Social EnterpriseStellenbosch University7 May 2013
Introduction Samsung Vodacom Medscheme Group Alexander Forbes Hewlett Packard Edgars Diners Club International Fir...
OverviewSocial Enterprise - Why Social?The Missing Middle - The Gap in Capital MarketsInvesting for Impact - The Rise o...
Wicked Problem: Poverty Nearly 50% of world’s population live on less than US$ 2 a day 3 Billion people, 3 000 000 000, ...
Solution: Aid? US$2.3 trillion in global aid since 1950 (William Easterley, World Bank) US$1 trillion in Aid to Africa, ...
Solution: ‘Social’ Enterprise? Economic growth is the fastest way to reduce poverty – China, Asian Tigers FDI is critica...
Topic # 1: Social EnterpriseWhat is a social enterprise?How do these differ from conventional enterprises?Transformatio...
Topic # 2: The Missing MiddleHow are social enterprises financed?Which sources of funding are available in South Africa?...
The Missing Middle*Cumulative investment in frontier market SMEs.**Estimated loans outstanding.***Foreign development assi...
Funding Sources Commercial Banks Development Banks Small Business Development Organisations Angel Investors Private I...
Funding Requirements Business Plan Financial Forecasts Track Record Management & Board Good Governance Current Finan...
Topic # 3: Investing for ImpactImpact Investing ContinuumCase Study: Silulo Ulutho TechnologiesConcept: Social Impact B...
Topic # 3: Investing for ImpactImpact Investing ContinuumCase Study: Silulo Ulutho TechnologiesConcept: Social Impact B...
Impact Investing Continuum (Oostlander)
Impact Investing Analysis (Markets for Good)
 Founded in Khayelitsha, Cape Townin 2004 by 4 local partners Computer training, internet access andbusiness support ser...
Financial Innovation: Social Impact BondsSource: From potential to action: Bringing social impact bonds to the US, McKinse...
Topic # 4: Relational EconomicsWhy ‘Relational’?
Relational Economics Commitment is the basis of lasting, loyal relationships The bond that is formed through building a ...
Loyalty EconomicsSource: Reichheld, 1996, 2001The Loyalty-based Cycle of Growth
The Purpose of Loyalty The ‘Right’ Contributions from the ‘Right’ Relationships How do you find the ‘Right’ Stakeholders...
Relational Economics:A Virtuous Value ChainEmployeeBusinessPartnerCustomerCostEfficiencies&InnovationCustomerIntelligenceS...
Relational Economics:Creating Shared Value CSR to CSV Value Creation not just Value Add Intrapreneurship Economic & so...
Topic # 5: The Source of InnovationThe Periodic Table of Elements (as per Prof. J. Kinghorn…)
The Periodic Table of Elements
Social Enterprise: University of Stellenbosch: 7 May 2013
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Social Enterprise: University of Stellenbosch: 7 May 2013

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Guest Lecture to Finance Honours class of Stellenbosch University on 7 May 2013, invited by Prof Suzette Viviers.

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Social Enterprise: University of Stellenbosch: 7 May 2013

  1. 1. Social EnterpriseStellenbosch University7 May 2013
  2. 2. Introduction Samsung Vodacom Medscheme Group Alexander Forbes Hewlett Packard Edgars Diners Club International FirstRand Old Mutual Group City of Cape Town University of Stellenbosch LoveLife NSPCA Guide Dogs Association SANParks Peace Parks Foundation GivenGain Medicins sans Frontiers WWF SA UNICEF Greenpeace Nelson Mandela Foundation
  3. 3. OverviewSocial Enterprise - Why Social?The Missing Middle - The Gap in Capital MarketsInvesting for Impact - The Rise of Investor ActivismRelational Economics - The Power in PeopleThe Source of Innovation - The Periodic Table of ElementsWhat role can finance play in the context of poverty and/or environmentalsustainability?Do you think massive salaries are morally justifiable in the world of financetoday? Why?In what way do you think relationships have a role to play in financialinnovation? Provide some real-world examples to illustrate points made.What role does governance play in a business and its stakeholder relationships?
  4. 4. Wicked Problem: Poverty Nearly 50% of world’s population live on less than US$ 2 a day 3 Billion people, 3 000 000 000, 3 thousand millions Less than R20 a day…R20! 10 million children die every year from preventable diseases AIDS kills 3 million per year 1 billion people lack access to sanitation 1 000 000 000 people are illiterate 25% of children in poor countries do not finish primary school 20% of the population own 77% of the world’s wealth That’s you and me Poorest 20% own 1.4% And these people are right outside, all around us…
  5. 5. Solution: Aid? US$2.3 trillion in global aid since 1950 (William Easterley, World Bank) US$1 trillion in Aid to Africa, 6 Marshall Plans equivalent toUS$5,000/person (Richard Dowden, Royal Africa Society)Aid and Income Growth in Africa(10-year moving average)0246810121416182019701973197619791982198519881991199419972000Aid/GNI(%)-1.0-0.50.00.51.01.52.02.5GrowthGDP/Capita(%)Aid/GNI Growth GDP/Capita
  6. 6. Solution: ‘Social’ Enterprise? Economic growth is the fastest way to reduce poverty – China, Asian Tigers FDI is critical to economic growth but requires political and economicstability, good governance – factors missing in poor countries ‘Social’ entrepreneurs needed to fill this gap Triple Bottom line – financial, social & environmental Sustainable profitable businesses Maximising financial and social returns Employment Empowerment Entrepreneurship training ESG (Environmental, Social, Governance)
  7. 7. Topic # 1: Social EnterpriseWhat is a social enterprise?How do these differ from conventional enterprises?Transformational Business Presentation
  8. 8. Topic # 2: The Missing MiddleHow are social enterprises financed?Which sources of funding are available in South Africa?What are the challenges that social entrepreneurs face when seeking funding?
  9. 9. The Missing Middle*Cumulative investment in frontier market SMEs.**Estimated loans outstanding.***Foreign development assistance, privatephilanthropy & remittances, per annum.Prosperity Ladder Concept: Legatum Global DevelopmentLow Cost CapitalNo Access to CapitalAbject PovertyPovertyMicro-EntrepreneursListedCompaniesGlobalEnterprises Rule of law Property rights Physical security Economic freedom Health & educationProsperityDriversProsperityDriversGrant Aid$325 B***Grant Aid$325 B***Public Capital$ TrillionsPublic Capital$ TrillionsMicrofinance$25 B**Microfinance$25 B** Limited Access to CapitalHigh Cost CapitalMedium Cost CapitalSMEs$10 B$10 BPrivateCapital* “TheMissingMiddle”
  10. 10. Funding Sources Commercial Banks Development Banks Small Business Development Organisations Angel Investors Private Investors Corporate Investors Institutional Investors Public Investors International Investors Network Friends Family10
  11. 11. Funding Requirements Business Plan Financial Forecasts Track Record Management & Board Good Governance Current Financials Creativity Communication Marketing Perseverance Sense of Humour Prayer
  12. 12. Topic # 3: Investing for ImpactImpact Investing ContinuumCase Study: Silulo Ulutho TechnologiesConcept: Social Impact Bonds
  13. 13. Topic # 3: Investing for ImpactImpact Investing ContinuumCase Study: Silulo Ulutho TechnologiesConcept: Social Impact Bonds
  14. 14. Impact Investing Continuum (Oostlander)
  15. 15. Impact Investing Analysis (Markets for Good)
  16. 16.  Founded in Khayelitsha, Cape Townin 2004 by 4 local partners Computer training, internet access andbusiness support services 1000’s of people introduced to ICTand trained per year Affordable, accessible servicesmeeting critical needs at a local level 18 Employees by 2009, 100+ in 2013 R1,8 million in turnover in 2009 up toover R 10 million to date From a car boot to over 20 trainingand internet centres in W & E CapeSilulo Ulutho Technologies
  17. 17. Financial Innovation: Social Impact BondsSource: From potential to action: Bringing social impact bonds to the US, McKinsey Company 2012
  18. 18. Topic # 4: Relational EconomicsWhy ‘Relational’?
  19. 19. Relational Economics Commitment is the basis of lasting, loyal relationships The bond that is formed through building a relationship with your stakeholders Should ultimately lead to advocacy1. Expectation2. Satisfaction after first purchase3. Behavioural loyalty4. Relationship forms5. Emotional loyalty6. Commitment7. AdvocacyNo emotional tieCustomer is satisfied unlesssomething better comes alongPositive interaction on both sidesBond becomes stable.Mutual problem solvingFind values in the brand and willing totake action on behalf of itSeven steps to loyalty“Loyalty Hurdle”“LoyaltyHurdle”
  20. 20. Loyalty EconomicsSource: Reichheld, 1996, 2001The Loyalty-based Cycle of Growth
  21. 21. The Purpose of Loyalty The ‘Right’ Contributions from the ‘Right’ Relationships How do you find the ‘Right’ Stakeholders and keep them?Source: Reichheld, 1996, 2001
  22. 22. Relational Economics:A Virtuous Value ChainEmployeeBusinessPartnerCustomerCostEfficiencies&InnovationCustomerIntelligenceSuperiorServiceFeedbackFulfilmentTurnoverTraining& IncentivesCompensation&OpportunitiesSuperiorProductivitySpend&ProfileSuperiorProductsLoyalty&ReferralValueAddedBenefitsQualityAssuranceInvestorCompetitorreturns/reinvestmentmarketing/mindshareCommunityResponsibilitiesEnvironmentalConcernsMarket & IndustryConditionsLegal & EthicalRegulationsSource: Habberton, 2005
  23. 23. Relational Economics:Creating Shared Value CSR to CSV Value Creation not just Value Add Intrapreneurship Economic & social returns Stakeholder relationship managementLinked to normative structures in SA including: King III Report on company reporting: “…how a company has, both positively or negatively, impactedon the economic life of the community in which it operated …” Principles for Responsible Investing & CRISA
  24. 24. Topic # 5: The Source of InnovationThe Periodic Table of Elements (as per Prof. J. Kinghorn…)
  25. 25. The Periodic Table of Elements

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