Social Enterprise

Social Enterprise

In the most basic terms, a social enterprise is a business whose primary purpose is the common good of a group of people or a community. Although the specific characteristics vary depending on the source, three general guidelines are available to distinguish a social enterprise from other types of businesses; a social enterprise directly addresses a social need and serves the common good, its commercial activity is a strong revenue drivers, and the common good is the primary purpose of the business (Alliance 2014). If a business is a social enterprise, it must declare its legal incorporation as a for-profit company, a non-profit company, or a hybrid model of the two. The legal incorporation of the business determines the tax liability, financial reporting requirements, and the types of finances that are available to the business (Capital and Organization 2011).

If a business is considered a social enterprise, several support systems are available, including financial programs that will help the company become successful. One such program is the Broad-Based Black Economic Empowerment (BBBEE) programme, which was designed to be an initiative of the South African government to promote economic involvement by black people in the country (Africa 2014). BBBEE gives preferential treatment in government processes to companies who are seen to empower black people in business/entrepreneurial roles. Big name companies who support black-based businesses receive points that are then used to increase their reputation as a company and gain benefits (Capital and Organization 2011).

This business model proved extremely beneficial for our project, regardless whether or not we qualified yet. Based on the basic set of guidelines, our project in Langrug fits well with the concept of a social enterprise. By declaring as a for-profit social enterprise, the group would be able to look for finances and receive assistance from a variety of sources such as BBBEE and Enterprise Development Funding (EDF). To determine if the group qualified for funding, we had to ask ourselves five critical questions:

1. Does our enterprise fill a gap in the market with a unique service?
2. Is the market for our product expanding fast enough to allow us to make good money from it?
3. Does our product have a unique selling point that makes it more attractive than other offerings?
4. Can we sell our product for less than the competition and still make a profit?
5. Does our enterprise deliver unique social and environmental benefits (Capital and Organization 2011)?

Based on our answers to the preceding questions, the group might be able to declare the business as a social enterprise and apply for valuable funding. Below is an info-graphic describing the process of answering these question for our project.

Critical questions when declaring a social enterprise

Although the five critical questions lead us to assume we could be defined as a social enterprise, it was important to make sure we qualified, and to decide if this was truly the right model for us to follow. While the benefits of funding and support make the model enticing, there are some drawbacks we needed to consider. Most importantly, declaring as a social enterprise would limit the options for how the profits are used. We would have to be careful not to allow much of the revenue to leave the WaSH facility, otherwise it could be deemed as going to stakeholders and not to the community it is meant to support. With this in mind, it appeared that the business would be able to control the revenue in such a way that almost all of the money stays within the facility. The money made by the kiosk will go directly to paying for the upkeep of the WaSH facility and the kiosk itself.

Social enterprises are growing in popularity across the globe, and the concept was definitely one to consider as our group tried to distinguish what business model we would use in our project. It appeared to be a good model for us to follow, based on the support it provides and the overall message it conveys. As quoted in Business Strategy Review, “Social entrepreneurs tackle some of the toughest and most intractable challenges around” (Harding 2004).

Hierarchy of social enterprises