Thoughts on the Social Economy Strategy in South Africa

The South African government is busy developing a strategy to help cultivate the social economy in the country.

This process is housed in the Economic Development Department (EDD) and conducted in partnership with the International Labour Organization (ILO). It is supported by several donors, universities and other stakeholders.

I’ve been fortunate to contribute to the strategic process – I’ve been interviewed several times and shared some written insights with the project team.

At the time of writing this article (February 2019), the government has commissioned a Green Paper on the Social Economy – a draft set of policy proposals for discussion. Green Papers tend to be followed by White Papers or official policy documents.

Since this strategy has been on my mind recently, I took a moment to record my thoughts and share them online and with the policy team. I’m also curious about what form you think the Social Economy Strategy should take.

Official definitions of the social economy

Official definitions tend to be quite abstract, which makes the policy process more difficult.

In 2009, the ILO’s Africa Conference defined the social economy as follows:

“A concept designating enterprises and organisations, in particular cooperatives, mutual benefit societies, associations, foundations and social enterprises, which have the specific feature of producing goods, services and knowledge while pursuing both economic and social aims and fostering solidarity.”

The first time I became aware of the social economy in the policies of the South African government was when the New Growth Path was released in 2011. This policy, which aims to create 260,000 new jobs in the social economy by 2020, defined it as follows:

“The social economy includes a myriad of not-for-profit institutions that provide goods and services, including co-operatives, non-governmental organisations (NGOs) and stokvels.”

As you can see, both definitions have bundled a mix of organizational types, legal forms, descriptions and values. As everyone who reads my articles knows, I strongly dislike jargon, especially when people confuse their terminology (hence my Social Enterprise Glossary).

Social economy is an artificial construction

The social economy is ultimately a construction – a grouping made by academics and policy makers.

The tendency to group sectors of society is not new. The South African economy traditionally contained three sectors: the private sector containing businesses; civil society containing non-profit organizations; and the public sector with government organizations. Over time, the boundaries between these sectors have become blurred and the distinction less useful. For example, a social enterprise could do the work of government, resemble a business in the private sector, but have its identity and values in civil society.

Policy makers then decided to define this thing called the social economy to explain those organizations that are working hard to improve the world and have embraced a certain set of values. This definition overlaps with the traditional three sector model of society, as is illustrated alongside in the diagram by Quarter & Mook (2010) from an article titled “An Interactive View of the Social Economy” in the Canadian Journal of Nonprofit and Social Economy Research.

The social economy is highly segmented – it is a bundling together of organizations that have very different needs, as well as policy and support requirements. Social economy organizations will tend to have different identities and legal forms. They will also belong to different sectors and different industry bodies.

You can begin to see the challenges that policy makers will face.

Perspectives on the social economy

I have always considered the social economy to much like a multi-faceted gemstone. It can look very different depending on whether one adopts a legal form perspective, an organizational-type perspective or a sector perspective.

  • Perspective of legal forms – the social economy contains non-profit companies, trusts, voluntary associations, stokvels and cooperatives.
  • Perspective of organizational-types – the social economy contains non-profit organizations, social enterprises, township businesses, high-impact enterprises, foundations, social businesses, trade unions etc.
  • Perspective of sectors – the social economy contains organizations that work in the primary health care sector, homeless sector, green investment sector, agricultural sector, craft sector etc.

There have also been attempts to describe the social economy in terms of values and traits (e.g. solidarity, voluntary participation, not-for-profit) but I’ve found these less useful from a policy perspective.

You can see the obvious problem. How do you decide which organizations are clearly in the social economy and which ones are not? This is important for policy-makers since policy likes clear and measurable boundaries.

For example, a social enterprise with a legal form of a private company (PTY) that provides affordable primary health care would be excluded from a government policy which uses the legal forms perspective.

Similarly, if one adopts the organizational type perspective or sector perspective, then many organizations that are not part of the social economy become “free riders” (i.e. able to benefit from policy and resources that were not designed for them).

The desire by policy makers for clear boundaries will be very difficult since the social economy is amorphous, and its boundaries are permeable.

Social economy is all about “intention”

I have always thought of the social economy in terms of “intention” and would define it as follows:

“The social economy consists of all organizations that are primarily striving to achieve a social or environmental impact – impact that ideally benefits communities or society as a whole.”

I believe that it should be required that this is the “primary intention” of qualifying organizations, rather than the secondary intention (e.g. in CSR) or incidental impact of these organizations.

This definition is inherently subjective, but I suggest it is the only way of defining the social economy. Using legal forms or other “hard” boundaries to identify participants will limit the social economy more than benefit it.

Existing policy framework is comprehensive

There is a comprehensive policy framework that already covers the organizations that operate in the social economy. I’ve heard many organizations complain that there is too much policy!

To illustrate this point, let us consider the example of a non-profit organization with a legal form of a non-profit company (NPC) that works as a hospice. This organization will strive to comply with laws and policies linked to its legal existence, sector and type of work:

  • Legal existence (e.g. Companies Act, Income Tax Act, Non-profit Organizations Act)
  • Legal compliance (e.g. Broad-Based Black Economic Empowerment Act, Basic Conditions of Employment Act, Protection of Personal Information Act, Consumer Protection Act, Promotion to Access to Information Act)
  • Sector and work (e.g. Department of Health, National Policy Framework and Strategy on Palliative Care, Health and Welfare SETA, Health Professions Council of South Africa, Hospice Palliative Care Association).

Should the hospice in our example decide to interact with medical aids or respond to government tenders, then additional laws and policies will come into play.

I’m acutely aware of the burden of complying with policy. I run a small consultancy business and I need to complete 26 business and personal tax forms per year to maintain my tax clearance certificate. Since the forms frequently change and become more complicated and difficult to access, you can imagine my frustration and the distraction this represents. I would not wish to inflict this bureaucratic burden on any social entrepreneur. Policy makers frequently underestimate the unintended consequences of their creations.

What should be clear by now is that organizations in the social economy are already overwhelmed by policy. Many also don’t understand the laws and policies, lacking the time or skill to get to grips with them. A good example would be the confusion around legal forms of social enterprises, which I’ve written about. Many social economy organizations don’t have the resources or skills to comply with these policies, let alone figure out how to derive the full benefits therefrom.

I believe that certain policies will need to be tweaked, but it is unlikely that significant policy changes are required. The upcoming Social Economy Strategy should rather focus on policy coherence and integration, improved communication, and programmes to help organizations to benefit from policy and other opportunities out there.

Strategy should be focused on five areas

When I worked with the Bertha Centre on a draft Social Entrepreneurship Strategy for the Western Cape Government in 2015, we conducted a detailed review of the how other governments were supporting social enterprises and growing their social economies. We synthesized these findings into five questions, which formed the basis of our strategy. We asked how we could help organizations to:

  • increase market access?
  • access finance?
  • access “business” support?
  • demonstrate their social and environmental impact?
  • build their brands?

The way that these questions are answered may be different for each segment within the social economy, and even the organizations within each segment. These questions nevertheless act as a useful framework for thinking about how the government can support such organizations.

Strategy should focus on programmes

While increased policy coherence is required, I recommend that the Social Economy Strategy focus on programmes and effective communication. No doubt quite a few people will disagree with me, but this is my position.

These programmes will help organizations to succeed in the five focus areas I’ve mentioned above. These hands-on interventions will include training courses, workshops, campaigns, incubators, linkages, mentoring, fund management, accreditation etc. Such programmes will need to be practical and tailored to the needs of organizations in each segment.

Such work must also be done in collaboration with industry bodies – I learned the importance of this during my time at the helm of the African Social Entrepreneurs Network.

Clear and extensive communication will also be required with the different stakeholder groups to remove ambiguities (e.g. “non-profit”), improve clarity around key concepts (e.g. legal forms, tax, finance) and inform organizations about the things they need to know to benefit from the Social Economy Strategy.

These programmes and communication should be segmented in nature, since each segment in the social economy has different needs and challenges in terms of the five focus areas I’ve mentioned above. For example, the needs of cooperatives might differ from the needs of foundations which would differ from the needs of organizations working with the homeless in Cape Town.

This approach would allow policy makers to adopt each of the three perspectives I mentioned in the beginning of the article. In other words, one programme could benefit organizations with a certain legal form, another could benefit organizations based upon the type of work they do, and another programme could focus on organizations in a particular sector. One could also target combinations of the above if required.

Conclusion

This article has summed up my thoughts on the social economy (which I might change as I learn more).

The social economy strategy should focus on making sure that policies work together effectively, and are easier to understand and comply with. The burden of compliance must be reduced.

Then efforts should be turned to setting up programmes that support organizations, help them access markets, finance, “business” support, and to demonstrate their impact and build their brand.

Because of the segmented nature of the social economy and complex challenges faced by these organizations, I expect the process of developing an effective strategy will be very hard. My fear is that the South African government has underestimated the time and resources needed to do this properly.

Furthermore, the government’s ambitions for the social economy will only be achieved if it significantly improves support and removes barriers for these organizations. Otherwise, this is just another attempt by policy makers to formalize and regulate the economy, in which event it may even have the opposite effect.

I’d appreciate your thoughts on the form that South Africa’s social economy strategy should take and the items that should be addressed in the upcoming Green Paper. If you send them to me, I’ll make sure that they get in the right hands.

Let us make sure that this strategy serves organizations in the social economy, rather than hindering them from doing the good work they do.

Thanks to Andy Simpson (Imani Development), Nicole Copley (NGO Law SA) and Philip Anastasiadis for their insightful contributions to this article.

In pursuit of strategic clarity

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