the enterprise development (ED) code, have continued to grow. Fortunately, social enterprises are no longer naively sending funding proposals to ED departments. Instead they’ve began to unpack exactly what is meant by these codes and develop appropriate ED products. I’ve noticed social enterprises such as Fetola, Learn to Earn, Clothing Bank and FoodForward make good progress in this area. I’ve worked with Peter Ross (a B-BBEE strategist) to help social enterprises to use the B-BBEE codes to their advantage. Peter and I also intend to write an e-book on social enterprises and the B-BBEE codes in 2017.

Nine, moving on to impact investment. I’ve continued to hear impact investors observe that social enterprises emerging from the non-profit sector have weak business models. It appears that investments in social enterprises have tended to take the form of grants or convertible loans. The bulk of the financing appears to be directed at “high-impact businesses”, particularly those with an environmental focus. However, on a positive note, I’ve been impressed by the work that the Bertha Centre’s Innovative Finance Team has done to promote social impact bonds and educate wealth managers about impact investment.

Ten, on a personal note, this year has forced me to realize the limitation of my time and my skill-set, and the need to partner with a variety of other experts. For example, I have collaborated with the team at Imani Development on large-scale economic development projects. This realization has humbled me and helped to clearly define what I’m best at: the design and oversight of strategic processes that apply business strategy to a social purpose.

Overall, it has been a busy but exhausting year for many of us. There has been lots of political and economic instability, both in South Africa and throughout the world.

On the bright side, people are no longer questioning the need for social enterprises. I expect the sector to continue to grow and gain momentum.

In 2017 I will continue to work on strategic projects that strengthen social enterprises in South Africa. I expect next year to be even busier than this one.

Cultivating strategic clarity.

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