Presented during Tshikululu's first Serious Enterprise Development workshop, which took place on 6 October 2010. Dr Francois Bonnici (founder, TSiBA Entrepreneurship Centre) explores the opportunity for supporting social enterprises as part of an aligned enterprise development and corporate social investment strategy.

1. Opportunities for scaling social enterprises
through enterprise development
DR FRANÇOIS BONNICI
SCHWAB FOUNDATION FOR SOCIAL ENTREPRENEURSHIP

2. “ We are continually faced with a series of great opportunities,
that are brilliantly disguised as insoluble problems “
John W Gardner
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3. Session description
Social enterprises should be considered as a subset of opportunities in
enterprise development, that not only contribute to the creation of employment
opportunities but also that tackle some of the significant social and
environmental challenges faced by South African citizens ‐ such as health,
education, crime, access to energy, conservation, etc.
In this session, we will visit a few local and international case studies of
successful social enterprises, and explore the opportunity for supporting social
enterprises as part of an aligned enterprise development and corporate social
investment strategy.
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4. In this breakaway session
• what are social enterprises?
• international / local trends & examples
• exploring opportunities in ED strategy
• what are the potential benefits & risks
• real opportunities for ED investments
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5. social enterprises
• what are social enterprises?
• international / local trends & examples
• exploring opportunities in ED strategy
• what are the potential benefits & risks
• real opportunities for ED investments
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6. Defining social enterprise concepts
social enterprises
social practical, innovative and market‐oriented approaches (whether for‐
entrepreneur‐ profit or not) aimed at catalyzing large scale and sustainable,
ship systemic social change through innovation Schwab Foundation
an organization or venture that primarily advances a social mission
social through entrepreneurial earned income strategies & robust business
enterprise
models Social Enterprise Alliance
non‐loss, non‐dividend business aimed at social objectives , eg.
social
business “poverty alleviation, education, health, environment, whatever is
needed to address the problems faced by society Grameen Creative
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7. Organizational Model Spectrum
social enterprises
Hybrid spectrum
social
traditional non‐profit socially corporation traditional
enterprise &
non‐profit with income responsible practising for‐profit
social
NGO/charity generation business CSI businesses
businesses
Mission motive • • Profit‐making motive
Stakeholder accountability • • Shareholder accountability
Performance measured in • • Performance measured in
social impact or SROI economic ROI
Income reinvested in social • • Profit redistributed to
programs or operational costs shareholders
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8. Finance for Social Enterprises
social enterprises
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Jed Emerson (2003) “The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social and Environmental Value Creation ”

9. trends & case studies
• what are social enterprises?
• international / local trends & case studies
• exploring opportunities in ED strategy
• what are the potential benefits & risks
• real opportunities for ED investments
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10. Social enterprise in South Africa ‐ trends
trends & case studies
Social enterprise is an increasingly used and recognized approach of tackling the
multiple challenges of socio‐economic and enterprise development.
Research by the ILO, the University of Johannesburg and Tshikululu agree on
three elements which make up the working definition for social enterprise in SA:
• has a primary social purpose – has a clearly stated social purpose as its core objective
• uses a financially sustainable business model – has a realistic prospect of generating
sufficient income to exceed costs, now, or at some point in the future; and
• is accountable & transparent – mechanisms to ensure accountability to beneficiaries
In South Africa, using the above definition, social enterprises can and do
currently exist as CCs, companies, section 21 non profit organisations, as trusts
and voluntary associations.
The 2009 GEM report recognised and focused on social enterprises in South
Africa for the first time.
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B Fury, Tshikululu Social Investments. “Social Enterprise Development in South Africa ‐ creating a virtuous circle”

11. Local Case Study: Shonaquip
trends & case studies
• provides high quality appropriate, locally made
modular, fitted wheelchairs and equipment
• trains family and healthcare professionals to
empowers those with disabilities to reintegrate
into society and the workforce
• has made a significant contribution to the
expanding the quality and supply of equipment to
both public & private health sectors
• has contributed to both national and
international policies regarding mobility and
empowerment of the disabled
• impressive 65% growth in revenue rate last year
• expansion into neighbouring SADC countries
• Shonaquip is proving that social enterprises can
have real impact at scale.
Jobazda Khatun
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25 years old, solar panel engineer
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12. Social enterprise in South Africa ‐ trends
trends & case studies
International Labour Organization have given a recent focus and
emphasis to social enterprises, viewing them as part of the broader
Social Economy (putting people and communities ahead of profit),
together with co‐operatives, mutual associations etc.
Several networks of social entrepreneurs & social enterprises exist in SA:
‐ African Social Entrepreneurs Network (ASEN) www.asenetwork.org
‐ South African Social Investment Exchange (SASIX) www.sasix.org
‐ Ashoka Southern Africa www.ashoka.org
‐ Schwab Foundation for Social Entrepreneurship www.schwabfound.org
And other networks that also include social entrepreneurs
‐ Technoserve www.technoserve.org
‐ Endeavor www.endeavor.org
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B Fury, Tshikululu Social Investments. “Social Enterprise Development in South Africa ‐ creating a virtuous circle”

13. International trends: Legal Structures of Social Businesses
trends & case studies
CIC – Community Interest Companies (UK)
Community interest companies (CIC) are a type of limited company designed specifically for
those wishing to operate for the benefit of the community rather than primarily for the benefit
of owners of the company.
CICs can be limited by shares, or by guarantee, and will have a statutory “Asset Lock” to prevent
the assets and profits being distributed, except as permitted by legislation. This ensures the
assets and profits are retained within the CIC for community purposes, or transferred to another
asset‐locked organisation, such as another CIC or charity.
L3C – Low‐profit Limited Liability Corporations (USA)
L3C'sare low‐profit limited liability corporations, which function via a business modality that is a
hybrid legal structure combining the financial advantages of the limited liability company, an LLC,
with the social advantages of a non‐profit entity.
An L3C is run like a regular business and is profitable. However, unlike a for‐profit business, the
primary focus of the L3C is not to make money, but to achieve socially beneficial aims, with
profit making as a secondary goal.
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14. The Six Seven Principles of Grameen Social Business
trends & case studies
1. Business objective will be to overcome
poverty, or one or more problems (such
as education, health, technology access,
and environment) which threaten people
and society; not profit maximization.
2. Financial and economic sustainability.
3. Investors get back their investment
amount only. No dividend is given beyond
investment money.
4. When investment amount is paid back,
company profit stays with the company
for expansion and improvement.
5. Environmentally conscious.
6. Workforce gets market wage with
better working conditions.
7. …do it with joy.
This was first written on a napkin in Davos at the World Economic Forum Annual Meeting
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in January 2009 by Professor Muhammad Yunus (Board member, Schwab Foundation)Bain-Template
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15. International Case Study: Grameen Bank
trends & case studies
brings microcredit people in poverty
who otherwise would not be able to
obtain a loan
since its founding in 1983 it has loaned
over 6 billion €—some in portions of as
little as 5 Euros
it has 7.6 million clients, 97% women
who are also owners of the bank
active in over 80,000 villages
98% loan recovery rate
100% literacy in 2nd generation
Jobazda Khatun
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25 years old, solar panel engineer
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Source: Grameen Bank and Grameen Creative Labs

16. International Case Study: Grameen Social Businesses
trends & case studies
Following the success and reach of Grameen Bank, there
was a realisation that this reach could be used to deliver
other services and goods to the poor based on a similar
business model.
The Grameen Group has over 20 businesses including:
Grameen Shakti (GS), rural power company; Grameen
Mobile (mobile phone service to 100 million inhabitants
in rural Bangladesh).
More recently in Joint Ventures with multinational
corporations as well. Danone, BASF, Adidas, Veolia.
This provides some fertile opportunity to explore how
companies can support, build and even procure from
social businesses as part of business strategy.
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Source: Grameen Creative Lab

17. International Case Study: Waste Concern
trends & case studies
Iftekhar Enayetullah (and Maqsood Sinha) had the idea to solve the waste
problems of mega‐cities and the communities that lived off landfill dumps
www.wasteconcern.org
turns out it was a profitable social business that cleared waste effectively,
employed & skilled marginalised poor people, and created compost from organic
waste & reduced carbon emmissions that could be sold as carbon credits
http://www.youtube.com/watch?v=iFLTqVVQecg&feature=SeriesPlayList&p=910FAA4450B6A276 17
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18. International Case Study: First Book
trends & case studies
Kyle Zimmer recognised an huge need that was only partly filled by
donors, but could be served even more with a market mechanism
www.firstbook.org
Following huge success, proven impact and replication, First Book
required the help of corporates to scale up their efforts and impact
http://www.youtube.com/watch?v=XqUzV1cqihE&feature=SeriesPlayList&p=910FAA4450B6A276
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19. International Case Study: THE 99
trends & case studies
Naif Al Mutawa was moved by the psychological effects of war and
terrorism and his children’s future to create new role models in superheroes
www.the99.org
Even before The 99, South African social enterprises have used mass
media communications to change attitudes and behaviours has been
successfully achieved by Soul City, and subsequently Heartlines.
http://www.youtube.com/watch?v=5GO3bO2fq1Y&feature=SeriesPlayList&p=910FAA4450B6A276
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20. Video links to Social Entrepreneurs' Ideas Lab in Davos 2010
trends & case studies
Iftekhar Enayetullah – Waste Concern:
http://www.youtube.com/watch?v=iFLTqVVQecg&feature=SeriesPlayList&p=910FAA4450B6A276
Kyle Zimmer – FirstBook
http://www.youtube.com/watch?v=XqUzV1cqihE&feature=SeriesPlayList&p=910FAA4450B6A276
Reed Page – Belu Water
http://www.youtube.com/watch?v=uKG6Bw1usCY&feature=SeriesPlayList&p=910FAA4450B6A276
Naif Al Mutawa – THE 99
http://www.youtube.com/watch?v=5GO3bO2fq1Y&feature=SeriesPlayList&p=910FAA4450B6A276
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21. exploring the ED strategy
• what are social enterprises?
• international / local trends & examples
• exploring opportunities in ED strategy
• what are the potential benefits & risks
• real opportunities for ED investments
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22. Enterprise Development could create “blended value”
exploring ED strategy
market‐based approach to addressing many of the social and
impact environmental challenges facing the global community
investing
Monitor Institute & World Economic Forum
investors simultaneously generate economic, social & environmental
blended
value through providing capital to organizations, where that value is
value
itself non‐divisible and thus a blend of the three. Jed Emmerson
discounted, monetized value of the social value that has been
SROI created, relative to the value of the investment.
Roberts Enterprise Development Fund (REDF)
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23. A potential win‐win‐win ED investment?
The opportunity for investing in social enterprise is a simple and
compelling one. If sustainable businesses which meet social needs can be
financed and supported, we have the ability to create lasting social
impact.
And, at the same time, working within the BBBEE frameworks, if social
enterprise development is categorized as both enterprise development
(ED) and as socio‐economic development (SED) for which there is a
strong argument being made, there are potentially 20 BBBEE scorecards
points up for grabs ‐ a win‐win‐win for business and for society.
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B Fury, Tshikululu Social Investments. “Social Enterprise Development in South Africa ‐ creating a virtuous circle”

24. Value add to business operations or sustainability strategies
exploring ED strategy
Enterprise Development is often categorized as either “core” to business
operations, or unrelated and not having a direct value add to the
business.
Investment in social enterprises could offer the opportunities of
integrating both directly into business operations, but could also be
considered central to business strategy and its sustainability or social
development strategy, depending on the enterprise and its activities.
Corporates have mostly viewed their enterprise development (ED) and
CSI (SED) strategies as as two separate and distinct areas ‐ but these can
aligned in a much more strategic approach with social enterprises.
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25. Opportunities in the B‐BBEE framework (from TSI research)
exploring ED strategy
The B‐BBEE legislation allocates:
‐ 15 scorecard points to companies which invest 3% of post‐tax‐profit for In
terms of enterprise development.
‐ 5 points which are allocated to CSI spend under the socio‐economic
development (SED) category.
Therefore investments in the development of social enterprises could present
opportunities to enable enterprise development while simultaneously fulfilling
socio‐economic development criteria.
“This has the potential to create a virtuous circle in which financially sustainable
enterprises can be stimulated, which tackle key social issues and, assuming the
B‐BBEE frameworks can be tweaked to take this hybrid approach into account,
provides an added incentive for the private sector to invest in social enterprise
development with a potential full 20 point reward on the B‐BBEE scorecard “
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Source: B Fury, Tshikululu Social Investments. “Social Enterprise Development in South Africa ‐ creating a virtuous circle”

26. Aligning the ED & SED strategies through social enterprise investments
exploring ED strategy
• Equally important is to create clear guidance for corporates and other
potential private sector investors wanting to take best advantage of B‐BBEE
scorecard points (particularly when investing through enterprise development
budgets) by investing in social enterprises, so that there is no
misunderstanding over whether investment in a social enterprise should be
allocated points – as CSI rather than enterprise development ‐ but rather as
both.
• Rather, as part of a joined‐up, strategic approach to creating maximum social
impact, corporate decision‐makers should look outside their narrow CSI or
enterprise development focuses to consider alternatives for creating social
change through social enterprise development.
• And it is not just in providing important access to finance that corporates can
contribute, but also in filling the gaps that exist in the provision of essential
non‐financial business development services such as education and technical
assistance in order to bring these enterprises to a point of investment
readiness.
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B Fury, Tshikululu Social Investments. “Social Enterprise Development in South Africa ‐ creating a virtuous circle”

27. Measuring the social impact / social return
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Clark et al. (2003) “Double Bottom Line Project Report: Methods Catalog” BOS Bain-Template

28. IRIS: a common language for reporting social & environmental impact
Impact Reporting & Investment Standards (IRIS)
• a common language for describing the social and environmental
performance of an organization
• provides an independent and credible set of metrics for organizations
to use when reporting their impact
• IRIS indicators span an array of performance objectives and include
specialized metrics for a range of sectors including financial services,
agriculture, and energy.
• like financial accounting standards, IRIS provides a basis for
performance reporting and organizations need only report on
applicable metrics from the IRIS library.
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29. benefits & risks
• what are social enterprises?
• international / local trends & examples
• exploring opportunities in ED strategy
• what are the potential benefits & risks
• real opportunities for ED investments
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30. Benefits & risks
benefits & risks
Potential benefits
• As before – opportunity for meeting both ED and SED criteria
• Potential tax benefits if social enterprise also has section 18A status
• Several social enterprises are gearing themselves to deliver this
• Creating direct sustainable social impact in addition to jobs
Potential Risks
• As with standard enteprise development support – all those plus:
• Delivering on a social impact agenda and revenue generating agenda
can lead to tensions within the business as to priorities
• Only a few well established social enterprises with long track records
exist at present in SA, although many are emerging
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31. real SA opportunities
• what are social enterprises?
• international / local trends & examples
• exploring opportunities in ED strategy
• what are the potential benefits & risks
• real opportunities for ED investments in SA
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32. SA social enterprise examples already supported by ED
real SA opportunities
Learn To Earn http://www.learntoearn.org.za
• Training for employment. Sewing, woodwork, crafts. Establishes small
businesses.
• Feel Good Store – joint venture partnership with Foschini – retail
outlet, work for sewing group, training ground for interns.
http://www.tfg.co.za/csi/projects/tfgs.asp
Shanduka Black Umbrellas http://www.blackumbrellas.org
• support of emerging black business through enterprise development.
• business office hub provides with a working environment and support
services that will enable them to thrive
• More than 20 corporates have invested and received ED & SED points,
as well as tax benefits on donations
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33. Selection of some SA social enterprises worth exploring
real SA opportunities
Shonaquip www.shonaquip.co.za
employment through empowering those with disabilities
Open Africa www.openafrica.org
rural jobs & environmental conservation through tourism
Soul City www.soulcity.org.za & Heartlines www.heartlines.org.za
health and values through mass media communications
Johannesburg Housing Company www.jhc.co.za
affordable low cost housing & building economically active neighbourhoods
The Hope Factory www.thehopefactory.co.za
creating sustainable livelihoods through business, technical & life skills
TSIBA Education www.tsiba.org.za
education in entrepreneurship & business
The Big Issue www.bigissue.org.za
employment, skills targeting those who are homeless
Raizcorp
Cause Activation www.cause.co.za 33
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34. thank you
DR FRANÇOIS BONNICI
SCHWAB FOUNDATION FOR SOCIAL ENTREPRENEURSHIP
francois.bonnici@schwabfound.org or frb@weforum.org
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