In 2015, there were more people living in extreme poverty in the Sub-Saharan Africa than the rest of the world combined. Out of the world’s 28 poorest countries with poverty rates above 30%, 27 are in Sub-Saharan Africa. It is estimated that by 2030, poverty rates will remain in double digits in Sub-Saharan Africa even under the most positive outcome.

Thanks to social entrepreneurs and social enterprises, we have a new kind of approach to

reducing the poverty rates and possibly, alleviating poverty in Sub-Saharan Africa.

Social entrepreneurs are pioneers aiming to create and provide new products and services to

customers with low incomes and provide employment opportunities. They provide

market-based solutions to social and environmental issues. Bill Drayton describes

social entrepreneurs as “not content just to give a fish or teach how to fish. They will not rest

until they have revolutionized the fishing industry”.

Social enterprises (SEs) exist across all of Africa with most of them in East and South Africa. Level of maturity and scale varies from country to country. Few countries such as Rwanda, Kenya and South Africa have social enterprise communities and networks but there is still inadequate support ecosystems that would help to scale SEs and leverage their potential in many other countries.

An ecosystem refers to communities or networks of interconnected and independent organizations and individuals whose actions determine if a business will succeed or not. In regards to SEs, these communities include the government, customers and beneficiaries, business associations, competitors, academic and other research institution and the media. By drawing upon lessons from the United Kingdom and Canada, this piece will focus on components that make up an adequate support ecosystem that will allow SEs to excel and grow. The 3 main components that makes an adequate support ecosystem are:


Legal and Regulatory frameworks

There is little to no recognition in policies for SEs in most African countries and even if their role is recognized, there is no common understanding what it involves. Legal and regulatory frameworks are necessary to bring some clarity and open the way for policies. Governments need to recognize and promote the role of SEs by creating special legal forms such as Community Interest Company. The Community Interest company is a special type of limited company created by the UK government for SEs that want to use their profits to benefit the community rather than private shareholders. In Canada, the Ontario government recognizes SEs as an integral sector to the province and developed a 5 year strategic plan which has been bringing clarity, awareness and growth to the sector. Governments can implement sector specific policies such as the Social Enterprise Tax relief introduced by the UK government. Such sector specific policies will help SEs attract capital so they can launch and scale. Lastly, governments can also adapt existing legislation to put a greater focus on increasing recognition, awareness and public spending with SEs by introducing an Act similar to the Social Value Act. This Act requires people who commission public services to think about how they can also secure wider social, economic and environmental benefits.


Financial solutions

SEs have access to various grants programs, mostly from international organizations including donors but there is a need for SEs to have a mixture of financial sources to kick start their business. Commercial lending can be challenging due to high lending rates. Banks are extremely risk averse and unwilling to lend to early stage enterprises. For instance in Tanzania, the situation is worse since SEs put social gain ahead of profits. SEs turn to microfinance which usually comes with high interest rates. Banks and lenders can offer loan programs with lower interest than market rates and develop repayment plans with longer payment periods to allow time for SEs to reach a level of maturity. With a recognized and established legal and regulatory framework, Banks and lenders will be more willing to offer more financial solutions to SEs. In addition, governments and the financial community can work together to create and offer funding targeted towards SEs. In the UK, social finance intermediaries such as Social Finance and Big Society Capital work with governments and the financial community to provide funding for the Social Sector of UK.


Business support structures, as well as, training and research

Capacity building for social entrepreneurs and enterprises can also be a support intervention. Networks, consulting firms, incubators and educational institutions can provide training and support to SEs to help launch and scale. More business support structures such as hubs and incubators, specific to SEs need to widespread in order to provide adequate support to SEs. Governments in Africa can look into creating development funds such as Social Enterprise Demonstration Fund as exists in Canada. Such a fund does not only provide financial solutions but mentorship and support to SEs. The Social Enterprise UK is a good example of a network that runs campaigns, lobbies for social enterprise sector and provides information on SEs. Other examples are MaRs and Social Venture Partners which brings together various experts to provide support, network and information. Lastly, governments, universities, foundations and independent research organizations can also support by evaluating and publishing the impact of SEs. This will create more awareness, highlight the economic benefit of SEs and attract more activity into that space.

In conclusion, an adequate support ecosystem is needed to allow social entrepreneurs and social enterprises to excel and grow. Will a collaborative effort and entrepreneurial approach alleviate poverty? My view is that creating an ecosystem to foster social entrepreneurs and social enterprises will contribute significantly to alleviating poverty. A change in approach towards SEs, a new Legal and Regulatory framework, more financing solutions and business structures are needed to realize the full potential of SEs so that we can see more of social enterprises such as Trashy Bags of Ghana and Totohealth of Kenya. If not, it might well be yet another situation where we fail to reach our full potential.


The views expressed in this article are those of the author alone and not the Future Africa Forum.