Turning caring into cash

Two GSB graduates turned social entrepreneurs say if you want to make a difference through business you need to stop looking for broken things to fix and instead find what is working and build on its strengths to create social benefit.

Social enterprise Lakheni has been turning heads at home and internationally. Within six months of registration, the social enterprise – a bulk buying grocery shopping service for parents and crèches in underprivileged areas – was awarded third prize in the SAB Foundation Innovation Awards, came third in the Global Social Venture Competition and won R1 million in funding from Alphacode and Bank of America Merrill Lynch.

Very few start-ups in South Africa can claim this kind of early success. The country is well known for low entrepreneurial activity with the SABC reporting in May last year that 86% of small businesses fail in their first year. According to the latest Global Entrepreneurship Monitor (GEM), entrepreneurial activity in SA is the lowest in sub- Saharan Africa.

So how is Lakheni bucking this trend? To begin with – it’s a great idea. Cash-strapped parents in underprivileged areas are offered grocery items at a discounted rate and these are delivered to their local crèches, which make a small commission off each hamper sold. Families also save on the travelling costs to hypermarkets each month.

Co-founders, Nokwethu Khojane and Lauren Drake, who met while doing their MBA at the GSB, said that they hit on the idea when they noticed that households and crèches shop for the same items every month.

“These are not hand-outs; this is not charity,” says Drake. “This is a for-profit organisation with very real benefits as well as a share option in the business for crèches. The name, Lakheni, is a Nguni term that can loosely be translated into ‘let’s build.’

It may run like a well-oiled machine now, but it took the two entrepreneurs a while to come up with the right concept. Their initial thinking was around improving early childhood development in underprivileged areas. But once they started visiting pre-schools and talking to principals, they realised that many of these schools were actually working quite well. They saw that they would be able to make a bigger impact by finding indirect ways to support financially struggling parents as well as the crèches themselves.

With the help of Warren Nilsson from the Social Innovation Lab at the Bertha Centre for Social Innovation and Entrepreneurship, Khojane and Drake refined their business ideas. Nilsson, who has spent years researching why some social ventures work and others fail, helped guide them by getting them to dig deeper to find the real social purpose for their business idea.

For a social innovation enterprise to succeed, says Nilsson, it needs more than a good business plan. It also has to go beyond the philanthropic urge to help people. Instead of seeing themselves as a tool or an instrument of change, businesses need to see themselves as part of the world that needs to change.

A perfect example of this approach can be found in South American water filter company, Ecofiltro. Despite noble intentions to provide the rural poor in Guatemala with clean water at no cost, people were not using the filter as intended and still drank contaminated water, falling ill.

Founder and CEO, Philip Wilson then made a critical decision: not to look at the rural poor as objects of pity but rather as potential clients. He re-packaged the product, worked out a competitive price for each unit and came up with an instalment payment programme that would allow him a small profit margin.

This time round, the product worked. Ecofiltro is now a profitable organisation, reaching hundreds of thousands of customers. Wilson says social entrepreneurs need to ask more questions, go into the field and exhaust every single angle of what they want to do. “Ask what their needs are,” he says.

Khojane agrees. “What was critical for us was looking into a system, not to fix what we thought to be broken, but to find what was working and build on its strengths.” Drake adds that they didn’t come to the crèches with concrete ideas about what to do, instead they listened to what parents and principals really needed.

Starting out this way helps the business becomes viable in the long term, Nilsson says. “The biggest challenge the world is facing today is not how to create change, but how to sustain it,” he says.

For more information on Lakheni visit: www.lakheni.co.za.