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. 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 environmental
sustainability?
Do you think massive salaries are morally justifiable in the world of finance
today? Why?
In what way do you think relationships have a role to play in financial
innovation? Provide some real-world examples to illustrate points made.
What role does governance play in a business and its stakeholder relationships?
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. 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 to
US$5,000/person (Richard Dowden, Royal Africa Society)
Aid and Income Growth in Africa
(10-year moving average)
0
2
4
6
8
10
12
14
16
18
20
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
Aid/GNI(%)
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
GrowthGDP/Capita(%)
Aid/GNI Growth GDP/Capita
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 economic
stability, 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. Topic # 1: Social Enterprise
What is a social enterprise?
How do these differ from conventional enterprises?
Transformational Business Presentation
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. The Missing Middle
*Cumulative investment in frontier market SMEs.
**Estimated loans outstanding.
***Foreign development assistance, private
philanthropy & remittances, per annum.
Prosperity Ladder Concept: Legatum Global Development
Low Cost Capital
No Access to Capital
Abject Poverty
Poverty
Micro-
Entrepreneurs
Listed
Companies
Global
Enterprises
Rule of law
Property rights
Physical security
Economic freedom
Health & education
ProsperityDriversProsperityDrivers
Grant Aid
$325 B***
Grant Aid
$325 B***
Public Capital
$ Trillions
Public Capital
$ Trillions
Microfinance
$25 B**
Microfinance
$25 B** Limited Access to Capital
High Cost Capital
Medium Cost Capital
SMEs$10 B$10 B
Private
Capital* “TheMissingMiddle”
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
Family
10
11. Funding Requirements
Business Plan
Financial Forecasts
Track Record
Management & Board
Good Governance
Current Financials
Creativity
Communication
Marketing
Perseverance
Sense of Humour
Prayer
12. Topic # 3: Investing for Impact
Impact Investing Continuum
Case Study: Silulo Ulutho Technologies
Concept: Social Impact Bonds
13. Topic # 3: Investing for Impact
Impact Investing Continuum
Case Study: Silulo Ulutho Technologies
Concept: Social Impact Bonds
16. Founded in Khayelitsha, Cape Town
in 2004 by 4 local partners
Computer training, internet access and
business support services
1000’s of people introduced to ICT
and trained per year
Affordable, accessible services
meeting critical needs at a local level
18 Employees by 2009, 100+ in 2013
R1,8 million in turnover in 2009 up to
over R 10 million to date
From a car boot to over 20 training
and internet centres in W & E Cape
Silulo Ulutho Technologies
17. Financial Innovation: Social Impact Bonds
Source: From potential to action: Bringing social impact bonds to the US, McKinsey Company 2012
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 advocacy
1. Expectation
2. Satisfaction after first purchase
3. Behavioural loyalty
4. Relationship forms
5. Emotional loyalty
6. Commitment
7. Advocacy
No emotional tie
Customer is satisfied unless
something better comes along
Positive interaction on both sides
Bond becomes stable.
Mutual problem solving
Find values in the brand and willing to
take action on behalf of it
Seven steps to loyalty
“Loyalty Hurdle”
“Loyalty
Hurdle”
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. Relational Economics:
A Virtuous Value Chain
Employee
Business
Partner
Customer
CostEfficiencies
&
Innovation
Custom
er
Intelligence
Superior
Service
Feedback
Fulfilment
Turnover
Training
& Incentives
Com
pensation
&
Opportunities
Superior
Productivity
Spend&
ProfileSuperior
Products
Loyalty&
Referral
ValueAdded
Benefits
Quality
Assurance
Investor
Competitor
returns/reinvestment
marketing/mindshare
Community
Responsibilities
Environmental
Concerns
Market & Industry
Conditions
Legal & Ethical
Regulations
Source: Habberton, 2005
23. Relational Economics:
Creating Shared Value
CSR to CSV
Value Creation not just Value Add
Intrapreneurship
Economic & social returns
Stakeholder relationship management
Linked to normative structures in SA including:
King III Report on company reporting:
“…how a company has, both positively or negatively, impacted
on the economic life of the community in which it operated …”
Principles for Responsible Investing & CRISA
24. Topic # 5: The Source of Innovation
The Periodic Table of Elements (as per Prof. J. Kinghorn…)