September 30, 2009

Social Economy 101 – South Africa

Filed under: social economy 101 — benmetz @ 11:25 am

This is part two of a series of short posts looking at the social economy in a number of countries around the world.  this time it’s South Africa.  As the series develops we’ll start to see some themes emerging, notably this perennial issue of what’s being termed “missing middle finance”…

A snapshot of the social economy in South Africa

According to the South African Department of Trade and Industry as of February 2009 there are 21,573 registered not-for-profit organisations in the country plus roughly 2,000 new registrations per year.  However, as far back as 2002, the South African Non-Profit sector study – a multi university collaborative survey and study – estimated in excess of 98,000 not-for-profit organisations, turning over more than R13.2 billion and with over 50% of these organisations existing in the more informal space and being predominantly community based.

Conversations with key sector leaders paint a picture of a social economy where individuals and organisations don’t yet see themselves as social entrepreneurs or social enterprises.  The South African third sector overall appears to be suffering from a lack of motivated and inspired individuals as well as structural legislative and regulatory barriers that prevent social economy activity from developing.

The current South African legal system allows for three distinct types of organisations to exist: closed corporations, trusts and collectives. As a consequence of this legislative framework hybrid social enterprise models are severely restricted in their ability to operate.  This major, structural, barrier has prevented social businesses from becoming established and perpetuated the historically polarised state of affairs where you can either be a profit maximising organisation or a charity. The International Labour Organisation has acknowledged this barrier to development and is funding a major study, being led by the University of Johannesburg, to explore these issues and work with government to change legislation to allow and even promote hybrid models to come into existence.

The social economy is in the earliest stages of its infancy in South Africa with very little in the way of infrastructure support available or legislation in place and therefore very few practitioner organisations at any stage of development or scale.  Support to South African Social Entrepreneurs is few and far between. Ashoka is the oldest and most established player in the social enterprise and social entrepreneurship space, being present for 17 years and having elected 130 Ashoka Fellows during this time. While additional support infrastructure is beginning to become established in South Africa there are no real signs of a similar development in the provision of finance to the country’s emerging social economy.


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