The results of a study (n=506) conducted during consultations for the Social and Solidarity Economy Policy process, was launched by the ILO this week, along with the South African government’s Department of Trade Industry and Competition, the Industrial Development Corporation and the Government of Flanders.

A lack of networks in the SSE in South Africa meant that the research team first collated all public ally available databases (n=150,000+), which they used to contact people. They added to this through social media, government and community networks. Travelling across the country, the researchers conducted workshops in community venues with more than 700 SSE practitioners to capture their views and perspective. The results of the final sample group (n=506) captures the reality of a diverse range of SSE practitioners living and working in some of the country’s poorest and marginalised areas, and is regarded as an important contribution to the country’s efforts towards evidence-based policy making.

Characteristics of the SSE in South Africa

The report highlights the micro nature of the SSE, with its formal and informal characteristics. Eighty six percent of organisations are micro enterprises, employing less than ten people. The majority (98 per cent) are registered: as for-profit companies (33 per cent), Not for profit companies (31 per cent), and Co-operatives (34 per cent). Only 6 per cent are hybrid enterprises, validating earlier South African studies (see Hanley et al., 2015; Lovasic & Cooper, 2020; Myres et al., 2018) which also found low hybridity for the hybrid social enterprise model. A majority (85 per cent) have organizational bank accounts and those who are not registered, are the least likely to have bank accounts.

Ninety-eight percent live and work in the same place, and only two per cent run SSE units across multiple provinces. Tthis localised approach affects how the SSE units secure support, creating a close connection to the communities within which they work. Their local knowledge is credited for support from the community, local business and helps with funding. SSE units are working across the spectrum of developmental services, specifically in social services, agriculture, and professional services such as unions, with 94 per cent working towards outcomes of togetherness, tolerance and trust.

The study highlights how SSE units in South Africa, blend formal and informal characteristics. Even when registered, they also rely on trust systems to navigate difficulties in their environment, amplifying the usefulness of networks and organisational practices associated with building trust. Organisations rely on their credibility to demonstrate their worthiness, and they work hard to demonstrate through their work, the good that they do within their communities.

Modelling the Enabled Eco-system for the SSE in South Africa

Financing remains the primary barrier for SSE organisations in South Africa, with 81 per cent having only one source of funding, and 43 per cent not making any money the previous month. This financial insecurity tops a list of barriers and constraints (26 per cent), and is followed by the need for a helpful, and supportive eco-system (9 per cent) and access to practical skills related to operating and managing a business (7.4 per cent).

Building on these insights, the research team modelled what the enabled eco-system should look like, identifying three pillars of support focused on Creating a helpful environment, Expanding Access to Resources and Enabling Access to initiatives, such as skills development programmes, market-led opportunities and information.

Pillar 1: The helpful enabled ecosystem is supportive: it acknowledges the work of SSE units and in doing so, they are considered to be part of the mainstream economy recognised across the formal and informal institutional dimensions. This brings a legitimacy to their work. Networks are supported with relevant listings of those involved in the sector, and partnerships are encouraged, entrenching collaboration and solidarity. Bureaucracy is easy to navigate and relevant, and the system is perceived to be fair and transparent. As a result, more organisations operate across the formal institutional dimensions, increasing decent work and employment opportunities.

Pillar 2: SSE units are able to access resources. These are not just financial but are also provided through subsidized infrastructure (for example, electricity, transport and warehousing), buildings and land. Because of the helpful, enabled eco-system, local municipal-level partnerships help identify assets that can be used by SSEO’s in their community-based work. Scaling occurs at a local level, resulting in a breadth of services across communities, that are responsive to the needs of their community. Finance is structured to suit small and micro enterprises.

Pillar 3: SSE units have access to a range of support services that enable their sustainability. This includes practical training programmes, that support SSEO leaders to manage their organisations well, recognising the benefits of stability to sustainability. Access to markets is facilitated, with SSE units able to sell and market their goods and services outside of their immediate locale. This translates into opportunities for growth and employment.

Implications for SSE Policy? No One Size Fits All

The study provides insights into the SSE in South Africa, providing a map for regulators and policy-makers. It shifts attention away from further regulation and bureaucracy, instead to ‘soft’ mechanisms such as strengthening networks, partnerships and collaborations, that provide resources and support. It reflects on the three pillars of an enabled ecosystem for the SSE in the country.
South Africa’s high levels of inequality is well documented. The study affirms that the SSE activity is localised, community-led, with social and economically beneficial consequences which has potentially profound consequences in addressing inequality, and developing an inclusive economy and society.

This also has implications for scaling. Inequality results in growing distrust (Conceição, 2019). If trust-building systems are valued, then policy makers and SSE champions should consider supporting organisations to be financially and operationally stable and sustainable, before being encouraged to scale ‘deeply’ within their communities.

Because the researchers deliberately targeted SSE practitioners working across poverty divides, the findings are relevant to those working across the country’s diverse and complex landscape.

There is little variation in the difficulties experienced by SSE units in the poorest and least poor areas, showing that the difficulties experienced are common to all. However, those organisations operating in the middle of the spectrum – the smaller towns and cities that plot in the median - struggle the most. Here funding, support and access to development opportunities is more limited than in the poorest or the least poor areas.

SSE units also operate across formal and informal dimensions of the environment. Our findings affirm the benefits of organisations being compliant to regulatory mechanisms, such as being registered and banked, which brings legitimacy, stability, decent work and finance. SSE units also rely on their community networks for support and sanction. We therefore regard them as “institutional bridges” to be supported at both formal and informal levels, whilst encouraging formalisation, recognising the benefits it brings.

Lastly, the study affirms a number of important characteristics: that the SSE units operate across the country, in very diverse contexts and settings providing a range of goods and services that respond specifically to the needs of their communities. They are micro in size, financially insecure but working to provide social and environmental services, with outcomes of tolerance and togetherness.

For policy makers, the study affirms the value of the SSE, as a means of stimulating inclusive growth, irrespective of the depth of poverty and inequality. It confirms the societal benefits of SSE work, and the value that it brings both economically and socially to small and large communities across the country.

You can read the report here.