Ever since 2006, when Muhammad Yunus of Bangladesh won the Nobel Peace Prize for his pioneering work in using the principles of micro finance and micro credit to bring much-needed loans to people in the developing world, the idea of social entrepreneurship has received a wave of attention from different actors. The development sector welcomed this fresh approach as a promising alternative to traditional lending programs, which had been unsuccessful. Financial organizations are interested in satisfying the demands of new customers – particularly those with high net worth – by adding a social bottom line to their investment products.
For many in “Generation Y,” social entrepreneurship offers a path to a meaningful job in an agile and attractive industry. Yet, it still is controversial. Important questions remain: How are financial returns compatible with social returns? How effective is it? How should the responsibilities be decided between the private and public sectors?
As a student at Zeppelin University in Friedrichshafen, West Germany, I was part of a research project called the Humboldt Journey that launched in September 2012. Inspired by the famous German philosophers of the Enlightenment, the Humboldt brothers, we set out to research the implications of social entrepreneurship in South Africa. Horace said, “Life is always a matter of expectations,” but my research travels changed the way I perceive the world today.
I worked in partnership with the European Commission on a project for lifelong learning (“Light’in’Europe”), with a focus on social enterprises in Cape Town, South Africa, exploring the relationship between the degree to which they were embedded in the culture and their capacity for innovation. As a woman of French, Italian and German ancestry, I have always struggled with the idea of national or ethnic affiliation. I found a common denominator in the research I did in South Africa with that I had done in Ethiopia: the importance of community in innovation-driven approaches to complex problem-solving.
I had long viewed entrepreneurship with a romantic eye – seeing hard-working people who have a high risk tolerance, change the world before they turn 30, and retire early to a life of prosperity. However, the time I spent in Khayelitsha, Cape Town’s largest township, showed me a different reality. Entrepreneurs there were not so much driven by opportunity as they were by necessity. As Hubspace, a project of a company called Heart Capital that I worked for in South Africa, stated, “Entrepreneurship is often a means of survival in under-resourced communities where jobs are scarce. Driven by the desperate need to earn money, most entrepreneurs start their businesses without adequate funding, infrastructure, knowledge or experience. Limited access to these resources compromises their chances for success.” Numbers published by local researchers estimate that around one third of all start-ups in South Africa are necessity driven. This township entrepreneur scene I followed over months shared no common denominator with the hype-hipster-entrepreneurs of Berlin-Mitte juggling a latte while hustling from investment presentation to a “brainstorming session.”
The high number of “necessity entrepreneurs” may well be the result of history. During the last 370 years South Africa has experienced 350 years of colonialism, segregation, apartheid and economical suppression. The aftermath is still present. The country is pretty much separated into two worlds: a black world that has the Human Development Index (HDI) equivalent to that of Zimbabwe, and a white world in which the HDI rests comfortably close to that of Italy. The aftermath of Apartheid is a socio-economic polarization in which class and color almost perfectly correlate. The result is townships where people are separated by color and ethnicity, and there is a scarcity of economic knowledge and infrastructure.
Only during the last 20 years has it became possible for people in townships to get economically involved. But as the nation’s industries develop, they are demanding workers with more skills, and that favors the white population. Black unemployment is about 29 percent, while just 7 percent of whites are unemployed. As a result, entrepreneurship is sometimes the only chance for people in townships to get economically active.
Currently South Africa’s government is trying to increase black enterprise development through a Black Economic Empowerment program, and by increasing funding for education. The goal is to lower poverty and offset inequality, which is important for a country in transition, in order to keep it politically and economically stable. However, according to the latest Global Entrepreneurship Monitor, South Africa still lags behind in most of the key metrics concerning entrepreneurship.
Entrepreneurship, whether driven by necessity or opportunity, is perhaps the most effective way to tackle South Africa’s social problems starting at the bottom, and therefore it has to be supported. A good starting point might be to understand and explain why there is a lack of entrepreneurship in black communities, and intervene at the root of the problem to boost entrepreneurship in the townships around Cape Town.
“The world is a mess,” said Former Secretary of State Madeleine Albright at the end of her recent speech at the New Jersey Speaker Series. Even if I couldn't agree more, this realization puts a weight on one’s shoulder. It would be easier, at the end of the day, to relax on a beach and forget about the ongoing horrors of the world. But it won’t make them disappear.