Business with Missions

Lack of Appropriate Policy Thwarts the Development of Social Enterprises

In many developing countries like Ethiopia, there are countless social problems to be addressed. These causes used to attract major sponsorships from donors in Europe, North America, Far East Asia and Australia. However, with the Syrian refugee crises taking the major global agenda, and Ethiopia having put in place a proclamation which affects the financial resources of civil societies in 2008, donations for civil society organizations is declining. This has pushed CSOs to look for alternative revenue generation schemes such as engaging in social businesses and looking for creative fundraising strategies to fill the funding gap. EBR’s Hiwot Salelew explores the issue.

Nearly two decades ago, during the catastrophic war that broke out between Ethiopia and Eritrea, Agegnew Worku and his two siblings lost their father to the war. The loss was particularly hard for the three children and their mother, who was a house wife at the time. Worku was the sole bread winner of the household. This led to the tragic disintegration of the family and Agegnew ended up on the streets of Hawassa, 275km south of Addis Ababa with four of his friends.
Fast forward almost twenty years and after three miserable years on the streets, Agegnew had to endure all the elements including overcoming an incessant drug addiction to become a successful entrepreneur and now goes to university. He and his friends received life skills training from a local social enterprise, Enibra Eras Agez Yenatoch Temeret. The Association, working in collaboration with Jerusalem Children & Community Development Organization (JCCDO), also arranged a loan for Agegnew and his friends to start a small Stationary shop that provides services such as printing, laminating and photocopying in Wolayita Sodo, a nearby town to Hawassa.
JCCDO, a community based development organization that has an active fundraising wing as one of the nearly 55,000 social enterprises according to a 2017 survey conducted by the British Council. The same study underlines that social enterprises in Ethiopia are engaged in an array of self-resilient financing schemes to support social causes including manufacturing, services, education and health. Such enterprises aim at improving and changing the lives of community’s most vulnerable youths, children and women through fostering an independent and sustained means of income for beneficiaries. They provide employment opportunities, especially for women who play a more dominant role compared to those who are engaged in mainstream businesses that are conventionally understood as business ventures where profit making is the major goal of the endeavor.
JCCDO has established a training facility – Opportunity for Change Training Center –with a mission to further its community development programmes, while ensuring financial independence by generating its own revenue.
Contextually defining social enterprises has proved to be a challenge. It emerged as a result of draining funds from conventional sources such as donations to support social causes, and can be understood as “an organization that implements commercial strategies to further its activities in human and environmental well-being, using business methods to achieve a positive and sustained social impact through engagement in production and/or selling of goods and services,” Helina Abrham, Senior Business Development Officer at Jerusalem explained to EBR.
In addition, the programme called Support for Social Enterprise in East Africa, a two-year project financed by the European Union and implemented by the British Council in Ethiopia and Kenya defines social enterprises as “businesses that tackle social and environmental problems [through the] creation of jobs and generation of income like other businesses, but instead of channeling their profits to owners they reinvest them to support their social mission.”
Finding a contextual definition is the least of the problems for social enterprises in Ethiopia. According to the British Council’s survey, lack of an enabling policy and regulatory framework, technical capacity, access to business development support services and finance are among factors that are grappling social enterprises.
The Charities & Societies Proclamation No. 621/2009 leaves the door open for non-governmental organizations (NGO’s) to engage in income generating activities to support their social missions. “The Charities and Societies Agency has set a guideline for NGOs to engage in social businesses in line with the proclamation.” Mesfin Taddesse, director of communication affairs at the Agency told EBR. “The guideline is aimed at ensuring that non-profit organizations are to stick to their founding principles and be able to generate income to further social causes in a sustainable manner.” he added. However, several civil society organizations such as JCCDO highlight the lack of favorable environment and policy framework for social enterprises.
Income generation has become increasingly important in substituting the wearing external donations. “If we establish income generating activities locally, we can easily support those in need. We should not depend on external funds. The trend indicates a sharp decline in donations,” Masresha Kibret, Hawassa branch manager for Jerusalem said. Though the proclamation allows social enterprises to make money which is directed to support their cause, it makes no distinction between conventional businesses, depriving them of badly needed incentives.
Lack of financing and dependence on external donors is exactly what is worrying Sisay Abate, project coordinator for ‘Yeset Mehaber’ , an initiative of local women in Addis Ababa Yeka District, Woreda 8. Two hundred children from several elementary schools across the woreda receive support in kind, including materials, uniforms and food. With the phasing out of the project called Yekokeb Birhan in July 2017, a partner that has been supporting this informal initiative, the activities are now facing the abrupt cancellation of their assistance.
“We’ve been struggling these past few years as the projects supervised by NGO’s have phased out one after the other,” Sisay commented. This is a case in point for the critical need to break free from donations and generate income through social enterprises that can sustain finance for a given social cause. Sisay’s association organized a crowd funding event to gather donation from the community, but it garnered little result.
On the contrary, JCCDO has established various income generating schemes that have proved instrumental in sustaining its core activities of empowering communities. A sustainable income generating capability has made JCCDO continue its interventions that “empower communities, provide trainings and essential services benefiting the most vulnerable in a society such as, access to education, clothing, health care, sanitation, livelihood promotion and community based care and support for orphans and adolescents.” Helina stated.
Insiders in the sector say that the difference between social enterprises in successfully securing financial support from different sources and sustaining their services lies on their experience in the area and the relationship they built with donors. Some even have facilities and management system established before hand and they are leveraging that opportunity.
A study by Social Enterprise UK found that “in a time of public sector austerity and globally networked markets, social enterprises are providing real answer to the significant social and environmental problems.” The study highlights the role of social enterprises in the economy, in terms of making profits and making difference in several other key indicators. The study concluded that the enterprises “outperformed their mainstream SME counterparts in nearly every area of business.”
The history of social enterprises in UK is relatively long and the policy frameworks they are governed by are quite different than the context in Ethiopia. The term social enterprise in UK covers wide range of things with the three key common features; clear social purpose, generate significant proportion of their income from trading and reinvest majority of their profits in the social mission.
Helina sheds some light on the paradox by emphasizing on the difference in the strength of the enterprises that emanate from their sense of community. “Achieving sustainable development and transforming the community at the grassroots level,” she argues, are boosting the presence of such enterprises.
Despite the absence of appropriate policy framework and clearly outlined incentives, such as tax holidays, financial accessibility and free or subsidized land and capital good supply, social businesses are actually growing in Ethiopia, according to a survey conducted by the British Council. The role of young entrepreneurs, according to the survey, is significant in creating and leading these enterprises.
Reach for Change, an international NGO working in Ethiopia since April, 2015, provided leadership training for Ayatam Simeneh, a social entrepreneur who is finalizing a product launch which will not only address a social cause, but also generate income. He produces soap and plans to retail the product with half the price of similar products.
Despite the many challenges social enterprises in Ethiopia continue to face, they hold a great promise in elevating people out of poverty and fundamentally altering the source of financing community-based aid and development activities. That’s why Policy makers should pay attention to fill the policy gap and incentivize social businesses to harness their full potential and maximize their multi faceted positive outcomes. The award-winning founder of Tebita Ambulance Kibret Abebe, whose services are credited to have reached to more than forty thousand people over a course of nine years, believes that the “government should nurture social entrepreneurs.”
People like Tsegereda Sisay, an 18 year old former street child from Hawassa owe their current success in life to social enterprises like Enibra and JCCDO that have helped them turn their lives around. Tsegereda faced unimaginable hardships when her father passed away, leaving her mother unable to look after the child. After spending a year on the streets, she received training on hair dressing and now earns a living, helps her mother and looks to a bright future. EBR