Micro Social Enterprises in Developing Countries: The South African Experience

Introduction

The social entrepreneurship body of literature has struggled with a lack of clarity with regard to definition and scope for decades (Bacq & Jannsen, 2011; Choi & Majumdar, 2014; Gordon, 2015; Mair, 2010; Nicholls, 2010; Steinman, 2010; Zhang & Swanson, 2013). Key authors suggest that this is because the field encompasses a range of phenomena (Bacq & Jannsen, 2011; Gordon, 2015; Grassl, 2012). More recently, the field has moved away from the struggle for definition, towards exploring and understanding the social enterprise organization (Defourny & Nyssens, 2016; Gordon, 2015; Grassl, 2012).

The social enterprise concept encompasses organizations along a continuum, from purely non-profit through to purely for-profit, all with a social mission of some kind (Defourny & Nyssens, 2016; 2010). The non-profit side of the continuum is interesting for several reasons: non-profit organizations (NPOs) fulfil a critical role in societies where both state support and market forces fail to respond adequately to all citizen needs (Department of Social Development [DSD], 2012; Urban, 2013). In particular, developing countries with large-scale poverty, unemployment and related social issues rely on NPOs to meet numerous social needs (DSD, 2012; Karanda & Toledano, 2012; Urban, 2013).

There is, however, a dearth of literature exploring how NPOs financially sustain themselves in order to fulfil their social mission, beyond relying on government or corporate grants (Battilana, Lee, Walker, & Dorsey, 2012; Zhang & Swanson, 2013). Indeed, the social enterprise literature mostly disregards those organizations that do not have the capacity to generate profit or adopt a more entrepreneurial approach (Young, 2001). In certain developing countries it appears that the pure not-for-profit organization will not be able to achieve financial sustainability in the future, even where social need exists, without transitioning to a more entrepreneurial business model (Karanda & Toledano, 2012). There is consequently no recognized best practice for NPO success, which is defined as acquiring sufficient resources to be able to meet the intended social mission (Salamon, 2010).

Social businesses are a relatively new phenomenon in South Africa, and are poorly described in this context (Milson, 2017), despite these conceptualizations initially being advanced by Yunus (2010), largely within developing country contexts. Yunus (2010) defined the social business as a business developed specifically to solve a social problem, which generates profits that are reinvested into the business, and which is not at all reliant on grants and donations. In South Africa, social businesses tend to address social needs by focusing on bottom-of-the-pyramid (BOP) markets, selling products or services that meet social needs, or responding to South African legislation regarding the triple-bottom-line (financial bottom-line, social investment, and environmental impact) by ensuring community involvement, concern for the environment, and donations of parts of their profits (Claeyé, 2017; Milson, 2017).

Social businesses possess necessary business expertise, but frequently lack an understanding of how to define their social mission in relation to their business, and of how to measure their social impact (Wilson & Post, 2013). In addition, because the social enterprise concept is so broad, there are no recognized business models for these kinds of organizations within a developing country context especially (Mair & Schoen, 2007).