Social Enterprise Hawker Centre: Are the Unfair Terms Justified?

First proposed in 2011 by the Hawker Centre Public Consultation Panel (HCPCP) (a committee tasked with providing new ideas on hawker centres – more below), Social Enterprise Hawker Centres (SEHCs) were intended to be an innovative solution for:

• Addressing problems of food affordability for consumers; nand

• Achieving certain social objectives such as;

  • Creating employment opportunities; and

  • Providing a springboard for potential aspirants looking to enter the hawker industry.

However, since the initial allegations of hawker exploitation and unfair contract terms in August 2018, the ongoing controversy of the legitimacy and effectiveness over SEHCs has invited much commentary from various communities and individuals.

Taking into account these opposing views, this article aims to be an objective examination of what social enterprises are and determining whether SEHCs were a case of good intentions gone wrong, or a misconstruing of what running a social enterprise actually entails.

What is a Social Enterprise?

Currently there is no one-size-fits-all label of what social enterprise is.

Countries and organisations globally differ in their definitions of social enterprise, where these may not only be ambiguous, but also contradictory in terms of the extents to which a social enterprise should create social value and capture financial value.

See the following definitions of social enterprise for example:

• In the United States: Market-based approaches to address social issues.

• In Europe: Organisations that trade for a social purpose, and these organisations can include those in the non-profit sector.

Whereas the Singapore Center for Social Enterprise (raiSE), which was set up to develop the local social enterprise sector, defines social enterprises as businesses that :

• Generate majority of revenue from the provision of goods and services;

• Articulate a clear business plan to achieve financial sustainability and profitability;

• Have clear social goals (e.g. support persons in need/at risk, such as low-income families/the disabled) to address social needs and service gaps (e.g. via employment opportunities or basic living needs) in an inclusive, non-discriminatory manner;

• Allocates clearly resources to fulfil social outcomes; and

• Have a clear intention to make social goals the core objective of the business.

Prior to the implementation of SEHCs, the HCPCP also broadly defined social enterprise as a “regular business that maximises profits to deliver social impact”, where the social enterprise could be either a non-profit or profit depending on the business model (see below).

Following this definition, the HCPCP, in its recommendation report on hawker centres, then defined a SEHC as a “registered non-profit organisation that tenants out hawker stalls to create viable livelihoods for small time individual hawkers, the low income and the less privileged locals to provide affordable food to the community.”

Do Social Enterprises Seek to Earn Profit?

A social enterprise can operate on either a not-for-profit or for-profit model. It is important to note that the difference is not in whether profits are generated or not, but rather to what ends profits are directed towards.

A not-for-profit social enterprise can generate profits, but will put its profits into initiatives that further fulfil its social mission. The profits cannot be distributed to the shareholders.

On the other hand, a for-profit social enterprise is primarily concerned with private financial gain and maximising the interests of shareholders.

Therefore, social enterprises – whether profit or non-profit – can and do seek to earn profit. This is as long as they maintain a sustainable business model that consistently provides benefits to persons they aim to assist.

Unlike conventional businesses, social enterprises may also eschew conventional profit measures such as the standard net income “bottom line” in favour of “double bottom line” that measures a social enterprise’s performance in not just financial value creation, but also social impact.

What is the Difference Between Social Enterprises and Non-Profit Organisations?

One difference is that social enterprises can choose between for-profit and not-for-profit business models, while non-profit organisations must adopt a not-for-profit model.

Also, while non-profit organisations like charities generate funds primarily by donations, social enterprises have to be largely funded by earned income.

Did the Hawkers Operating in SEHCs Enter into Unfair Contracts and/or was it a Case of Good Intentions Gone Wrong?

Concerns raised by the public have allegedly been addressed prior to the implementation of the SEHCs by the HCPCP.

Set up as an 18-member committee in November 2011, the HCPCP recommended a management model for SEHCs to achieve 3 primary objectives:

• Provide the community with ”maximum benefit”

• Create employment opportunities for lower-income and less privileged individuals

• Provide a platform for individuals who aspire to enter the food industry.

In the pursuit of the 3 primary goals listed above, the SEHCs encountered 2 key issues:

1. High rental and auxiliary costs

Under these SEHCs, it has been revealed that, excluding the SEHCs operated by Timbre Group, hawkers were obligated to pay excess fees and abide by harsh terms and conditions from the onset of operations.

SEHC operator OTHM (the social enterprise subsidiary of food court operator Kopitiam), in particular, mandated a $4,000 standard charge for running a stall at the Tampines SEHC and dictated a policy that demanded hawkers clock in between 16 to 20 hours a day to get 1 to 2 off-days per month.

Other unprecedented issues faced by hawkers included not having the autonomy to freely adjust food prices, being compelled to pay penalty fees for terminating their tenancies, as well as comparatively higher rentals and excess costs despite a low customer turnout in these SEHCs.

While conventional hawker models charge a flat rate that was easily understood by the hawkers, the social enterprise model levied many additional charges that ran expenses to more than $4,000 a month, severely constricting the hawkers’ already tight margins.

This, combined with the fact that hawkers were obligated to offer a few dishes at $3 or below at SEHCs that were seeing low footfall, created a situation where hawkers were working for less but paying for more.

Consequently, many hawkers have found themselves squeezed out of business due to poor profit margins. And in the case of SEHCs, the already weak profit margins of hawkers were apparently further eroded by additional costs for services such as tray returns, stall inspection, crockery washing and “coin changing”.

2. Being required to operate on a 24-hour basis

In addition to this management model, the HCPCP also made a recommendation to disallow the assignment of stalls by the National Environment Agency (NEA) to tenants, in favour of joint tenancy to increase hawker centre operating hours and improve “vibrancy” (in terms of the number of people consuming food at the SEHCS).

Hence, with the intention of improving the “vibrancy” of hawker centres, certain hawker operators such as Fei Siong Group operate a section of their SEHCs on a 24-hour basis.

It was revealed, however, that while hawkers were supposed to operate 24 hours a day, they were also entitled to only 2 off-days. They also faced a $250 penalty should they close without giving notice of this for approval by the hawker operator 1 week in advance.

Given the issues above, it is thus sufficiently evident that the contracts hawkers entered into with hawker operators were unfair.

Being Social Enterprises, are SEHCs Justified in their Unfair Terms and Treatment of Hawkers?

Social enterprises are not only subject to the same ethical codes of conduct as conventional enterprises, but also hold themselves accountable for the social impacts they are designed to achieve.

We have already established that SEHCs failed to positively affect hawkers (who are supposed to be the primary beneficiaries), and the terms of the contract are unfair.

Nonetheless, we should acknowledge the fact that the SEHC model was operated in pursuit of achieving the above-mentioned objectives and as stated by the Minister for the Environment and Water Resources Masagos Zulkifli, social enterprises need “time to establish themselves”. Meaning, the SEHC model is a work in progress and to get it right the first time, may be a challenge.

The unfair terms and treatment towards the hawkers are definitely not justified.

However, authorities such as the NEA have stepped in to take into serious consideration the public’s feedback. Changes have ever since been implemented to better adjust the SEHC model for its beneficiaries.

What has been done to improve the SEHC model?

Parliamentary hearings have since been held on the issue, and the NEA has issued a number of recommendations that will take effect from 1st January 2019 onwards. These recommendations include:

• Greater regulatory oversight of NEA over SEHCs to safeguard hawker’s well-being instead of the current hands-off approach

• The removal of terms that hawkers have found highly difficult to abide by, such as the premature termination clause that states that stallholders are liable to pay rent for the rest of their contract should they terminate their stall prior to the end date stipulated.

• SEHC operators may impose liquidated damages for regulatory or other breaches at no more than $50 for minor ones and $100 for major breaches.

• Standardisation of a 5-day week, with the option for hawkers to work more than 5 days a week/8 hours a day after prior consultation with NEA.

• Other undisclosed changes to termination notice periods, security deposits and legal fees.

Opening of a New SEHC: NTUC Enterprise Kopitiam

On December 2018, NTUC Enterprise which aims to address pressing social needs such as cooked food, announced its acquisition of Kopitiam.

Kopitiam has an estimated 80 outlets, 56 foodcourts, 21 coffee shops, 1 hawker centre and 2 centre kitchens.

NTUC Enterprise is also the holding entity and single largest shareholder of all NTUC Social Enterprises including NTUC Foodfare, which manages 14 foodcourts, 10 coffee shops and 9 hawker centres.

Both the Kopitiam and NTUC Foodfare is said to share the same purpose of making quality cooked food affordable and accessible to all.

However, many can’t help but raise concerns of rental fees, and terms imposed on vendors, especially upon the controversial SEHCs.

Nevertheless, the Kopitiam spokesman in a response said that, “separately from the acquisition, lease renewals and pricing are regularly reviewed as part of the ongoing business operations” and assured vendors that business will continue as usual.

NTUC Enterprise also added that, “Cost savings could be used to offer vendors better rental terms.”

Moreover, the merged entity would only operate 10 out of the 114 hawker centres in Singapore, which will be subject to regulatory oversight by the National Environment Agency (NEA) with regard to the management of the hawker centres and the terms imposed on food vendors.

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As hybrid organisations that lack clear definition, social enterprises present new opportunities and challenges not only to the social, but the broader legal and public sector as well.

While the recent SEHC debacle represents a setback for hawkers and the local social entrepreneurship scene, the lessons learnt from this incident may better inform future rules and regulations that govern the actions of local social enterprises.

It is hoped that through iterative tweaks to the SEHC model, both hawkers and the general public will benefit from good times and good food.

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