Unlocking the Potential of Social Entrepreneurship in South Africa: Building a Missing Pillar in the Entrepreneurial Ecosystem

South Africa has incredibly high levels of youth unemployment. Entrepreneurship is seen as a mechanism to not only stimulate entrepreneurial growth, but also reducing the overall unemployment rate. For this reason, South Africa’s entrepreneurial ecosystem has witnessed significant growth in recent years, with more than 200 incubators and accelerators driving innovation, fostering startups, and supporting small businesses.

Yet, despite this progress, a glaring gap remains: the exclusion of social enterprises from this ecosystem. This oversight not only stifles the growth of social enterprises but also limits the entrepreneurial ecosystem’s capacity to scale, attract investment capital, and contribute meaningfully to job creation and economic sustainability.

What makes focusing on including social enterprises into the entrepreneurial ecosystem even more critical is that we also need to consider the future financial stability of not-for-profit organisations. It is inconsistent to advocate for social purpose organisations to diversify their income sources and achieve financial independence by functioning as social enterprises, without providing the necessary support and facilitation for this transition.

What Makes Social Enterprises Different?

Social enterprises operate at the intersection of business and impact, combining entrepreneurial principles with social and environmental goals. While they aim to generate revenue and remain financially sustainable like traditional enterprises, their core mission goes beyond profit to include measurable social or environmental objectives. This dual-purpose approach sets them apart in several key ways:

• Mission-Driven Focus: Social enterprises prioritise solving societal or environmental challenges, whereas standard enterprises primarily focus on maximising shareholder returns.
• Reinvestment of Profits: Many social enterprises reinvest a significant portion of their profits into furthering their social or environmental mission, whereas traditional businesses distribute profits to owners or shareholders.
• Inclusive Market Reach: Social enterprises often serve underserved or marginalised communities, addressing market gaps that standard businesses may overlook due to lower profit margins.
• Systemic Change: By tackling root causes of societal challenges, social enterprises create long-term solutions that extend beyond transactional business activities.

Additional Value Created by Social Enterprises

Social enterprises bring unique value to the economy and society that traditional enterprises often do not prioritise:

• Addressing Inequality: They provide opportunities for marginalised groups, such as youth, women, and rural communities, fostering economic inclusion and social cohesion.
• Driving Social Innovation: Social enterprises often pioneer innovative solutions to pressing challenges, from renewable energy access to affordable education and healthcare.
• Environmental Stewardship: Many social enterprises focus on sustainability, creating products and services that mitigate environmental degradation or promote green practices.
• Community Empowerment: By engaging with local communities, social enterprises build capacity, transfer skills, and empower people to take ownership of their development.
• Resilience and Adaptability: Social enterprises are often well-positioned to respond to crises, such as natural disasters or economic downturns, due to their strong ties to the communities they serve.

The Overlooked Potential of Social Enterprises in South Africa

Despite their potential to create transformative value, social enterprises in South Africa often find themselves locked out of the mainstream entrepreneurial ecosystem. This exclusion has several consequences:

• Limited Access to Capital: Without tailored incubators and accelerators, social enterprises struggle to access the funding necessary to grow and scale.
• Missed Opportunities for Job Creation: Social enterprises often operate in underserved communities, where their growth could have a direct impact on employment opportunities.
• Constrained Ecosystem Growth: By neglecting social enterprises, the broader entrepreneurial ecosystem misses out on scalable and impactful investment opportunities.
• Fragile Financial Sustainability: Without adequate support, many social enterprises face challenges in sustaining their operations over the long term.

Current Landscape of Support for Social Enterprises

In South Africa, only a handful of initiatives focus on social entrepreneurs. For instance:

• Innovation Edge: This platform supports social enterprises focused on early childhood development, offering funding and technical support.
• Bertha Centre for Social Innovation and Entrepreneurship: As part of the University of Cape Town’s Graduate School of Business, the Bertha Centre offers programs that incubate and accelerate social impact initiatives.
• SAB Foundation: The foundation supports social innovators through grants and capacity-building programs targeting underserved areas.
• Social Enterprise Connect, developed by Social Enterprise Academy, is a Community of Practice (CoP) for social entrepreneurs in South Africa. The CoP was born out of a partnership between Social Enterprise Academy Africa (SEAA) and the Industrial Development Corporation (IDC).
• ORIBI: Is a  9-month-incubation journey aiming to promote and catalyse transformative entrepreneurship while unleashing the potential of social entrepreneurs in their development of innovative solutions that address food system issues and challenges in South Africa.
• ygap – Agriprenenur Accelerator Program that centres around three cross-cutting areas of focus essential to underpin and help create an equitable and sustainable world; gender, climate and business digitisation.
• E Squared Investments : Social Impact Investments providing blended finance to early-stage hybrid social enterprises focused on youth entrepreneurial initiatives whilst creating meaningful societal impact.

While these initiatives are commendable, they represent only a fraction of what is needed to truly integrate social enterprises into the broader entrepreneurial ecosystem.

Lessons from International Ecosystems

Globally, countries like the United Kingdom and Canada have demonstrated the benefits of investing in social enterprise ecosystems:

• Social Enterprise UK: This umbrella body has successfully advocated for policies that integrate social enterprises into government procurement, unlocking new revenue streams.
• MaRS Discovery District in Canada: MaRS runs a Social Venture Program that provides tailored support to social enterprises, helping them scale and access investment.
• Singapore Centre for Social Enterprise (raiSE): raiSE provides funding, capacity building, and a platform for social enterprises to connect with investors and custom

In addition, global fellowship programs set up to grow the ecosystem includes:

• Ashoka Venture & Fellowship: A global organisation that supports social entrepreneurs in different sectors around the world. Their focus is on supporting innovators with new ideas to address social problems. Ashoka provides access to funding, resources, and mentorship to help entrepreneurs achieve their goals.
• Skoll World Forum Fellowship: A peer-centred network program that supports cross-region connectivity, learning, and visibility for proximate social innovators.

Global early stage investors into social enterprise ecosystems include:

• Acumen: A non-profit impact investment fund that invests in social enterprises across sectors, including healthcare, energy, agriculture, and education, with a focus on low-income communities in Africa, Asia, and Latin America. Their mission is to tackle poverty and promote social change.
• Better Society Capital Limited, formerly Big Society Capital, is a social impact investor in the United Kingdom, with a mission to grow the amount of money invested in tackling social issues and inequalities in the UK
• ImpactAssets: A US-based impact investment firm that invests in a wide range of sectors, including sustainable agriculture, renewable energy, and affordable housing. They focus on investments that promote social and environmental impact, and work to support investors in creating a diversified impact investment portfolio.
• Social Ventures Australia: SVA provides loans and equity investment to organisations with positive social impact. SVA supports social enterprises, Indigenous businesses and social benefit suppliers to grow and win and deliver social procurement contracts.

These examples highlight that a deliberate and well-structured approach can unlock the full potential of social enterprises.

Building South Africa’s Social Enterprise Ecosystem

To create an inclusive and thriving entrepreneurial ecosystem in South Africa, we need to actively integrate social enterprises. This can be achieved through:

• Policy Advocacy: Government and industry stakeholders should work together to establish policies that promote social enterprises, including tax incentives, procurement preferences, and investment facilitation.
• Targeted Incubation and Acceleration: Existing incubators and accelerators should expand their mandates to include social enterprises, designing programs that address their unique challenges.
• Access to Capital: Impact investors, development finance institutions, and corporate foundations can play a crucial role in providing patient capital tailored to social enterprises.
• Capacity Building and Mentorship: Programs should focus on equipping social entrepreneurs with the skills needed to scale their ventures while maintaining their social impact.
• Cross-Sector Collaboration: Partnerships between the private sector, government, academia, and civil society can create a cohesive ecosystem that fosters social entrepreneurship.

Conclusion: A Call to Action

Social enterprises represent a powerful vehicle for addressing South Africa’s pressing socio-economic challenges. By integrating them into the broader entrepreneurial ecosystem, we can unlock new opportunities for growth, investment, and impact. It is time for policymakers, investors, and ecosystem support organisations to recognise the untapped potential of social enterprises and take deliberate steps to build an inclusive ecosystem that enables them to thrive.

The future of South Africa’s entrepreneurship lies not just in profit-driven innovation but also in purpose-driven impact. Together, we can create an ecosystem that scales solutions, creates jobs, and ensures the financial sustainability of social enterprises—driving meaningful change for generations to come.

Reana Rossouw – Next Generation Consultants Next Generation Consultants is a management consultancy that works at the intersection of the impact, social and solidarity economies. Next Generation’s services include research and development, strategic advisory as well as impact management and measurement.