Social enterprises need solid financial discipline and control to succeed.
As labour costs rise, the social enterprise has to be sustainable.
Social enterprises can be used to cross-subsidise other social actions.
They can be a platform to train new entrepreneurs.
The EU can play a key role in supporting pilot projects.
Social enterprises in Africa are starting to bridge the inequality gap in key areas. Their goals are promoting and encouraging social change, while addressing gender inequalities, skills acquisition, health and safety at work, financial inclusion and all of the relevant factors linked to a decent jobs agenda.
Today’s economic model is focused on GDP growth. It has seen the poorest get poorer while inequality increases. The business model needs to change from one based on shareholder value to one that looks at the wider issues of stakeholders. The model must be able to prevent inequalities, and social enterprises can address this. They are businesses that address environmental and social needs – and returns the benefits to the community.
In Ghana, the Meringa Connect social enterprise supports farmers. Training farmers to plant the Meringa trees helps them grow a nutritious product and earn a good income. In this system, the farmer is no longer beneficiary - he is the customer.
Other examples include Soronko Solutions, an IT company set up by a woman who uses its profits to fund work with women and jobs across Ghana; and Tebita Ambulance in Ethiopia sells healthcare insurance and uses the profits to subsidise ambulance services.
The Ethical Fashion Initiative, which runs fashion projects in Mali and Burkina Faso on behalf of big fashion brands, has a business model centred on paying a living wage to artisans. In this model, labour costs will be more expensive. The social enterprise has to be sustainable and run for a profit, although they can run for a loss for the first three years. Clients such as Vivienne Westwood have to commit to working with the Ethical Fashion Initiative for the long term.
These systems need a strong financial control system. Artisans are paid decently but savings have to made elsewhere. There is no room for waste. Social enterprises also need an enabling framework to help them succeed. This involves access to markets, and services from banks and lawyers. It is also important to raise awareness about their operation to improve credibility.
The European Commission can play a role in encouraging the development of social enterprises. It is in a position to promote pilot projects and social enterprise initiatives.
Indeed, the EU – as Africa’s largest donor - recognises that SMEs are the main providers of jobs (60 %). It has a role as a catalyst for such developments, particularly through creative finance instruments. The EU is able to support the testing of new approaches and pilot models that are sustainable and support local ecosystems.
The low-cost structure of social enterprises could match the needs of Africa’s many unemployed youths.