The Future of Commerce is Social Enterprise

The 4th Industrial Revolution is here - and it is dressed up as Innovation for Social Good.

The African narrative is gradually shifting from aid-led responses into enterprise-led solutions to mitigate development challenges.

Social enterprises are at the heart of this change - and we are here for it.

Social enterprises are businesses that put the interests of people and the planet ahead of shareholder gain. These businesses are driven by a social/environmental mission and reinvest profits into creating positive social change.

According to the British Council's "The State of Social Enterprise" reports on African countries, the new social enterprise business model is being used by an estimated 44,000 companies in Kenya, Ethiopia at 55,000 and 26,000 in Ghana. The survey also finds that profit remains a critical outcome for social enterprises, but as a means to create employment and conserve the environment.

This is a meaningful departure from traditional corporate social responsibility, which only requires companies to be mindful of local communities as they pursue their core business.

Using the best available data, the estimate for the number of jobs directly created by social enterprises in Sub-Saharan Africa (SSA) ranges from 28 million to upwards of 41 million, according to the report.

Social entrepreneurs are building innovative, sustainable businesses that give development ownership and stewardship back to communities, are increasing opportunities for young people, and creating positive social change in Africa and the rest of the Global South.

Growing out of the need to address pressing social and environmental problems, social enterprises combine the best parts of what non-profits and regular companies have to offer by focusing on the triple bottom line: money, environment and social impact.

Nobel Laureate Professor Muhammad Yunus is known for championing his social business model, which pours all profits back into the community. He is globally acclaimed as the founder of Bangladesh based Grameen Bank, which lends to the poor at a low cost interest rate to cover operational costs - and without collateral. The effect this has had on people's lives cannot be overestimated.

For example, with so much pressure on our forests, Bentos Energy (Kenya) is using bio waste as an alternative energy solution instead of cutting down trees. The social enterprise converts biomass waste into smokeless, compact and solid environmentally-friendly fuel blocks called briquettes.

?Briquetting machines use high pressure to mold loose biomass waste that can be used for cooking, boiling water or heating rooms, among other uses. In two years, it has produced 41,500 tonnes of its green briquettes - equivalent to saving over 4,000 mature trees. The firm hires several community-based organizations which in turn recruits hundreds of community members to collect and supply the organic waste used - producing the briquettes that are cheaper, safer than carbon emitting charcoal, and provide a family of four with a month's energy at half the cost of wood charcoal. This reduces the pressure on forests and minimize the carbon footprint, in addition to creating employment.

Good Nature Agro (Zambia) works closely with communities to maximize impact and profitability. By identifying high-value premium markets for legume commodities, producing proper seeds and working with farmers to grow what’s in demand, the social enterprise has lifted smallholder incomes by an average of USD 220 per 10,000 square metre by recruiting and training agricultural extension workers from the community, who in turn support farmers during the entire production process - from preparing the land to putting products on the market. By introducing inter-cropping techniques alongside low cost techniques, the firm works with 5,200 small scale farmers and growing.

Social enterprises come in even smaller sizes, but the impact is equally as grand. Sikia Cafe, located in the dreamy lakeside town of Jinja (Uganda) is a social enterprise seeking to create a better future for the deaf community through employment and skills provision. The colourful ice cream flavours displayed at the entrance makes you easily spot the cafe.

When it is time to order though, that's when you notice that this is no restaurant like any other: The info-graphics on the menus give you a hint that you will be shortly served by a staffer with a hearing impairment.

Here, it is more than a place to get yummy dessert, dinners and lunches, snacks, coffee or ice cream flavors. Sikia Cafe is building a community, breaking down societal stigmas attached to the deaf community, and sustaining employment for persons differently abled - and I will forever cherish the experience I had at the cafe. Now that's business with a social conscious!

Despite the tremendous promise, the social enterprise ecosystem is still relatively young in the continent, presenting challenges for investors and startups because there is limited experience to draw from. There is also little in the way of institutional knowledge in relation to social entrepreneurship dating beyond a generation, and leaders of such enterprises tend to be young. This means there are few lessons learned that are specifically anchored in the local context.

This, however, presents an opportunity for impact investors (financiers focused on investing in social enterprises) who actively pursue early stage investment windows.

We may start to see a closer collaboration between international non-profits and local for-profit organizations. The globalization of financing also means social enterprises can now raise capital from alternative means, such as the crowdfunding website Indiegogo, which helped the Zambian based Good Nature Agro raise its funds to train rural farmers in agriculture and entrepreneurship.

But make no mistake, social enterprises, just like for-profit organizations, still have to deploy a solid business case and not just potential for investors; the long-term interest of the beneficiaries and the company depends on it. Impressive beneficiary numbers are no substitute for a professionally run outfit, after all.

That said, impact investors ought to take chances on social enterprises that embrace their hybrid identity. Social enterprises are perfectly placed to offer solutions if they combine private sector practices with experienced donor and impact-investor support.

Having worked in public sector and development, auditing not-for-profits and donor funded projects, I have seen how budgetary cuts impact communities. During the pandemic, for example, donor countries slashed Non-governmental organizations (NGOs) development spending to shore up their own economies. Additionally, and crucially, despite the tremendous impact they have had, and how sustainably intended NGO programs could be, the dependency evoked by Dambisa Moyo's provocative book "Dead Aid" always came to mind.

If only NGOs could be modeled along the lines of 'teaching a man how to fish' and giving him the tools, man would be fed for a lifetime.

That's the premise of social enterprises.

In what is expected to be Africa’s century, social entrepreneurs can play a catalytic role in driving inclusive and sustainable economic development on the continent.

At their core, social enterprises are created to care about the products they sell, instill ownership to the communities they serve and the world they are part of. It's a wonderful time to be part of this swelling movement!