Social Enterprise Ecosystem Country Profile

SOUTH AFRICA

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AcknowledgmentsThis report was prepared by Cristina Navarrete Moreno (Private Sector Development

Specialist) and Natalia Agapitova (Senior Economist). However, without the contribution

of several colleagues the report would have not reached its final form. Therefore, we are grateful for the help of Elaine Tinsley, Belen Sanchez, Marta Milkowska, Ergun

Ertekin, Juan Carlos Guzman Hidalgo, Branislav Kralik, Niharika Hanglem, and Pallavi

Shrivastava.

The report uses data and information gathered by Endeva and BoP Learning Lab. We

wish to acknowledge the great inputs received and the particular effort of Sara Balan

(project manager, BoP Learning Lab) and Christina Tewes-Gradl (project director,

Endeva). Sharon Fisher provided editing and design support.

Copyright © April 2017. The World Bank, 1818 H Street NW, Washington, DC 20433, USA. All rights reserved.

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Overview InSub-SaharanAfrica,with388millionpeoplelivingonlessthanthepovertylineofUSD1.90perdayandrapidpopulationgrowth,thechallengeforthepublicsectortodeliverserviceswillonlygrowinthecomingyears.1Sofar,traditionalactors,includinggovernments,civilsociety,andtheprivatesectorhavebeenunabletosolvetheproblemofprovidingessential,qualityservices,suchasaccesstowater,energy,sanitation,education,andhealthcare.Inthiscontext,socialenterprises(SEs)haveemergedasanewtypeofdevelopmentactorwiththepotential to help solve the service delivery gap. During the last decade, SEs in Africa increasinglyaddress service delivery gaps for the poor in novelways,with Kenya and SouthAfrica among theleadingcountriesintheSEsector.SEsareprivatelyownedorganizations—eitherfor-profit,non-profit,orahybridofthetwo—thatusebusiness methods to advance their social objectives. They focus on maximizing the social andenvironmentalimpactfortheirtargetbeneficiariesincontractofmaximizingtheshort-termprofitsfortheir shareholders and private owners. Due to their strong presence and understanding of localcommunities, SEsareoftenable to reachunderservedpopulations through flexibleand innovativebusinessmodels.Although positive examples abound, SEs have not yet fully realized their potential in Africa.Withvariationsacrosssectors,manySEsstruggletoscale-upanddevelopsustainablemodels.SEsfacehighbarriers that areoftenaggravatedby thedifficultmarkets they serve.Commonchallenges includeunconduciveregulationandpolicy,lackoffinancingsolutions,weakinfrastructureandhumancapital,andalackofinformationandnetworks.Inaddition,SEsarenotorganizedasasectorandfallbetweentraditionally recognized public and private organizations. The public sector often does not play acatalyticrole.TheSEecosystemiscomprisedofactors,institutions,andnetworkthatsupportSEsincontributingtodevelopmentgoals.Inmanydevelopingcountries,theSEsectorstilllacksasupportiveecosystem,orenabling environment,whichwould allow theseorganizations to thrive and grow. Four ecosystemdimensions capture the enabling environment for SEs: policy and regulation, financing solutions,infrastructure and human capital, and information and networks. Where these dimensions areimproved,SEscansignificantlycontributetoaservicedeliverychallenge.In developing countries and in particular inAfrica, there is limited data collected and analyzedonexistingsupportingfactors,challenges,andopportunitiesfortheSEsector.ThisreportprofileshowSEs across seven African countries—Kenya,Malawi, Rwanda, South Africa, Tanzania, Uganda, andZambia—address service delivery gaps for poor populations and assesses the status of their SEecosystems. The report targets development practitioners involved in policy design andimplementationwhoareinterestedinnewwaystoaddressservicedeliverychallenges.Thesespecificexamples of challenges and opportunities for SEs in Africa can highlight ways to increase thesustainabilityandscaleofcurrentandfutureSEbusinessmodels.

1Beegle,Kathleen;Christiaensen,Luc;Dabalen,Andrew;Gaddis,Isis.2016.PovertyinaRisingAfrica.Washington,DC:WorldBank.https://openknowledge.worldbank.org/handle/10986/22575.

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GeographicThe report focuses on seven African countries: Kenya,Malawi, Rwanda, South Africa, Tanzania, Uganda, andZambia(Figure1).Thesecountriesrepresent:

• Differentlevelsofsocio-economicdevelopment.• DifferentstagesofSEdevelopmentandecosystem

support.• Tworegionalclusterstotestforregionalpatterns

andpotentiallyallowregionalknowledgesharingandlearning.

ServiceSectorsThe report covers four basic service areas: education,energy, health, and water and sanitation. These basicservices lay the foundation for alleviating poverty,reducingincomeinequalities,andultimatelycontributingtoeachcountry’ssocio-economicdevelopment.BeneficiariesThe report considers target beneficiaries for SE activities as underserved, low-income populationsrepresentingtheBaseoftheeconomicPyramid(BoP),livingonlessthanUSD1.90perdayin2015(theWorldBankGroup’spovertylineatthetimeofstartingtheresearch).AnalyticalFrameworkIn this report, the ecosystem framework consists of four parts: demand, supply, SE situation, andecosystemdimensions.SEsareattheheartofthemodel(Figure2).SEopportunitiesforprovidingservicesdependonthedemandbytheBoPandtheexistingsupplysituation.ThefourecosystemdimensionsinfluencetheabilityofSEstooperateeffectivelyandscaleup.Theecosystemframework guides the analysis at all levels: country,service sector, and service sub-sector. Table 1describeseachelementinmoredetail.

Figure1.Focuscountriesinthisreport

n Kenya

n Malawi

n Rwanda

n South Africa

n Tanzania

n Uganda

n Zambia

Figure2.Ecosystemframework

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Table1.Fourpartsoftheecosystemframework

DataCollectionEndeva and BoP learning labs conducted desk and field research to map the SEs and ecosystemdimensions.TheybasedtheSEmappingonpubliclyavailableresourcesanddeskresearch,whichwassupplementedwithsemi-structuredinterviewswithSEsandlocalstakeholdersrepresentingdifferentpartsoftheecosystem.Accordingly,thesamplesizeforeachcountryvariesinthereport.Theinformationisbasedon:• 59interviewswithSEs• 140interviewswithstakeholders• InterviewswithBoPserviceusers• Adatabasewith271SEexamples

Demand • BoPneeds:WhatarethedevelopmentchallengesandunmetneedsfortheBoP?• BoPmarket:What are the volume and dynamics of the current BoPmarket?

What are the main challenges related to the 4 A's: awareness, accessibility,affordability,andacceptance?

Supply • Public supply:What is the structureand levelof currentpublic supply for theBoP?Whataresupplygapsandchallenges?

• Non-publicsupply:Whatisthestructureandlevelofcurrentnon-publicsupplyfortheBoP?Forexample,fromNGOsortheprivatesector.

• Donors:Whatroledodonorsplayinthesector?SEsituation • SE understanding and presence: How many SEs are there? How are they

perceived?• Type:Howbigarethey?Howaretheyorganized?Whatistheirlevelofmaturity?• Value chain: What are typical activities in the value chain? In which service

sectorsandservicesub-sectorsareSEsactive?Ecosystemdimensions

Ecosystem dimensions capture the enabling environment for SEs. This includesdimensions thatare specific to SEsanddimensions thatdetermine theviabilityofmarket-basedapproachesmorebroadly.• Policy and regulation:What are the main policy drivers or barriers for SEs?

Includingpolicystrategy,regulation,andlevelofpublic-privatecollaboration.• Financingsolutions:WhatarethesourcesoffundingforSEsaswellasfortheir

clients?Includingcommercialfunding,consumerfinance,andgrantfunding.• Infrastructureandhumancapital:Whatareimportantinfrastructureissuesthat

affecttheoperationsofSEs?WhatistheskilllevelavailableforSEs?Isthesectorabletoattractrelevanttalent?

• Informationandnetworks:Whatorganizations,incubators,networks,training,etc. are available to build awareness, knowledge, and capacity among SEs, oradvocateforSEs?

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Social Enterprise Ecosystem Country Profile

SOUTH AFRICA

Socialenterprise(SE)productsandservicescouldhelpaddressgapsatthebottomofthepyramid(BoP)inSouthAfrica’shealth,education,andenergysectors.Themainchallengesaretensionsbetweenthepublicandprivatesectorsandsignificantfundingandskillsgaps.

Policy and Regulation • ThegeneralpolicyenvironmentisfavorabletoSEs.• SEsfacenomajorregulatorybarriers.Insomecircumstancestheycanqualifyfortaxincentives.

• Public-privatepartnerships(PPPs)arecommon.

Information and Networks • Variousorganizationsoffereducationalprograms,funding,andbusinesssupportforSEs.

• DataontheBoPmarketareavailable,andafewspecializedorganizationsconductresearch.

• AsmallnumberofnetworksandSEcommunitiesexist,thoughtheireffortsarenotcoordinated.

Finance • LargecorporationsprovidegrantsandsoftloanstoSEsaspartoftheCSRstrategy.

• Commercialcreditisavailable,andthereisasmallbutactivenetworkofimpactinvestors.

• Microfinanceinstitutionsextendconsumerfinancing,butoverindebtednessisagrowingconcern.

Infrastructure and Human Capital • SouthAfricahasthemostadvancedinfrastructureinAfrica,butaccesstoservicesforlow-incomecommunitiesremainsachallenge.

• Themarketforskilledprofessionalsishighlycompetitive.

SE Situation • Socialenterpriseisalabelwithappealbutnocleardefinitionorrigoroususe.

• SEsareoftenhome-grown,includinginlow-incomecommunities.

• SEsareemerginginthehealth,education,andenergysectors,buttheirpresenceisstilllimited.

Demand by the Bottom of the Pyramid (BoP) • Despiteprogress,16.5percentofSouthAfricansstillliveinextremepoverty.

• BoPmarketdemandforbetterservicedeliveryishighforenergy,mediumforhealthandeducation,andlowforwaterandsanitation.

Supply to the

BoP • Publicservicesupplyhasimproved,butbeneficiariesdonotfeelitisadequate.

• NGOsprovideawidevarietyofsocialservices,includinginthehealthandeducationsectors.Corporationscontributethroughcorporatesocialresponsibilityprograms.

• Donorscontributesignificantlytoservicesupply,especiallyinthehealthsector.

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StudybackgroundThis profile is part of the ecosystem mapping of SEs—nonpublicprovidersofservicestolow-incomepopulationsbased on a sustainable revenue model and a socialmission.ItidentifieskeyelementsoftheSEecosysteminfour sectors—education, energy, health, and water andsanitation—supplementing the individual sector profilesandareportwithcross-cuttinganalysis.TheprofileisbasedondeskresearchandinterviewswithlocalexpertsandSEsconducted in thesummerof2015.The listofpeople interviewedappearsat theendof theprofile.

CountryFacts• Population:54million(2014)• Numberofpeoplelivingonlessthan

USD1.25aday:4.6million(2011)• GDP per capita (purchasing power

parity):USD6,800(2014)• Average annual GDP growth 2010–

14:2.5percent• MaturitylevelofSEs:Emergent

Source:WorldDevelopmentIndicators.

NEEDANDDEMANDFORSERVICESSouth Africa has a population of 54 millionpeople, almost 60percentofwhomareundertheageof30.Extremepovertyiswidespread:In2011,4.6millionpeoplelivedonlessthanUSD1.25 a day, and 13.4million livedon less thanUSD2aday.The incidenceofpoverty ismuchhigherinruralareas(77percent)thaninurbanareas(39percent).Although much progress has been made overthe past two decades, driven largely by thepublicsector,theneedforservicedeliverytothebaseofthepyramid(BoP)remainshighacrossallfour focus sectors. Access to good-qualityhealthcareandeducationisverylimitedfortheBoP.Publicsectorhealthcare is largely free forthepoorestpatients, but the system isoverburdenedandunderresourced. Thepublic educationalsystemsuffersfromsignificantstructuralweaknesses,includinglow-qualityteachingandashortageofadequatelearningmaterials.Withtheexceptionofwaterandsanitation,whichpresentspoliticalchallenges,therearesignificantmarketopportunitiesforSEstoaddressthesegapsandcomplementexistingofferings.SEscouldhelpincrease levels of access to basic services and provide more affordable services and products topopulationsthatalreadyhaveaccessbutareoftenunabletomakeuseof itbecauseofcompetingpressuresonhouseholdcashflow.BoPmarketdemandforbetterservicedeliveryishighforenergy,mediumforhealthandeducation,andlowforwaterandsanitation.TheenergysectorisarguablythemostpromisingsectorforSEs,asSouthAfricaisgrapplingwithanenergysupplycrisisinthepublicsectorandthecountryiscurrentlyoneofthefastest-growingmarketsintheworldforrenewableenergy.EvidencesuggeststhattheBoPiswillingtopayforreliableproductsandservices.

Figure 3. Key indicators of access to basic services in South Africa (Source: World Bank data)

48.5

95.1

74.4

82.7

100.8

62

64

30

35

100

Cause of death, by communicable diseases …

Improved water source (% of population with access), 2012

Improved sanitation facilities (% of population with …

Access to electricity (% of population), 2010

School enrollment, primary (% gross), 2013

South Africa Sub-Saharan Africa average

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The health sector is also promising. A small number of SEs already serve the market, and thegovernment,despitesomereservations,hasshownincreasingwillingnesstoallowSEstocomplementtheprovisionoffreehealthcarebythepublicsectorwithmarket-basedapproaches.Thesuccessofseveraluser-feemodelsalsosuggestsawillingnesstopayforgood-qualityhealthcareservicesattheBoP.Theeducationsectoralsopresentsopportunities.Agrowingnumberoflow-costprivateschoolsareprovidingaffordableeducationandattractinginvestors.Water and sanitation is a politically sensitive sector inwhich few, if any, for-profit enterprises arecurrentlywillingtoinvest.Theoverwhelmingperceptionisthatwaterandsanitationarebasicservicesthatshouldbeprovidedbythepublicsectorfreeofchargeatpointofuse.Asaresult,thereisalmostnowillingnessattheBoPtopayforsuchservices.SUPPLYOFSERVICESSupplybythePublicSectorThepublicsectorhasmadeimpressiveandmeasurableeffortstoimproveaccesstoelectricity,waterandsanitation,andhousingforlow-incomecommunitiesoverthepast20years.Almost60percentofgovernmentspendinggoestosocialservices,includinghousing,health,andeducation,accordingtotheSouthAfricanTreasury.Beneficiaries’expectationsexceedwhatthestatecandeliver,however,asevidencedbythegrowingfrequencyof“servicedeliveryprotests”aroundthecountry.South Africa still suffers from extremely poor education outcomes, high unemployment, and sloweconomicgrowth(whichaveragedjust1–3percentayearbetween2011and2015).Relationsbetweengovernmentandbusinessarecharacterizedbymutualdistrustandcriticism,makingitdifficultforthetwosectorstoagreeonacommonvisionandsharedobjectives.TheRoleofDonorsWith total aid flows reaching USD 1.4 billion in 2014, international donors, including foreigngovernments and NGOs, contribute significantly to service delivery at the BoP in South Africa,especially in social services and healthcare. The Department of Health has a formal structure ofcollaborationwithNGOscalledthePartnershipfortheDeliveryofPrimaryHealthCareProgramme.SupplybyNGOsandOtherNon-stateActorsSouthAfricahasastrongecosystemofprivateorganizationsthatsupportserviceprovisiontotheBoP.NGOsandcivil societyorganizations (CSOs)areveryactive.Thecountryhasanestimated100,000registerednonprofits,mostofwhichfocusonsocialservicesandeducation(Sangonet2013).The corporate sector alsomakes a significant contribution to service delivery, both by sponsoringcorporatesocialresponsibility(CSR)programsandbydevelopinginclusivebusinessmodels.TotalCSRspendingbythetop100listedcompaniesinSouthAfricain2014wasestimatedatmorethanUSD700million(Trialogue2014).SupplybySEsThe desire in South Africa to address the country’s many socioeconomic challenges makes SE afashionable label. As a result, many organizations define themselves as SEs, whether they fit thedescriptionornot.Manyothersthatmaynotexplicitlyusethetermhavebusinessmodelsthatfocusonlow-incomecommunities.ManyexamplesoforganizationsthatfittheWorldBank’sdescriptionofaSE(financiallyself-sufficiententities with a specific social purpose) are operating in South Africa, in tourism, manufacturing,

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healthcare,energy,andfinancialservices(table1).OneofthemaindistinguishingfeaturesoftheSElandscapeisthatitismainlyhome-grown,drivenbylocalmotivationtoaddressSouthAfrica’ssocietalanddevelopmentalchallenges.Indeed,anumberofSEshaveemergedfromlow-incomecommunitiesthemselves.MostSEsaresmalloperations(1–10employees)andhavealocalratherthananationalfocus.Table2.SEactivitylevelandexamplesinSouthAfricaacrossthesectorsSector Levelofactivity ExampleEducation

Spark schools are a network of primary schools providingaccessible,high-qualityeducation in the Johannesburgarea.ThecompanyplanstoexpandintheWesternCapein2016.

Energy

GIMACprovidesoff-grid,renewableenergyproductsandservicesin Gauteng Province. It plans to expand to Mpumalanga andLimpopoprovinces.

Health

IyezaExpressdeliversmedicationsinthepoortownshipsaroundCapeTownviabicycles.

Waterandsanitation

Noactivity

ThereisnoSEactivityinthewaterandsanitationsectorinSouthAfrica.Accesstowaterandsanitationarelegallyenshrinedasbasicservicesandareconsideredoff-limitsforcommercialapproaches.Thesectorispoliticallysensitiveandunlikelytoattractanyprivatesectorinvestmentunderpresentconditions.

Social Enterprise Ecosystem POLICYANDREGULATIONPolicystrategyAlthoughthesignalsitsendsoutaresometimesmixed,theSouthAfricangovernmenthasoftenexpressedaninterestinworkingwiththeprivatesectortopromoteservicedeliverytotheBoP.TheNationalDevelopmentPlan, thegovernment’s keydevelopmentpolicy framework, coversalmost every aspect of national life, including the economy, healthcare, infrastructure,education,nationalsecurity,and“nationbuilding.”Itexpressesacommitmenttostrengtheningfinancialservices,reducingthecostofliving,anddevelopingacultureofbusinessinnovation.Italsomakesanexplicitcommitmenttoreviewregulationsforsmallandmedium-sizeenterprises,in order to reduce the regulatory burden and streamline the business-creation process. TheNationalDevelopmentPlanistheobjectoftenseinternaldebatewithinthegoverningalliance,however.Asaresult, it isnotbeingfully implemented,remaining largelyaguidingframeworkandawishlistratherthananactualsetofclearpolicies.ThestructuralandinstitutionallandscapeaswellasthenatureofthesocioeconomicchallengesSouthAfricafacesarelikelytoresultinthecontinuationofbenignorevenfavorablepoliciesandregulatoryenvironmentforSEs.Thetensionsandlackoftrustthathavecharacterizedrelations

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betweengovernmentandthecorporatesectorover thepastdecademayarguablystrengthenthecaseforSEs,whichexplicitlyseektocombinefinancialandsocialbenefits.RegulationSEsinSouthAfricafacenomajorregulatorybarriers.Insomecircumstancestheycanqualifyfortaxincentives.ThetermSEcarriesisnotdefinedinlaw;SEscanregisterasfor-profits,nonprofits,ora combination of both (a for-profit company canhave a nonprofit branchor own a nonprofitentity). The twomost relevant pieces of legislation are the Companies Act of 2008 (amajoroverhaulofSouthAfricancompanylaw,partlyinresponsetotheemergenceofnewhybridformsofenterprise,)andtheNon-ProfitOrganizationsActof1997,whichgovernsNGOsandCSOs.TheclosestSouthAfricahastoalegalformofSEisanonprofitcompany(NPC),thebasicrulesofwhichcorrespondcloselytothedefinitionofSEorsocialbusinessasproposedbyMohammedYunus(2009):a“non-loss,non-dividendcompanyinwhichprofitsarereinvestedinthebusinessitself.”SouthAfricanlawdefinesanNPCas“acompanyincorporatedforpublicbenefitorotherobjectrelatingtooneormoreculturalorsocialactivities,orcommunalorgroupinterest.”Theincomeandpropertyofsuchanentityarenotdistributabletoitsmembersorownersandmustbeusedto“advancethepurposeforwhichitwascreated.”TheofficialviewofNPCsasstrictlynonprofitisreflectedinthefactthattheyregister with the Department of Social Development rather than the Department of Trade andIndustry,asfor-profitenterprisesdo.LaborlawsapplytoallformallyregisteredemployersinSouthAfrica.Therearenominimumcapitalrequirementstostartabusiness,andSEsareeligibleforthesametaxbreaksorincentivesasanyotherbusinesses.Donationsandgrantsofupto10percentofanenterprise'staxableincomeareexemptfromtaxation.SomeNGOsmayqualifyaspublicbenefitorganizations(PBOs),whichgivesthemfulltax-exemptstatusaslongastheyderivetheirincomepurelyfrompublicfundingandgrants.SEs registered as nonprofits are subject to the same rights and responsibilities as any nonprofitorganizationregisteredinSouthAfrica.TherearefewlegalrestrictionsonNGOs(orSEs).RulesandpublicpracticesdonotpreventNGOsfromdevelopinghybridincomemodels.Public-privatecollaborationSouthhas a long traditionof public-private enterprises (PPPs) and (despite tensions) collaborationbetweenthepublicandprivatesectors.Since1997anaverageoftwonewPPPshavebeensignedayear (OECD 2015). A dedicated government website (www.ppp.gov.za) provides a list of past andcurrent PPPs, at all levels of government (local, provincial, and national). PPPs and the legislationaffectingthemareexplicitlydefinedinTreasuryRegulation16ofthePublicFinanceManagementAct,whichestablishedadedicatedPPPunit.Themainforumforpublic-privatedialogueistheNationalEconomicDevelopmentandLabourCouncil(NEDLAC),formedin1994,whichbringstogetherthegovernment,business,andorganizedlabor.Itappears tohave lost influence in recentyearsandhascomeunder fire frombusiness forallegedlyfailinginitstasktofosterdialogue(BusinessDay2015).PPPs in South Africa may provide opportunities for social entrepreneurs. There is no evidence,however,thatanySEhasyetbenefitedfromorbeenanactorinanyofthePPPslisted.

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FINANCINGGrantfundingMuchgrantfundinginSouthAfricacomesfrombusinesses,thelargestofwhichspentanestimatedUSD700milliononCSRin2014(Trialogue2014).AlthoughSE-relateddataarenotavailable,someofthatmoneymayhavebeenchanneledtothem.SouthAfricancorporationsalsoinvestindevelopinginclusive business strategies. They support South Africa on Enterprise Development, one of thecomponentsofBroad-BasedBlackEconomicEmpowerment(BBBEE),SouthAfrica’sgeneraleconomicframeworkseekingtotranslatepoliticalfreedomintoeconomicempowermentforSouthAfrica’sblackmajority.The National Youth Development Agency (NYDA), a public organization, offers small grants andbusinessadviceforentrepreneursbetweentheagesof14and35.However,theorganizationhasbeentheobjectofseverecriticismandallegationsofmismanagementandpoorresults.UnLtd South Africa is a nonprofit organization that provides financial and nonfinancial support toindividualswithinnovativeideasforSEs.Aftercompleting50hoursoftraining,mentoring,andaccesstonetworksandbusinessexpertise,newSEsorSEsatthepilotstagescanreceiveuptoUSD1,600.Theorganizationhelpsprojectsattheearlystagesofdevelopmentincreasetheirimpactandimprovetheirsustainability.CommercialfundingCommercial credit is available in South Africa, and there is a small but active network of impactinvestors.SouthAfrica’smaincommercialbanksoffercommercialcredittobusinesses,includingSEs,using the same financial criteria for all types of firms. This type of financing is available only toregisteredenterpriseswithfinancialstatementsthatshowgoodprospectsofreturnoninvestmentforthebank,however.Moreover,creditconditionsforsmallandmicroenterpriseshavetightenedoverthepastfewyears,becauseofgrowingconcernsinSouthAfricaaboutrisingdebtanddefaultrates.Thepublicsectorofferssomefundingtononpublicservicedelivery,mostlyintheformofsoftloans(loansmadeontermsveryfavorabletotheborrower),throughvariousdevelopmentfinanceinstitutionsandagenciesaimedatsmall-scaleentities.TheIndustrialDevelopmentCorporation(IDC)andtheDevelopmentBankofSouthernAfrica(DBSA)arelargeSouthAfricandevelopmentfinanceinstitutionswithmandatestoprovidefundingtomedium-orlarge-scaleventuresacrossSouthernAfrica.Smallbusinesses,includingSEs,canreceivesupportandfundingthroughtheSmallEnterpriseFinanceAgency(SEFA),whichfallsundertheDepartmentofTradeandIndustry. SouthAfricahasasmallbutactiveandgrowingnetworkofimpactinvestorswhoworkwithbothsmallandmicroenterprises and SEs. They include E2 E-square, an offshoot of Allan Gray, one of SouthAfrica’slargestassetmanagers,whichprovidesfundingandventurecapitalforSEslocatedinSouthAfrica; Thundafund, which has already funded almost USD 300,000 of SE projects and usescrowdfundingas awayof attracting capital;GreaterCapital, oneof the largest impact investmentorganizationsinSouthAfricaaswellasthefounderoftheSouthAfricanImpactInvestingConference(SAIIN);ImpactTrust,oneofSouthAfrica’sfirstprovidersofimpactbondfunding,ImpactAmplifier,whichactsmoreasa serviceprovider to impact investors.TheBerthaCentre forSocial Innovationprovides support for SEs in South Africa. It has partnered with Mustard Seed, a global impactinvestmentfund,toprovidelocalSEswithpitchingopportunitiesforfundingandinvestmentConsumerfinanceMicrofinanceinstitutionsplayasignificantroleinchannelingconsumerfinancetoSouthAfrica’slowerincome segments. KPMG, an international auditor, estimates the total face valueof loans through

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microfinanceinstitutionsatUSD3.2billionin2013.Thereisanintensedebateoverwhethertheimpactofmicrofinanceinstitutionshasbeenpositiveornegativereducingpoverty(Batemen2013),andthereisincreasingconcernaboutthelevelofconsumerdebt,especiallyamongpoorSouthAfricans.There are examples of collaboration between microfinance institutions and SEs—or microfinanceinstitutionsthatbrandthemselvesasSEs.OneofthebestknownistheKuyasaFund,whichprovidessmall home improvement loans to peoplewho live in social housing. It reports disbursingUSD22millionsinceitwasestablished,in1999.Partlybecauseofrigidregulationsandthestrongmarketpenetrationofcommercialbanks,mobilemoneyhasbeenmuchslowertotakeoffinSouthAfricathaninsomeotheremergingmarkets,suchasKenyaandTanzania.INFRASTRUCTUREANDHUMANCAPITALInfrastructureSouthAfrica’s infrastructure is themost advanced inAfrica, but access to services for low-incomecommunitiesremainsachallenge.Roads,railways,andothertransportationinfrastructurearemostlyworldclass.ITnetworksaregenerallygood,butthehighcostofmobilephoneandInternetservicesisanobstacleforSEs.Thereliabilityofelectricitysupplyhasdeclinedsignificantlyoverthepastfewyears;since2014regularpowercutsacrossthecountryhavehadanegativeimpactoneconomicgrowth.Theenergycrisishascreatedopportunities intherenewableenergysector, includingforSEs.SouthAfrica is thefastest-growingmarketforrenewableenergy(includingsolarenergy)intheworld.HumancapitalAnecdotalevidencesuggeststhatfinancialcompensationlevelsinthenonprofitsectorarecompetitiveincomparisonwithtraditionalprivatesector,especiallyatseniorlevels.Employeesandentrepreneursare generally keen to be seen as having a positive social impact on society, and companies spendsignificantresourcesonpublicizingtheireffortsinthisregard.Severalmajoracademicandnonprofitinstitutionsoffersocialentrepreneurshipandsocialinnovationprogramsaspartoftheircurricula.TheRaymondAckermanAcademy,withcampusesinJohannesburgand Cape Town, trains young entrepreneurs from disadvantaged backgrounds in socialentrepreneurshipandenterprisedevelopment.TheattractivenessofSEstoprofessionalsdependsontheweightstheyplaceonpersonalfinancialsuccessversuscontributiontosociety.INFORMATIONANDNETWORKSCapacitybuildingAnumberoforganizationsprovideeducationalprograms,funding,andbusinesssupportforSEs.SE“incubators” include Hubspace, based in Cape Town; the Innovation Hub, in Johannesburg; andLaunchLab,attachedtotheUniversityofStellenboschintheWesternCape.Hubspacedescribesitselfasan“impactbusinessthatprovidesthemosttalentedandpromisingstart-upentrepreneursinSouthAfricawithaccesstoasharedworkenvironment,advisoryservices,capitalandacollaborativenetworkofprofessionals,interns,trainersandmentors.”TheInnovationHubfocusesonbioscienceandgreenandsustainableenergy.Otherorganizationsprovidemoregenericcapacity-buildingandtechnicalassistancetoSEsinSouthAfrica.OrganizationssuchasTheBusinessPlace,fundedbyCSRprograms,provideskillstrainingand

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educationalprograms.Variouseducationalprogramsforsmallandmicroenterprises,suchasShandukaBlackUmbrellas,seektoimprovetheclimateforenterprisedevelopmentinSouthAfrica.ResearchanddataSeveral private, public, and civil society organizations gather information about SEs. They includeEighty20,whichcollectsquantitativedataandprovidesstrategicinsightsonSouthAfricanconsumermarkets, includingBoPmarkets;Wazimap,which compiles census-baseddatadown to thedistrictlevel;theUnilever InstituteofStrategicMarketing,attachedtotheUniversityofCapeTown,whichcompilesin-depthquantitativeandqualitativedataonBoPmarkets;andtheBerthaCentreforSocialInnovation,whichconductsresearchonsocialinnovation,SEs,andBoPmarkets.TheBoPLearningLabSouthAfrica,partofaglobalnetworkofsimilar labs,organizesregulareventsforpractitionersandlocalentrepreneursanddisseminatesinformationoninnovativebusinessmodels,includingSEs.CoordinationandadvocacyThe Gordon Institute of Business Science’s Network for Social Entrepreneurs (NSE) seeks to bringtogethersocialentrepreneurstocreatesynergiesusing“businessprinciplestobuildsustainableandhigh-impactinitiatives.”TheAfricanSocialEnterpriseNetwork(ASEN),formedin2008,includesmorethan3,800 social entrepreneurs acrossAfrica,mostly in SouthAfrica. TheBerthaCentre for SocialInnovationattheGraduateSchoolofBusinessattheUniversityofCapeTownisthefirstacademicinstitution inAfricadedicated to socialentrepreneurship. Itprovidesa rangeof services related toinclusivebusiness,socialentrepreneurship,andinvestmentintheBoP.Educationalprogramsincludeinclusiveinnovationstudiesandsocialinnovationlabsdedicatedtoprovidingstudentswithin-depthunderstandingofinclusivebusiness.TheBerthaCentrealsofundsresearchonhealthcare,education,andfinancingmechanisms.CONCLUSIONSANDRECOMMENDATIONSSouthAfricacontinuestograpplewithpoverty,inequality,andunemployment.Itiseagertoaddresstheneedsofthepoorinamoreefficientandeffectivemanner.Thecountryhassignificantfinancial,human,andphysicalresourcesonwhichtobuildadynamic,innovative,andefficientSEecosystem.An active local support ecosystem and emerging SE presence already exists, although efforts arescatteredandgenericandlackclearpoliticalsupport.To improve the environment for SEs in South Africa, the following short- and medium-terminterventionshavebeenidentified:

• EncouragepolicymakerstocreatealegaldefinitionandlegalframeworkforSEs,possiblywithincentives.Suchaneffortwouldcreatepublicawarenessandencourageanationaldialogueontheroleofbusinessandhowfinancialandsocialgoalscanbebetteraligned.

• Supportexistinginitiatives,programs,andcapacitybuilding,includingatuniversities,researchorganizations,NGOs,andcorporations.

• Channel funding and investment to existing and potential SEs in priority sectors, includingenergy, health, and possibly education, either directly or indirectly through the existingnetworkoffundersinSouthAfricaandleveraginggrowingpresenceofimpactinvestorfunds.

REFERENCESSBateman,Milford.2013.“MicrocreditHasBeenaDisasterforthePoorestinSouthAfrica.”

November19.http://www.theguardian.com/global-development-professionals-network/2013/nov/19/microcredit-south-africa-loans-disaster.

BusinessDay.2015.“Editorial:Nedlac’sRelevanceinQuestion.”June23.

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GovernmentofSouthAfrica.2011.“PPPProjectsSignedinTermsofTreasuryRegulation16,asatNovember2011.”Whyhttp://www.ppp.gov.za/Documents/Closedpercent20PPPpercent20Projectspercent20aspercent20atpercent20Decemberpercent202011.pdf.

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