What is a Social Enterprise?

How to make money and do good...

Imagine a cross between a business and a non-profit organisation. Something that earns money through selling things but uses its profits to achieve its social or environmental mission. It has the heart of a non-profit organisation but operates on sound business principles. 

Such organisations are called “social enterprises” and South Africa is starting to see a movement towards them. 

For example, you can visit Brownies & DownieS, a restaurant in the Cape Town CBD, where many of the staff have Downs Syndrome and undergo extensive training in the hospitality industry.This restaurant runs much like any other, but all profits are used to further its mission. It employs social workers that help its beneficiaries to acquire the skills they need to function in the workplace. 

A social enterprise sector is beginning to emerge in South Africa. There are non-profit organisations choosing to become social enterprises in order to earn additional income and decrease their reliance on donations. Similarly, we see businesses that don’t just want to be responsible - they want to make a real difference in the world.

This convergence between businesses and non-profit organisations appears to be echoed throughout the world. Social enterprise has even been described as a movement.

There are also an increasing numbers of young social entrepreneurs who are not burdened by outdated stereotypes of “non-profit organisation” and “business”. Instead they draw upon the best of both worlds to achieve their missions.

Wandisile Nqeketho recently started the 18 Gangster Museum. Its exhibitions are curated by ex-offenders, who also lead visitors on “’gangster tours’ through the townships they live in. This offers a vivid first-person view of the detrimental effect that gang culture can have on people’s lives. It also provides a way for ex gangsters to be rehabilitated, gain meaningful employment and give something back to their communities. Money raised through museum visits enables young kids from the community affected by gangs to come to the museum for free.

While Brownies & DownieS and the 18 Gangster Museum vary in their organisational structure and mission, there are four principles that are generally agreed upon for all social enterprises:

  1. Earn more than 50% of their income through the sale of goods and services (except for new social enterprises that rely more on donations)
  2. Use any profits to further their social and environmental objectives
  3. Have a social and/or environmental purpose at the heart of everything they do
  4. Run ethically and responsibly

It's difficult to estimate how many social enterprises there are in South Africa, partly because social enterprises can adopt the legal form of a non-profit organisation or a business. Some social enterprises find it makes sense to adopt a mix of for-profit and non-profit legal forms, and we refer to these as “social enterprises with a hybrid model”.

There is a bright future for social enterprises in South Africa. They are desperately needed and can navigate the funding shortages that pervade the NPO sector. Their role is pivotal in the radical social and economic transformation that still needs to take place in this country.

To understand more about social enterprises or how a social enterprise model can benefit your organisation, book your place on our Understanding Social Enterprise programme in Cape Town on 15 & 16 March.

Marcus Coetzee is a social enterprise strategist and consultant based in Cape Town. With over 16 years of experience, he specialises in helping organisations trying to do good in the world improve their social impact and financial performance.