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Co-funded by the European Union

Tax Incentives? New Laws? Regulations? Policy Makers and Sector Specialists Explore Effective Ways to Support the Social Economy in ACP Countries

In Jamaica, the social economy has grown rapidly in the past decade[1]. However, Charmaine Brimm of the Planning Institute of Jamaica, a government agency which manages policies for the country’s sustainable development, says that the sector has developed in a ‘highly informal and fragmented way.’

According to Brimm, the lack of a legal definition of social enterprise has meant that a number of social enterprises has failed to qualify for favourable tax treatment. Social enterprises find it difficult to access credit and other sources of funding, and struggle to list on the recently established Jamaica Social Stock Exchange. And all of these barriers, says Brimm, have resulted in ‘the inability of social enterprise to scale’.

The experience of Jamaica is hardly unique. Indeed, across African, Caribbean and Pacific (ACP) regions, the number of social enterprises and other impact-led businesses is growing. They are helping to address social and environmental challenges while creating jobs for young people, women, and others who are disadvantaged in the labour markets. However, they are often held back from reaching their full potential by a lack of supportive policies, according to participants in a peer-to-peer exchange on approaches to drafting legislation and policies for the social economy, hosted earlier this year by the ICR Facility.

In Kenya, said one participant, social enterprises are ‘struggling with recognition, we have no legal recognition, even though policies exist inadvertently.’ In Sudan, said another speaker, ‘social enterprises are struggling. It’s a movement, but we have no policy to support this.’ In Nigeria, said a third participant, ‘the definition of social enterprise is vague, the status quo is people are running them without the right form of registration, and there is no middle space for them to operate, either non-profit or for-profit.’

Sharing experiences, forging connections and building support

These peer-to-peer learning sessions brought together government officials, policymakers, chambers of commerce, think tanks, social enterprise networks and SME associations. Twenty participants attended these sessions, signing up from Kenya, Malawi, Tanzania, Ghana, Jamaica, Nigeria, Ethiopia, Botswana, Sudan and Zambia. These were representatives from different parts of government – from National Planning departments to cautious tax officials, those passionate about social enterprise and those more sceptical.

The sessions provided a chance for participants to share experiences and learning and support each other along the way. They were held as part of the ICR Facility’s ongoing support for stakeholders in ACP countries to draft business environment reforms which can support more sustainable business models, more conscious of their impact on people and planet. It is also in line with the EU’S SOCIAL ECONOMY ACTION PLAN. This agenda is only growing in importance amidst global challenges such as the Covid-19 pandemic, the escalating climate crisis and massive inequality.

The remote use of digital technology, which can sometime be so tiring, on this occasion enabled us to come together from thousands of miles apart and also make new connections in a way that was rarely possible before the pandemic.

The sessions were built upon the principles of peer exchange, learning from others, and sharing experience. They covered a range of themes, all around the role which government can play to support the social economy through shaping markets, establishing rules and standards, building infrastructure and creating an enabling environment.

Why should governments support the social economy? What roles can they play?

Together, we explored motives for governments to support the social economy – how the creation of an enabling business environment with a social and environmental purpose contributes to more sustainable development and the delivery of national priorities. We covered social enterprise definitions – perhaps inevitably – but also the crucial but confusing distinction between legal form and legal status. All businesses can choose from a menu of legal forms when they set up, but in some jurisdictions they can additionally have their status  as a social enterprise formally recognised.  We explored the advantages and disadvantages of various legal forms, of experiments with new ones, adjustments to existing ones, , registration, accreditation and kitemark schemes.

We reviewed the process of developing a LEGAL STATUS FOR SOCIAL ENTERPRISE IN JAMAICA, which was led by the Planning Institute of Jamaica and the country’s Ministry of Industry, Investment and Commerce with technical assistance from the ICR Facility in 2021.  This would permit any entity – regardless of its legal form – with a defined social mission and commitment to reinvest a significant portion of its profits into that mission to seek social enterprise status. Additionally, said Charmaine Brimm of the Planning Institute of Jamaica in an INTERVIEW WITH PIONEERS POST, the new law will introduce a public register of social enterprises and lead to the consideration of tax exemptions or other financial incentives to spur their growth and development. (This was also presented in this LIVE EVENT held by the ICR Facility).

Building on what works

Through this collective experience, we uncovered some new lessons. The Jamaican example reminded us that while some European countries are subject to EU State Aid law which influences national governments’ ability to offer subsidies, elsewhere it might be arrangements with the International Monetary Fund that limit capacity to introduce certain policies, such as new tax breaks. We saw the benefits of exploring examples from beyond the frame of social enterprise. For example, procurement policies in South Africa aimed at supporting Black-led enterprises can be instructive when considering policies around procurement for the social economy. We realised we sometimes lack knowledge of the impact of various policy innovations

The Peer-to-Peer exchange was an important networking and learning opportunity for those involved and the organisations they represent. There was a shared commitment to continue to work together to drive reform towards sustainable development, whether under the banner of social enterprise, creative and inclusive economies or impact investment, and we will continue to share experience around the world.

[1] A NATIONAL SURVEY conducted in 2018 indicated that 62% of the 126 surveyed social enterprises were founded in the preceding seven years (2011-2017), with most seeking to create employment, address financial exclusion, provide training opportunities and support vulnerable young people.

Download the summary of our INNOVATIVE FINANCE RESOURCES

The ICR Facility supported the production of this publication. It is co-funded by the European Union (EU), the Organisation of African, Caribbean and Pacific States (OACPS) under the 11th European Development Fund (EDF), the German Federal Ministry for Economic Cooperation and Development (BMZ) and the British Council. The ICR Facility is implemented by GIZ, the British Council, Expertise France, and SNV. The contents of the publication are the sole responsibility of the British Council and do not necessarily reflect the views of the EU, OACPS, BMZ or of the implementing partners.

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