South Africa’s social economy

building an inclusive society

News | 14 August 2018
An inclusive economy in South Africa is increasingly being called for as the public debate for greater equality in our system gains traction. I believe a large part of this is that we are realising that we cannot continue to see poverty as a simplistic financial indicator, measured in a household income gap between rich and poor. This is the standard assessment of the Gini Index, where South Africa, together with Brazil vies for top spot as the worlds most unequal country, where the gap between rich and poor continues to widen.

These big indicators are useful tools to track where we are, but they seldom give us the nuanced understanding we need to understand the dimensions of social change. South Africa’s position on the Human Development Index (HDI) remains stuck between 118 and 119, with conflict countries such as Palestine (114), El Salvador (117) and Iraq (121) surrounding our position. It remains a shocking statistic that in the 2014-2015 report, South Africa shared a position with Syria on the HDI, meaning the citizens of South Africa shared the same access to education, health and opportunity as those of the war ravaged country. It is becoming imperative that we shift our debate to a more nuanced understanding of inequality and the poverty it causes, so that we can start taking the small steps that are needed to strengthen the foundations of our society, building an inclusive society.

In April 2017 an agreement was signed that kickstarted an important process in South Africa – the development of a Social Economy policy, designed to create an enabling environment for those organisations that deliver social change whilst earning an income.
This is the world of the co-operative, mutual societies, associations and social enterprises, which operate outside of the spotlight of our GDP measures of economic success and societal wellbeing.
It is these organisations that if supported, have the potential to connect the growing divides of our country landscape. This is because they operate on the entrepreneurial frontier, responding to the nuances of poverty and catalysing opportunity. They are the needle in the ripped fabric of our society, steadily stitching the patchwork back together.

Poverty in South Africa manifests not as a financial indicator (this is a consequence) but instead, as a lack of opportunity, where the system determines the life that people are to lead, denying citizens choice to navigate. There is an excellent report, published by the British Council earlier this year which talks to young people in rural and urban areas across South Africa, asking how they see their future. The divides are clear: that South Africans born in rural areas are prejudiced from birth: the school they attend dictates the quality of their education and the work they are able to connect to as adults; the friends they make informs the jobs they are to be offered as they grow up, their ability to travel influences how they see the world, and their position in it. This is South Africa’s poverty, caused by inequality where the system continues to dictate the quality of life you lead. As important as it is to attack the consequences – our unemployment rate, the movement of people from rural to urban areas – it is equally important to address cause.

It is our social economy organisations that operate here, led by people who see opportunity where we often feel browbeaten by ongoing systemic failure: in our education and health system, in service provision to vulnerable people, in the strengthening of our social justice systems.
Social economy organisations are not charities: their ability to earn an income sets them apart, creating an independence of donor agenda’s and a long term sustainability which allows them to side-step the difficulties of short term funding. They are organisations like Spark Schools set up by Stacey Brewer in response to the lack of high quality, affordable schooling in South Africa; GreenAble an environmental recycling organisation that works with disabled people, connecting them to employment opportunities; and the accessible U-Care clinic franchise established by Dr Dulcy Rakumakoe. These organisations typically are highly innovative, constantly adapting to meet the needs of their customers and exhibit heightened accountability to their communities who are intricately involved in what they do: as without them, the organisations won’t exist.

In 2015, the Gordon Institute of Business Science commissioned a study to understand our social enterprises in South Africa – what they looked like, how they worked, where they were based. The survey of over 400 social enterprises shows a fast growing sector, that works across sectors from health, to education, housing and social justice. These organisations are employers, with 83% having between 1 – 50 staff. Considering their connectivity to the communities they operate in, we can assume that they are employing people in areas where opportunities for work are hard to come by. Fifty-five percent have been in existence for more than five years, and 13% for more than three years, showing that they are able to overcome that initial start up phase where South Africa has such a high failure rate. Seventy three percent ranked earning an income as very important to their work, showing an important shift away from charitable models of donor funding. And 65% report growth ahead of inflation. They are an important part of our supply chain: 38% sell goods and services to disadvantaged consumers, 32% to middle income customers and 56% sell to NGO’s and small businesses. These are small, but optimistic organisations with 80% having an income below R500,000 per annum; and 67% expected to “grow fast” over the next 12 months.

If we are to build an inclusive society, we have to acknowledge the reality of what inequality is, moving past our simplistic interpretation of poverty and discussions that label The Poor. This othering, is a stealthy positioning of inferiority which we think can be responded to by a centuries old concept of charity, that perpetuates the divide between us and them.

If we are to build an inclusive society, that connects all people across our economic and social divides, then we can start by enabling the environment for the types of organisations that do just this: our social enterprises, our co-operatives, our mutual societies, our non-profits that trade. We are only now starting to understand the extent of impact of these organisations as they deliver essential goods and services to citizens, whilst opening up opportunities for employment, skills development and trade. The consultation process that informs any policy is as important as the green and white papers that result, and we have an opportunity over the next three years to shift not just our understanding of poverty in South Africa but critically, how we respond to it.