The

 Social  Enterprise  and  the  Developmental  State  (1):  

the emergence of the Social Enterprise

…….mobilising  capital  for  transformative  social  impact……  

 
The   increasing   dominance   of   private   capital   in   the   past   25   years   has   not   had   the   anticipated  
impact   on   poverty   alleviation.     One   of   the   consequences   of   the   prevailing   ‘Washington  
Consensus’,   is   the   mismatch   between   needs   and   investment   in   social   infrastructure.     Not   having  
benefitted   from   the   postWW2   Marshall   Plan-­‐type   social   spending   bonanza,   this   discrepancy   is  
greatest   in   newly   emerging   economies.     The   resulting   widening   of   socio-­‐economic   disparities  
represent   the   most   persistent   danger   to   overall   socio-­‐political   cohesion,   particularly   in   the  
context  of  South  Africa’s  still  fragile  political  dispensation.    This  leads  to  an  increase  in  both  the  
perceived   and   real   risks   of   doing   business   in   jurisdictions   such   as   SA.     Indeed,   unless   we   can  
devise   and   promptly   implement   approaches   that   reverse   these   increasingly   embedded   social  
dysfunctions,   the   risk   related   returns   to   traditional   investors   will   be   significantly   undermined.    
Thus   it   is   in   the   interest   of   all,   especially   traditional   capital,   to   support   solutions   that   promise  
sustainable,  even  unconventional,  social  solutions.      
 
And  while  neo-­‐liberal  recipes  are  increasingly  critiqued,  the  resurgent  left  has  mostly  resorted  to  
repackagings   of   historically   low   impact   formulations   such   as,   hybrid   PPPs,   selective   re-­‐
nationalisations  to  cite  a  few.    Based  on  their  historical  track  records,  these  approaches  are  not  
only  unlikely  to  bridge  the  growing  chasm,  but  will  not  excite  the  owners/managers  of  capital.    
On   the   other   hand,   over   the   past   two   decades   there   has   been   a   rising   flood   of   non-­‐sovereign  
capital   into   the   developmental   space,   currently   USD10-­‐20bn   per   annum   by   some   estimates.    
Increasingly  these  flows  are  directed  by  individuals  such  as  Gates  who  bring  a  recent  history  of  
operational   management   of   private   companies.     Thus,   not   only   do   the   challenges   require  
sustainable   socially-­‐biased   models,   but   capital   providers   are   more   likely   to   respond   to  
approaches  that  credibly  promise  longterm,  replicable  solutions.      
 
It  is  in  this  context  that  a  space,  Social  Entrepreneurialism,  is  coalescing  to  foster  and  replicate  
high   Social   Value   Add   enterprises   –   those   whose   raison   d’etre   is   provide   social   goods   and  
services   to   the   poor.     The   distinguishing   element   of   this   economic   genre   is   the   primacy   of   its  
social  outcomes  in  the  context  of  operational  effectiveness,  financially  sustainability  and  entity  
replicability.     This   contrasts   the   incidental   accrual   of   CSI-­‐type   social   benefits   of   traditional  
corporates.     NGOs   and   Civil   Society   entities   generally   have   a   primary   focus   on   social   value  
outcomes   but   either   don’t,   or   are   unable   to,   place   this   in   a   framework   of   sustainability   and  
replicability.    As  the  State  is   increasingly  proscribed  by  policy  choice  or   conditional  relationships  
from  providing  key  aspects  of  social  infrastructure  necessary  to  underpin  stable  socio-­‐economic  
development   and   the   markets   are   not   persuaded   by   the   lower   financial   returns   available,   Social  
Entrepreneurship   represents   a   complementary   and   necessary   economic   formulation,   in   the  
arsenal   of   the   modern   developmental   state.     This   device   has   required   a   new   resource  
underpinning  -­‐  it  is  into  this  space  that  Social  Private  Equity  has  emerged.  
 

SPESA Fund Managers

Kojo M Parris
12/13/2010