Current Research Shows A Trend That Moves Social Entrepreneurship Towards A ‘Beneficiary-Centric Entrepreneurial-Nonprofits’ Model in South Africa
According to three researchers at Jiangsu University, who published their article ‘Assessing Social Entrepreneurship in South Africa’ in the International Journal of Economics, Business and Management Studies this year, the interests of small social entrepreneurship businesses in South Africa may clash with the current nature of funding, which is said to increasingly require that social entrepreneurs cooperate with investors and donors. Whereas the latter view appears somewhat pessimistic in the light of the emerging field of social entrepreneurship in South Africa, another article by Alex Bignotti and Kerrin Myres in the African Journal of Management hints that a change from ‘customer-centric social businesses’ to ‘beneficiary-centric entrepreneurial- nonprofits’ may take place over time, whereby the latter company types merely thrive on a different business model. This article will provide a brief background of social entrepreneurship in South Africa, thereafter debating whether moving towards a ‘beneficiary-centric entrepreneurial- nonprofits’ business model could make sense.
Social Entrepreneurship In South Africa
Different from earlier research between the 1990s and early 2000s, researchers have by now recognized that being a ‘social entrepreneur’ does not necessarily mean to lead a not-for-profit organization. As Bignotti and Myres write, social entrepreneurship is both focused on social and economic impacts, whereby business models, at least in some cases, merge commercial with non-commercial interests. With Dinah Quacoe, Kong Yusheng and Daniel Quacoe confirming the latter, what has been criticized for being absent within academic research and policy-making, is a coherent definition of social entrepreneurship business models in regional contexts. Only based on context-specific definitions as well as in-depth information about social enterprises, their impacts and operating modes, as Bignotti and Myres argue, can policy-making be informed.
The impact of the domain of social entrepreneurship on society has been recognized by the South African government in the last decade, despite that less than 2% of adults were involved in social entrepreneurship in Africa in 2016 with recent numbers being unavailable via the Global Entrepreneurship Monitor (GEM). Among others, governmental support was shown through the adoption of the 2010 New Growth Path Framework, which emphasized that “[l]everaging social capital in the social economy and the public services” is one of the five key drivers of employment. Before the latter plan, the Broad-based Black Economic Empowerment Act – BBBEE- (2003; last adapted in 2013) has been interpreted as a step towards social entrepreneurship and the widening of South Africa’s social economy as, how Bignotti and Myres point out, the BBBEE Act puts an emphasis on the necessity to support “previously disadvantaged individuals”.
Concretely, as it states in the Act, BBBEE “means the economic empowerment of all black people including women, workers, youth, people with disabilities and people living in rural areas”. Whereas the Act does not directly mention its support for the domain of social entrepreneurship, its goal to increase the number of black people with diverse backgrounds in business as an attempt to lobby for their interests, has been interpreted as such. In quite some time, the BBBEE Act has faced different types of criticism with some of the most recent remarks relating to the argument that the ‘already’ rich have abused the accompanying Preferential Procurement Policy Framework Act (PPPFA) to their benefit, whereby a “SDG-based model” could probably serve inclusive social and economic development more effectively. At the first glance, this argument seems logical as the SDG framework tends to promote development bottom-up, targeting society overall rather than a particular group of people.
In March 2022, the Democratic Alliance (DA) further illustrated the concrete, potential benefits of the latter model, among which are explained in the following. An SDG-based model is expected to: 1.) “leverage [a] significant [amount of the] government procurement expenditure; 2.) reinforce price functionality, 3.) target the most discriminated populations by addressing what has been done to them bottom-up; 4.) steer sectoral impact based on 17 comprehensive goals; 5.) coincide with global best practices and recognition; 5.) attract investments, where entrepreneurs commit themselves to further societal impact through SDG objectives. Whereas the latter does not directly say something about social entrepreneurship, further research should certainly explore the approaches, which social entrepreneurs in South Africa deploy at the current moment. Do even ‘customer-centric social businesses’ commit themselves to supporting the SDGs and how could their way of supporting SDGs differentiate from the efforts of ‘beneficiary-centric entrepreneurial- nonprofits’?
As Bignotti and Myres explain, by ‘beneficiary-centric entrepreneurial- nonprofits’, they refer to a business model, which relies on donor funding and grants as it promotes democratic governance, oftentimes work integration programmes and social innovation in the domains of healthcare, education and the larger domain of (quality) employment. Enterprises, which deploy such a model, might naturally be more inclined to measure their actual social impact in a target society or community as compared to ‘customer-centric social businesses’, which might be more independent from external stakeholders (i.e. donors) as they are argued to operate in mainstream economic sectors, whose expansion can very well lead to creating lasting and far reaching socio-economic impact. The latter reminds what social entrepreneurship has been regarded as by some, namely as a way to ‘make up’ for ineffective efforts on the sides of governments to work on making societies more inclusive.
As Visser reminds in his 2011 article ‘Social Entrepreneurship in South Africa: Context, Relevance and Extent’, Giddens understood the “‘blurring of the boundaries’ between governments and business” as a “‘Third Way’”, wherein the private sector receives the responsibility to steer socio-economic impacts and wherein the government partners up with the private sector to make sure that social efforts take hold. Examining ‘social entrepreneurship’ from this perspective, Visser’s argument may shed further light on how it connects to governance and (‘usual’) business. On the one hand, Visser underlines that governments regularly, already start failing at the provision of basic services (i.e. healthcare, access to education, housing etc.). On the other hand, he makes the point that the private sector tendentially produces social ills because of its appreciation for “short-term gain” and disrespect for environmental and social aspects of business.
Despite that Visser’s argument may no longer hold true today and in upcoming decades, at least as long as businesses keep being pressured, at various policy-levels and through life’s most pressing events, to commit themselves to societal obligations (i.e. their Co2 footprints, social impact, human rights compliance, impact on supply chains etc.), it might be useful to point out that an SDG-model could probably further push for long-term gains. Such a model arguably also contradicts with the outdated ‘trickle-down’ model of wealth, development, economic growth and business, which might be relevant to underline the fact that foreign direct investment (FDI) does not necessarily have a positive impact on poverty in Sub-Saharan Africa. As three researchers at the University of Johannesburg have recently argued, FDI’s influence is an indirect one, whose ‘felt impact’ depends on the flourishing of local economies, especially with regard to human capital and institutional frameworks.
Which leads to the question whether it actually makes sense for social enterprises, especially in the South African regional context, to move towards a commercially-minded ‘beneficiary-centric entrepreneurial- nonfprofits’ business model? An answer to this question might certainly not be easy to provide, especially as Bignotti’s and Myres’ intention originally was to understand and classify different models of social entrepreneurship so that policy-makers can make more effective decisions on how to treat them and incorporate their work in the wider perspective of (local and regional) development. However, in the following a few arguments will be made, which relate to boosting the impact of social enterprises in South Africa and Sub-Saharan Africa as a whole.
Could South Africa Benefit From A More ‘Commercially-Minded, Beneficiary-Centred’ Social Entrepreneurship Model?
As Bignotti and Myres illustrate, South Africa has been highly affected “by the nation-wide growing inequality, poverty and unemployment” and South Africa’s population has been tired of precarious financial circumstances. As a 2019 survey on subjective poverty in South Africa showed, the closer South Africans believed to be to the national minimum income, the higher their subjective level of poverty was (57%). Rather than being further confronted with the threats of precarity, inequality, income polarization and poverty, which have been observed in South Africa for decades, South Africans want a lasting and fair change, when it comes to socio-economic justice. Not only Eskom’s workers have been protesting for an increase in wages. In 2018, 1,500 members and allies of the South African Federation of Trade Unions (SAFTU) walked through the city of Cape Town in a protest march about the then newly suggested minimum wage at $1,62 (R20) per hour. With entrepreneurship being one catalyzer of the creation of employment, it could be argued that a ‘commercially-minded beneficiary-centred’ social entrepreneurship model could be advantageous as long as it somehow goes beyond equipping South Africans with job skills…
In a nutshell, moving social enterprises towards adopting a commercially-minded ‘beneficiary-centric entrepreneurial-nonprofits’ business model might coincide with:
|1. An increased focus on beneficiaries||‘Beneficiary-centric entrepreneurial-nonprofits’ (BC EN), as their name says, focus on expanding their outreach to particular social groups, which they seek to support at a local level…|
|2. An increased focus on ‘global good practices’ and aligned monitoring efforts||BC EN are said to regularly monitor their efforts internally and externally. As such they might also be more open to or already measuring their impacts in relation with SDGs…|
|3. Increased efforts opt for participatory approaches||BC EN were shown to communicate with their beneficiaries more formally than customer-centric social businesses. Combined with their drill to increase the amount of their beneficiaries, the latter could be a good basis for participatory forms of monitoring…|
|4. Decreasing employment opportunities, increasing human capital||Whereas BC EN have been told to employ less volunteers than customer-centric social businesses, they aim at affecting a larger beneficiary community for the social good, increasing human capital i.e. through work integration programs. By adding a commercial aspect and through expansion, BC EN’s, which teach particular employment skills, could also create employment…|
|5. The creation of a new legal environment for social enterprises||Currently, there is no coherent legal framework for social enterprises in South Africa. Arguably, providing a coherent legislation for ‘beneficiary-centric entrepreneurial-nonprofits’ could lead to making them more attractive to obtain commercial funding and decrease the overt reliance on donors, at least in some cases…|
|6. Increased cooperation between social enterprises and other businesses||By connecting what BC EN’s might equip communities with, with the interests of other businesses, the domain of entrepreneurship could overall be boosted…|
|7. Dependency on donors and a misled approach to ‘African’ development||Whereas around 31,8% of the BC EN’s from Bignotti’s and Myers’ study did not receive donations, the rest of BC EN’s more heavily relied on such, which could mean – as in the case of support through other investors – to have to keep pushing against a ‘Western’ narrative of development. However such a narrative could also affect commercial funding (i.e. equity investments and loans/investments from foreign financial institutions)|
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