Financing social enterprises : constraints and opportunities in South Africa

Abstract

Background: - Social enterprises (SEs) address institutional voids by solving social and environmental needs. In South Africa, SEs play a fundamental role as government led initiatives are increasingly strained in their ability to satisfy the social and environmental deficit. Consequently their funding structures are particularly relevant in the present socio-economic milieu of South Africa. Objective:- - This paper thus aimed to provide a detailed understanding of the nuances of funding of social enterprises in South Africa, exploring whether their structural and mission peculiarities warrant a unique funding approach. Methodology - This paper studied social enterprises and funders in South Africa through in-depth interviews provide a comprehensive understanding of the key funding issues from triangulating between funders and social enterprises to arrive at convergence and identify divergences. Results: The results indicate that there is no clarity on the structure and definition of social enterprises in South Africa. This has a direct bearing on the ability of the SE to attract funding as well as funders to provide funding. As a result, SEs pivot their structural from to fit funding requirements and funders sticking to funding approaches for traditional enterprises. Further, as social enterprises attain self-sustainability, scale is restrained by an unwillingness to accommodate traditional funding sources such as equity and debt. Conclusion: The results highlight the unintended funding consequence of the absence of clarity for social enterprises.