Helping the poor to help themselves

PUBLISHED : Sunday, 25 March, 2007, 12:00am
UPDATED : Sunday, 25 March, 2007, 12:00am

For nearly 15 years, Danny Leung Hong-hei had plied his trade as a repairman across the housing estates of Kowloon. But, as the 20th century drew to a close and Hong Kong's construction boom turned to bust, sam hong work dried up completely.

Unemployed construction workers flooded the job market and Mr Leung was forced on to a benefit to support his wife and two young children. For five years, the family struggled to survive in their Shek Kip Mei apartment on HK$4,000 a month plus rent allowance.

'I tried to find a job by asking friends to refer me, from previous employers, from newspapers and the labour exchange,' he said. 'But it was very difficult and I had little chance of getting work. I had to do anything I could to earn a living and I tried to sell second-hand VCDs as a hawker in Ap Lui Street. I tried to buy them cheaply from one store and resell them for a small profit.'

But the hawking didn't really come to much and, as the family fell deeper into poverty, Mr Leung resorted to borrowing cash from money lenders at a high rate of interest. Today, he is still struggling to pay off his debts but at least has regular full-time work with Sam Hong Workers' Mutual Aid Engineering company.

The firm is one of more than 180 social enterprises that have sprung up over recent years as Hong Kong turns to new business initiatives in an effort to beat unemployment and tackle pressing social needs. They are turning out products ranging from wheelchairs to eco-friendly soap and providing community-oriented services such as home-help for the elderly, recycling, school tuck shops and pest-control.

The Commission on Poverty, led by Financial Secretary Henry Tang Ying-yen, is promoting social enterprises as a key plank of its drive to alleviate poverty and develop people's self-reliance.

The catch-all term - borrowed from Britain - covers a variety of organisational models, including co-operatives, welfare companies and charitable trusts, that provide jobs for unemployed people.

For a business to qualify as a social enterprise, it must have objectives that are primarily social and its surpluses have to be mainly reinvested either in the business or in the community, rather than siphoned off as profits for shareholders and owners.

It is an idea whose time appears to have come. Chief Executive Donald Tsang Yam-kuen has pledged in his re-election platform to personally take charge of support for social enterprises in districts where unemployment rates are at least 2 percentage points above average.

But getting a social enterprise off the ground can be a really difficult task, as non-governmental organisations - and even political parties - that have pioneered the new type of business organisation in Hong Kong can testify.

The sam hong company that is helping Mr Leung to get back on his feet was launched by the Association for Democracy and People's Livelihood (ADPL) after the Social Welfare Department commissioned the party to set up a training programme for repairmen.

Association legislator Frederick Fung Kin-kee said that about half the repairmen who went through the programme gained building work qualifications but most still could not find a job. So the party had decided to step in and help create the work opportunities they needed. It set up the company in 2002 and used its political network to tout for business for the repairmen.

A team of unemployed repairmen was taken on and they quickly built up quite a good client network in Sham Shui Po but by the second year the turnover was only HK$500,000.

'At the beginning the results were not very good,' said Mr Fung. 'There were some traditional problems that we were facing. In the sam hong tradition in Hong Kong, you only get the money three months after you complete the job. This is all very well if you are a big company with lots of money - but we didn't have the money. And it is not only the salaries. You have to buy the materials and cover the running costs of the office.

'We asked the government and we asked some corporate bodies for help but no one responded. So at the very beginning, we just borrowed the money - about HK$300,000 - from the ADPL.'

A high-profile launch had been arranged for the company and afterwards there was a rush of orders for repair work - but they were all small jobs commissioned by party members, friends and associates.

'The problem was that we only had one manager to check the projects - the price of the materials and so forth - and there were too many orders for one manager to deal with,' said Mr Fung. 'It was a terrible situation because, even though we had the orders coming in and we had the workers available, we had to turn some of the work down. If the party had not been there to help, we would not have made it.

'In the private sector we face competition from some of the most successful companies and successful workers. And the public sector is a key potential market for social enterprises. But we can't work for the government because of the restrictions.'

Mr Fung said that to get on to the housing department's bidding list, building companies had to put down a HK$1.5 million deposit, have at least five years' experience and have done business worth more than HK$10 million.

From the second year, the company began bidding for larger contracts that would bring more cash for less administration and it has now got on to the bidding lists of the Hong Kong Housing Society, Goodwell Property Management and the Tung Wah Group of Hospitals. As a result, annual turnover is up to HK$1.5 million.

NGO Stewards Ltd runs 17 social enterprises that have a combined turnover of HK$12 million and employ 83 people with disabilities and more than 70 others. They include a mushroom farm, school tuck shops, a hospital convenience store, a landscape gardening business and a pot plant nursery.

Social service executive secretary Philip Chan Shiu-kan said it had tried to launch more than 20 businesses, but some had been overwhelmed by start-up problems. Projects had to be devised correctly so they met a real need, covered their costs and did not conflict with existing social enterprise and small businesses in the area. This required a high level of professional and managerial skill. The sam hong company is now set on bold plans to double its workforce and treble turnover within three years after winning HK$103 million last year through the Enhancing Self Reliance through District Partnerships programme, which provides start-up grants for projects that alleviate poverty and help disadvantaged communities.

The programme is one of several initiatives that the government has launched to support social enterprises. A total of HK$150 million is being pumped over the next five years into its sister project Enhancing Employment of People with Disabilities through Small Enterprise.

The Commission on Poverty, which came up with the programmes, has also helped NGO umbrella organisation the Hong Kong Council for Social Service and several universities to jointly set up a training programme for social enterprise managers that is due to start in May.

And it is working with the Small and Medium-sized Enterprise Mentorship Association to develop a programme that will assign a volunteer business adviser to every social enterprise.

Changes to public procurement rules and the regulatory framework for social enterprises are also under way. In April last year, government departments got the go-ahead to give special consideration in open tenders to businesses employing disabled people or bring in restrictive tenders for such firms.

And a trial is now under way for a bidding process for government contracts that will take account of the number of people who have been retrained by the Employees Retraining Board that the tendering companies employ.

Stephen Cheung Yan-leung, chair professor of finance at City University and poverty commision member, said: 'This package of measures will provide the necessary support to enable more social enterprises to be successfully set up in Hong Kong.

'These special initiatives will provide a good opportunity for those who have been jobless for a long time to get back on their feet and go back into the job market.'

But social enterprise chiefs say tax incentives and interest-free loans are also needed to convert Mr Tsang's election promise into reality.

Earlier this month, leaders of more than 40 social enterprises attended the first of a series of consultative meetings being held by the social service council in the lead up to a government summit on the issue.

Christine Fang Meng-sang, chief executive of the social service council, said it supported the measures suggested at the meeting by representatives of enterprises including MentalCare Connect, Bright Service Company and Rehabilitation Alliance.

'It takes tax incentives or recognition to encourage businesses to contract out services to social enterprises, work in partnership with them or even invest in them,' she said.

'The government could encourage the business sector by giving tax incentives to businesses that offer contracts or give rent discounts to the social enterprises.

'It currently offers interest-free loans to small and medium-sized enterprises and they should also offer these loans to social enterprises. If the government really wants to make it work, these are some of the things that they could consider.'