I have been fortunate to work with diverse, dynamic social enterprises as a mentor for some finalists in the SAB Foundation Social Innovation Awards, an annual competition that acknowledges innovative and impactful social entrepreneurs from across the country.
By definition, social enterprises are businesses that, at their core, desire to make a positive social impact, while striving to be profitable and sustainable. This dual business imperative – profit and social impact – presents certain unique challenges. It costs money to make a positive social impact, so unless these businesses are profitable, their actual impact is often severely constrained due to a lack of resources – the kind of resources they would probably be able to access if they were a non-profit (NPO) or Public Benefit (PBO) organisation.
And therein lies the rub. In South Africa, we do not currently have a legal business entity that recognises the dual mandate of a genuine social enterprise. One is either a for-profit business or a non-profit. This means raising funds, especially in the early stages, is a challenge, since many traditional funders of social initiatives will only support non-profits. This significantly narrows the start-up capital financing pool for such businesses, who often have to resort to 'friends, family and fools', or give away big chunks of equity in a bid to raise some cash. They must also strive to generate their own revenue as quickly as possible in a bid to survive, which often leads to mission drift in the first year or two – a challenging time for any new business.
Thriving, not surviving
In South Africa, we need these kinds of businesses to not just survive, but thrive. Traditional non-profit funding is shrinking every year, and most funders increasingly expect some form of self-sustainability in the programmes and projects they fund. Consequently, many traditional NPOs strive to generate income, something (in my experience) most of them do rather poorly.
Otherwise, a business model can be built that has sustainability and commercial relevance at its core, with the social impact a happy and positive outcome.
A third approach is to tailor the product or service offering differently for different markets. A good example is the Balambie, a locally developed childcare solution that has enjoyed significant traction as a social product distributed free to new mothers through NGOs and international donor organisations.
It is now making forays into the commercial retail market. Company founder Marié Janse van Rensburg says her original intention was to develop an alternative, for babies in low-income households, to having to sleep on the floor or squashed between their parents in a small bed, which can be hazardous. The Balambie cot, easy to assemble, robust and cost-effective, is made with strong corrugated carton and can be printed with health and childcare material.
It struck a chord with social funders, government departments and donor organisations, who love that it is safe, secure and educational. It also allows for visible brand placement for sponsors and funders. The next challenge – or opportunity – is introduction into the commercial market, says Janse van Rensburg. The retail version, she says, is "beautifully patterned and attractive" but still "safe, robust and practical". "We are essentially competing against portable and camper cots, but our price is considerably lower and the product is biodegradable and eco-friendly – not to mention light and quick to assemble – so I am confident the market will respond well."
Preliminary talks with some prominent retailers suggest Janse van Rensburg and her team are well-placed to develop the business' commercial side, but she remains focused on her original vision, too. She has a world map on her desktop screen where she visualises Balambies in every country, she explains, promising always to focus on the "health and social aspect". One day, she hopes for enough growth to distribute Balambies free, covered with health information for new mothers.
Another social enterprise making bold forays into the commercial space is Brownies&Downies. This coffee shop and restaurant in central Cape Town has a dual mandate: a commercial café and on-the-job training for people with intellectual disabilities. Loosely based on a concept originating in the Netherlands, the business' primary objective is to train and place people with special needs into meaningful employment, enabled by the café's commercial activities. Co-founder Wade Schultz says the goal is to be a "thriving business", with cafés in every major city in South Africa, uplifting special-needs beneficiaries by training them and placing them in meaningful employment. "Through food, coffee and great service", the café breaks down stigmas, says Schultz.
Having a greater purpose than commercial success does hold challenges for a company like Brownies&Downies. The other co-founder, social worker Wendy Vermeulen, says a large portion of resources and operating budget go towards the training programme and subsequent placement of beneficiaries. There is also a team of social workers in-house who offer support for trainees and the companies employing them.
Schultz says a key challenge is trying to balance having a tight, commercially and financially viable offering, and making a lasting social impact. "Our training and placement functions are largely funded, but we are currently still in a position where we have to cross-subsidise the operational and running costs of the café because of the amount of staff we need to make this model work," he explains. "Our customers are amazing, they love what we do but for us to be commercially viable we need to expand and also look at getting our social activities properly funded."
Winning the SAB Foundation Disability Empowerment Awards in 2017 gave the team some options in terms of opening a second branch, and they are currently also supplying brownies to select Spar outlets in the Western Cape. The ideal scenario, they say, is that the work is fully funded by the income generated from the café. That, however, is still some way off – so in the interim it is a "constant hustle" to ensure costs are covered.
"However, we are confident that our brand loyalty and the fact that we make the best brownies in SA will see us achieve the success we dream of!" says Schultz.
Businesses like Balambie and Brownies&Downies face multiple challenges. They must tick the boxes in terms of having a viable, efficient commercial offering. But they must also ensure they achieve their social aims, while navigating the minefield of governance, impact and sustainability.
When these elements come together, the results can be powerful indeed. Hopefully, such hybrid entities will soon receive official recognition in legislation – but meanwhile, we should support them any way we can, as they strive to succeed by doing good.
*Anton Ressel is Fin24's resident small business coach.
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