Social Enterprise Attributes Influencing Access to Impact Funding in South Africa

Abstract

The South African government has made little to no progress in alleviating the social ills plaguing the country, making it fertile ground for social enterprises (SEs) to operate. Nevertheless, SEs face operational challenges, leading to scaling down operations or ceasing activities. These challenges include a lack of financial, human and infrastructure resources. The lack of financial resources is a significant driver of SE challenges, as they struggle to access funding due to their dual mission (social and financial), which does not align with traditional funding structures. SEs also lack knowledge about investment decision-making, which involves finding/attracting, obtaining and retaining funding from investors. At the same time, the investee selection criteria applied by individual impact investors are not standardised. The study sought to investigate the extent to which attributes of SEs influence access to impact funding. The attributes identified were i) an impactful social mission, ii) financial sustainability of the business, iii) innovativeness, iv) the background and experience of social entrepreneurs and v) systematic entrepreneurship practices. The study followed a cross-sectional, quantitative research design. A survey was conducted to collect data through a closed-ended questionnaire distributed online. The study’s sampling frame comprised 387 social entrepreneurship associations based in South Africa, which contributed 80 responses. The study found that the identified attributes of an SE had a positive relationship with access to funding. However, the relationships were statistically insignificant. Therefore, the influential relationship between the SE attributes and access to impact investing was inconclusive. A plausible explanation for this result is that the SEs under study and impact investors were misaligned regarding expectations. However, business size, which was controlled for the study, provided conclusive evidence that it had a positively influential relationship with access to impact funding.