15 April 2021
Today, global finance and capital markets research house, Intellidex, has launched a pioneering report, Social Impact Bonds (SIBs) in South Africa. This ground-breaking report—funded by the Standard Bank Tutuwa Community Foundation—provides a detailed assessment of the country’s first two SIBs that focused on early learning as well as youth employability, and investigates the potential of using SIBs as vehicles to drive social change.
The first two SIBs in South Africa were launched in 2018: Bonds4Jobs and the Impact Bond Innovation Fund (IBIF). Both provided quality services to vulnerable youth and children. They demonstrate effective innovations in areas that have long suffered from poor quality service. This was driven in both cases by the pay-for-results structure, with outcomes measured and the working capital provided by investors.
Social economy research manager at Intellidex, Dr Zoheb Khan, who is the lead researcher on this project, says: “We are happy to be at the forefront of this exciting new area of research. We hope that the findings lead to further growth of impact investing in South Africa and to more effective social programming to tackle the country’s major developmental challenges.”
The majority of South Africa’s preschool children do not receive quality early learning services. This delays progress during formal schooling and entrenches long-term inequalities. Perhaps relatedly, South Africa’s unemployment rate registered a record level in the fourth quarter of 2020, partly accelerated by the Covid-19 pandemic. As such, innovative thinking is required to best support South Africa’s human capital. One of the undeniable realities in the path to socioeconomic recovery is that investment in education and efforts to boost job creation are paramount.
While the state and the private sector spend billions of rands on education every year, the country’s education and employment outcomes remain extremely poor. SIBs could change this. SIBs are a way of financing social welfare services that pay for results. For example, when set numbers of unemployed youths find jobs, or when a certain number of children have achieved improvements in early learning school readiness tests, investors are repaid their capital, plus interest. This means investors get both a social and financial return on their investment.
Zanele Twala, CEO of the Standard Bank Tutuwa Community Foundation says, “We are thrilled to be part of this pioneering journey—and as leaders in impact investing—we stand ready to strategically explore progressive financing mechanisms. Doing so will certainly ensure improved outcomes in the sectors where we invest.”
Please see full report here.