Social or commercial entrepreneurship?  …that is question…or is it?

Social or commercial entrepreneurship? …that is question…or is it?

Through various interactions with people and programmes in both the commercial and social entrepreneurship arenas in South Africa, I’ve often wondered why a distinction is still made between the two types. This is mainly because most social enterprises are expected to have viable and sustainable income generation sources to fund their social initiatives with minimal dependency on grants and donations; whilst there is, an equal and opposite expectation that viable, commercial enterprises will demonstrate their commitment to social development through business practices that honour the Broad Based Black Economic Empowerment (BBBEE) codes and the optimisation of the triple bottom line.

The amended BBBEE Codes of Good Practice were issued by Dr Rob Davies, Minister of Trade and Industry in April 2015 and came into operation in May last year. In particular, the annual value of enterprise development contributions (which, for the purposes of convenience for this post, we’ll deem contributions by established and profitable companies to start-ups) is 1% of the Net Profit After Tax (NPAT) of the former companies. Similarly, the annual value of all socio-economic development contributions by these companies is also 1% of NPAT to social initiatives.

Whether 1% of NPAT is an adequate private sector contribution for both enterprise and socio-economic development has been the subject of many spirited debates which won’t be contributed to in this post.

So, assuming that the aggregated 1% NPAT of all qualifying commercial enterprises to social development, is a comparable proxy for the financial sustainability of social enterprises then why is entrepreneurship still preceded by the qualifiers “commercial” and “social”? Abridged from the Houston Chronicle I found the following four main reasons:

 

Criterion Commercial Entrepreneurship Social Entrepreneurship
Initial investment sources Venture capitalists who invest on the basis of the company’s leadership team and the managers and staff that support it Philanthropists who gauge the viability of a project based on the individual at the helm
Perceptions of value Value lies in the profit the entrepreneur and investors expect to reap as the product establishes itself in a market that can afford to purchase it Value lies in broader social benefit to a community or the transformation of a community that lacks the resources to fulfil its own needs.
Profitability measures and company structures Always structured to make profits that benefit stakeholders such as shareholders or private investors Activities often structured under charitable trusts and non-profit organisations
Approach to wealth creation The business’ success is gauged by market cap size and how much wealth it creates – for the most part wealth creation is an end in and of itself Wealth creation is necessary, but not for its own sake. Wealth is rather a tool to effect social change and the degree to which minds are changed, suffering is alleviated or injustice is reversed represents the business’ success.

GIBS, which offers the Social Entrepreneurship Programme, reports that social enterprises in South Africa are often registered as both for and not for profit companies meaning that they can access both donations / grants and commercial funding. Surprisingly, GIBS has found that the consequence of this approach is not a shift away from the mission of the organisation, but instead a focus on it.

“[Social entrepreneurship] is a blend of for and not-for-profit approaches, which balances the value and trust of social organisations with the efficiencies and profit motive of business. Within this is a conflict that challenges our cultural interpretation of charity – to make money out of social services is interpreted as inherently wrong and counter-intuitive to the mission-focus of civil society.”

civil societyIn recognising the unique position of entrepreneurship in South Africa continued, innovative responses around both the challenges and opportunities faced by social entrepreneurs in South Africa are not only encouraging but have the potential to render the commercial vs social entrepreneurship question irrelevant.

Applications for Singularity University South Africa’s Global Impact Competition close on 15 March 2016 so don’t delay- apply today! The purpose of this competition is to foster successful start-ups that will positively impact a billion people in the next 10 years.

The 2016 SEED Awards are open for start-ups that integrate social and environmental benefits to solve pressing local issues. Entries close on 21 March 2016.

School Entrepreneurship in Action | by Alexander McLeod

School Entrepreneurship in Action | by Alexander McLeod

alexander mcleodIt’s been a month since the South African school calendar started and we’re keen to see how kidpreneurs will be developed and supported during this academic year.

Alexander McLeod is the CEO of Cape Town-based Calan Consulting, a company that has extensive experience with designing and implementing school entrepreneurship initiatives. Under its brand Kreeate, (pronounced “create”), its extra-curricular School Entrepreneurship Programme for high school learners is endorsed by the National Department of Basic Education and is now in its 6th year.

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School learners of today are the leaders and change makers of tomorrow. Entrepreneurship advocacy at school level is key to contributing to and in turn achieving a country’s socio-economic development goals. So why is so little being done to harness the untold potential that exists within this segment of our population?

In an interview at the 2016 World Economic Forum, Grameen Bank Founder and Nobel Prize Winner, Muhammad Yunus alluded to the fact that education systems, globally, foster the mindset of “I need to find a job” by posing the question “Why does the education system brainwash people into believing they have to ask for jobs rather than create them?”.

Sir Ken Robinson, in his 2006 TED Talk, said that the education system “kills creativity”. I could not agree more.

We have been developing and implementing high school entrepreneurship initiatives for the last five years and can confirm both of these views. Learners are “encouraged” to think and behave like their peers. If they step out of line, there are consequences. South Africa’s education system, for the most part, churns out followers who all think the same and have no inclination to create their own future.

Entrepreneurship is one of the three pillars of the Economic and Management Science (EMS) Subject for Grades 7 to 9. This may sound encouraging, but unfortunately it is not. Why? Because educators must ensure that they get through the EMS curriculum for the year. Entrepreneurship section of EMS done, tick the box and move onto the next section please learners.

box ticking exercise

It is all about content with mininal practical application and understanding. Yet practical application is what entrepreneurship advocacy and development should be focusing on at school level.

Entrepreneurship is about sacrifices and any entrepreneurship initiative aimed at school learners should be extra-curricular as it encourages learners to make a sacrifice of their time. It should also not be once off, but should run over school terms or the entire year. Once-off initiatives are not enough because if, for example, learners’ cake sales goes well they that think being an entrepreneur is easy and if it doesn’t go well they never want to try that again because of a fear of failure.

However, learners need to understand that they will not always get it right the first time and that it takes time to succeed. Overnight successes are very rare and learners must be made aware of this. If a learner does succeed, then they must reap the rewards. We encountered a school that proudly informed us that it had launched its own internal entrepreneurship activity. The school lent the learner a small sum of money which the learner had to repay, interest free. Unfortunately, in addition to the capital repayment, the school took all of the learner’s profits too!

Entrepreneurs want to make a profit. Schools must allow learners to keep their profits and use that money to initiate additional business activities. This is the Kreeate model – learners keep their profits and receive both cash and non-cash awards for being top performers. Incentives breed excitement and excitement is what keeps learners interested and competitive.

The Kreeate philosophy is that entrepreneurship initiatives targeting school learners must meet the following criteria:

  1. Be extra-curricular
  2. Run over an extended period of time (not be once-off)
  3. Be practical orientated (interactive, action-learning)
  4. Allow learners to keep their profits

 

But how practical is it?

But how practical is it?

Screen Shot 2016-02-09 at 8.51.07 AM

Taking action, not just for action’s sake, and getting things done right, warrants a thorough consideration of the environment and putting all available resources to their best possible use.

Practicality is about using what is at hand in order to achieve your entrepreneurial objectives. Rapelang Rabana – CEO and co-founder of Yeigo Communications – knows all about the importance of practicality through the action she took as a graduate to establish and run the highly-successful software-development and telecoms company. Rabana used existing Wi-Fi infrastructure on university campuses to lauch the mobile VoIP market, allowing cash-strapped students to call and send texts through the more affordable medium of the internet.

rapelang rabanaThe simplicity of Rabana’s offering belies its sophistication and profitability. As with all other success stories, the three secret ingredients are:

  • use what you have
  • create something that solves other people’s problems
  • reap and replant the rewards

Practicality is about having the maturity to see the environment (replete with ever-changing technology, opportunities, enablers, limitations and challenges) and the resources presented to you as the fertile ground from which your seeds will grow.

This maturity stems from a certain type of personality – the kind of personality that exemplifies the Foundation’s Personal Initiative pillar. It is the personality of a self-starter whose voice booms: “I am Southern AfriCAN, not Southern AfriCANNOT!” Personal Initiative speaks to honing your innate skills and having the independence and confidence to use those skills.

All the internal pep talk in the world becomes empty words if it is not followed up with action. Actioning is a mindset that enables you to take a leap of faith and put what you believe about yourself (and your business idea) to the test.

Actioning is best done in a gradually-phased (or staged) fashion. The use of algorithms is one way to solve some of the problems which you may encounter in the different executions of your buiness idea. Actioning is about taking charge, being courageous and maintaining a teachable spirit so that corrective action can be taken should things not go as planned.

Personal Initiative and Actioning precede an attitude of Practicality – without which unneccessary delays, losses (of time, money and talent) and general frustrations ensue as you reinvent the wheel or get ahead of yourself by not timing your market properly. Being impractical makes you a hammer and everything around you a nail.

Practical entrepreneurs are able to preempt situations and justify their decisions and expectations because of the deep regard they have for what is at hand. The moral of the story is: always be practical in your entrepreneurial endeavours.

 

The Fourth Industrial Revolution – an opportunity or challenge for South Africa?

The Fourth Industrial Revolution – an opportunity or challenge for South Africa?

One of the appeals of entrepreneurship is that, by providing a platform for the harnessing of human potential, a relatively small number of individuals can have a disproportionately high impact. It is the main reason why we at the Foundation have such conviction that the current community of 750 Allan Gray Scholars, Candidate Fellows and Allan Gray Fellows, despite being few in absolute number, can have a material impact in shaping the future of the country. And recent global developments have made it possible for this impact to be further accelerated where the outcomes no longer grow in a linear manner but now exponentially. By way of example, Singularity University which explores how to apply this exponential technology to some of the world’s grand challenges has the goal of fostering ideas that each will be able to impact a billion Lives. Initiatives positively impacting a billion people is the new world of exponential technology.

The promise of exponential technology has been captured in the concept of the Fourth Industrial Revolution which was one of the main themes of the recent 46th World Economic Forum Annual Meeting at Davos. So what exactly is the Fourth Industrial Revolution, what challenges are brought with it and how can South Africa make the most of the opportunity?

The World Economic Forum gives a very clear explanation of the progression of industrial revolutions: “The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.”

So we have the following progression:

4th-industrial-revolution explanation

A powerful example of the possibilities of the Fourth Industrial Revolution is demonstrated by one of our own. Patrick Soon-Shiong was born in Port Elizabeth before going on the graduate as a medical doctor at the University of Witwatersrand. Patrick now lives in Los Angeles and founded NantWorks in September 2011, with a mission  “to converge ultra-low power semiconductor technology, supercomputing, high performance, secure advanced networks and augmented intelligence to transform healthcare” Simplistically he aims to cure cancer by using technology to fully sequence a person’s genetic information in a matter of minutes enabling far more targeted treatment. In the meantime he is also working to assist the blind to see through a process known as machine vision.  These are the sorts of extraordinary breakthroughs that are made possible with the Fourth Industrial Revolution.

But the Fourth Industrial Revolution is not without its challenges.  Most acutely there is the prospect of greater inequality in society as the revolution disrupts labour markets.  One of South Africa’s respected business leaders returned from studying at Singularity University to explain how with enough information computers are able to generate better legal opinions than experienced lawyers or investment reports than analysts.  So skilled professions such as law and investment management are not immune from the impact of the Fourth Industrial Revolution.

But despite these challenges the Fourth Industrial Revolution creates great opportunity for South Africa and particularly for entrepreneurs.  As commented at Davos by Matsi Modise, Managing Director for SIMODISA and past Allan Gray Orbis Foundation Jamboree speaker “When you think about the fourth industrial revolution it’s underpinned by technology and technology essentially underpins all the industries and that is a great opportunity for entrepreneurship.”

Ultimately the extent of the Fourth Industrial Revolution’s positive impact will be determined by our own agency and willingness to shape, for the good, the opportunities that it creates. In the end it will be determined not by machine technology but human values.

In the words of WEF founder, Klaus Schwab: ”It all comes down to people and values. We need to shape a future that works for all of us by putting people first and empowering them. In its most pessimistic, dehumanized form, the Fourth Industrial Revolution may indeed have the potential to “robotize” humanity and thus to deprive us of our heart and soul. But as a complement to the best parts of human nature—creativity, empathy, stewardship—it can also lift humanity into a new collective and moral consciousness based on a shared sense of destiny.”