Developing a Social Economy Policy in South Africa

In 2017 South Africa’s Economic Development Department, with assistance from the International Labour Organisation (ILO), took steps to develop the social economy policy in South Africa, recognising the value of co-operatives, social enterprises and non-profits that trade in building an economy for all. The social economy has been globally credited for its inclusive entrepreneurial approach.
South Africa is working to catalyse employment amongst young people, whilst growing the breadth and depth of services and opportunity to communities. Against this context, the social economy brings enormous advantage when stimulating socio-economic activity, particularly beyond the borders of urban centres. One sees organisations thriving, delivering goods and services that add value to society, for example  low cost, high quality clinics such as the one that is run by Dulcy Rakamakoe at U-Care, or Muthi Futhi, a community business in Zululand that grows medicinal plants, or the re-imagination of housing by the team at Hustlenomics.
The Economic Development Department (EDD), together with the ILO, Industrial Development Corporation (IDC) and the Government of Flanders hosted a series of discussions, consultations and focus groups to understand what is needed to stimulate the social economy eco-system. In each of the consultations participants were asked different questions around the same topic, such as what would they like the policy to achieve? Where did they identify gaps? Each question provided insights into what is and isn’t working in the social economy in South Africa.
These are the top insights gained:
The need to clarify what the social economy is and why it is important
There is a strong call to have an agreed definition of what the social economy is, why it is important, and the value that it unlocks. During the National Consultation in February 2019, a definition was put forward which has been included in a draft Green Paper.  It is a reminder that the policy development process is as important as the final policy recommendation, as these discussions create a consensus and an opportunity to bring clarity.
Regulation will ensure policy cohesion 
A call is made for policy cohesion, recognising that South Africa has great frameworks that focus on social change, transformation and upliftment. Practitioners are frustrated by the need to work across contradictory policies that each have different requirements. The social economy is a highly inclusive concept because it operates across social and economic spheres. Therefore, the policy development process is an opportunity to integrate existing policies, aligning the country’s inclusive and transformation agenda.
Demand for capacity building and support
The assumption that more funding equals growth is turned upside down as a demand for stimulation and support is most prominent. Although some are financial, these are put forward in conjunction with recommendations for capacity building and training. The call for partnerships and networks dominates, showing the entrepreneurial nature of the social economy and its need to create an identity through togetherness. The need for collaboration over competition shows the strength of the social economy.
Access to markets and impact investing
There is a call to strengthen access to markets. This must be seen against the growing conversation within impact investing that is re-shaping how investors invest, which is to shift focus from financial returns to include social and environmental returns. South Africa has a good track record here. There is a growing movement away from traditional models of funding social services. We are starting to see innovation in the system, patient capital and a change in what constitutes risk. In the long term it allows organisations which focus on doing good to access funds that are suited to their impact and income needs.
The most prominent call is for a framework, which allows us to measure a set of guiding principles that maps out the social economy in South Africa. By naming it, we legitimise it, and we are normalising the model that social and economic value can be created simultaneously. When measuring our progress, one gains deeper understanding. By measuring success, these social economy organisations move to mainstream models within the broader system.
By enabling the social economy, understanding how to stimulate and support it, a long-term picture is clear where businesses exist to deliver high social value, together with financial returns.
If you’d like to know more, or would like a copy of the full Green Paper, please get in touch with the social economy policy team at [email protected]