Topic: The Social Economy


The social economy or 'solidarity' economy, as it is also referred to particularly in Latin America, is rapidly gaining in visibility at the international, national and local levels around the world. Social economy - also known as 'non-profit' or 'third sector'-organisations have grown in number and relevance, contributing to employment, social inclusion, democratic participation and community building.

Academics, policy-makers, politicians and civil society organisation argue that the recent rise of the social economy are a direct result of the global economic recession and financial crisis contributing to a worldwide increased interest in alternative business models, seeking to combine both business and social goals. However, it can also be argued that the inability of the state to meet the needs of its citizens has created a motivation to come up with entrepreneurial solutions to close social gaps.


What is the Social Economy?

An economy consists of four ‘sub-economies’ or sectors:

  • The private sector, privately-owned and profit-oriented;
  • The public sector, state-owned and to a large extent welfare-oriented;
  • The social economy, usually referred to as the ‘third’ economy that comprises of three sub-sectors; the community sector, the voluntary sector and the social enterprise sector;
  • The informal economy, characterised by enterprises that are not legally regulated and therefore outside the formal economy.

The social economy in that sense includes community and voluntary organisations and businesses which work for the greater good of local communities and marginalised groups, led and managed by people in the locality.

The community sector

The community sector includes organisations that are active on a local or community level, usually small, modestly funded and largely dependent on voluntary, rather than paid, effort. This includes neighborhood watches, small community associations, civic societies, small support groups, etc.

The voluntary sector

Voluntary sector organisations are usually formal (as they have a constitution); independent from government and self-governing; nonprofit-oriented and operate with a meaningful degree of volunteer involvement. Examples include housing associations, large charities, large community associations, national campaign organisations, etc.

The social enterprise sector

The social enterprises sector includes organisations which "are businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners". Examples include co-operatives, building societies, development trusts and credit unions.

Social economy organisations have many advantages and common characteristics compared to other organisations. They are:

  • Close to their customers and clients and therefore know and respond quickly to their needs.
  • Able to provide services to groups of people that are hard to reach.
  • Able to attract charitable donations (money, labour and contributions in kind).
  • Well placed to make experience based contributions to public debate.
  • An efficient way of building social capital.
  • Values and principles of the social economy.

The social economy promotes:

  • Economic activities with social goals;
  • Social and economic benefits for individuals and communities;
  • Co-operation and solidarity;
  • Mutuality;
  • Employee and community ownership and control of local economic resources;
  • Equal opportunities;
  • Social and economic inclusion;
  • Good employment practices;
  • Sustainable development.

The social economy usually develops because of a need to find new and innovative solutions to issues (whether they be socially, economically or environmentally based) and to satisfy the needs of members and users which have been ignored or inadequately fulfilled by the private or public sectors.

By using solutions to achieve not-for-profit aims, it is generally believed that the social economy has a distinct and valuable role to play in helping create a strong, sustainable, prosperous and inclusive society.

The Social Enterprise Compass

Defining the limits of the social economy sector is made especially difficult by the ‘moving sands’ of the political and economic context. Consequently, at any particular point in time organisations may be 'partly in, partly out' or moving within the various sub-sectors of the social economy. There is no single right or wrong definition of the social economy. Many commentators and reports have consciously avoided trying to introduce a tight definition for fear of causing more problems than they solve. One solution can be to locate organisations in the Social Enterprise Compass. The Social Enterprise Compass locates enterprises and organisations in the field between the business private sector and the public sector.

Key Issues

The Social Economy in South Africa

Although there are no robust figures on the size and value of the social economy in South Africa, the government has recognised its importance for economic growth and employment generation. The National Growth Path (NGP) sets the potential employment target of the sector at 260 000 new jobs by 2020, with comprehensive government support for social economy initiatives. 

Some of the core actions by government include the development of a strategy to support social economy organisations amongst others in obtaining marketing, bookkeeping, technological and financial services and training, and in developing linkages within the social economy to encourage learning and mutual support; work with union and community investment companies to develop a Charter with commitments to job creation; encourage state procurement from and service delivery through organisations in the social economy.

Practical Knowledge

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Theoretical Knowledge

Title & Detailssort descending User Ranking Popularity
A better future for young people: What cooperatives can offer
Author(s): ILO
Year: 2012
Format: Overview
Average: 5 (4 votes)
Job Creation through the Social Economy and Social Entrepreneurship
Author(s): OECD
Year: 2013
Format: Report
Average: 3 (4 votes)
The Social Economy: A Global Alternative
Author(s): Thierry Jeantet, Jean-Philippe Poulnot
Year: 2007
Format: Article
No votes yet