Social Impact Bonds
The Bertha Centre for Social Innovation and Entrepreneurship has been instrumental in introducing Social Impact Bonds (SIBs) into the South African market. An Impact Bond is a contracting and financing mechanism where socially motivated investors pay for social services upfront and are repaid by outcomes funders if pre-agreed outcome targets are achieved.
This stands in contrast to traditional contracting methods where governments pay for a set of inputs or activities upfront that may or may not lead to intended outcomes. Impact Bonds and Outcomes Based contracts more broadly thus provide donors, foundations, financial organisations and governments with a way to introduce competitive efficiencies, normally associated with the private sector, into the public and non-profit realm, thereby ensuring social and environmental programmes deliver maximum impact.
There are approximately 55 SIBs in operation with hundreds more in various stages of development including a number in developing countries, which will predominantly be funded by large donor organisations. The Bertha Centre in partnership with the Western Cape Departments of Health and Social Development has recently been successful in securing outcomes funding for the first Impact Bond Fund to be launched in the developing world. The provincial government have allocated up to R25 million over three years to pay for outcomes directly associated with Early Childhood Development. More specifically the funding will be made available to three community based organisations working with pregnant women and children up to five years of age with outcomes including improved antenatal care, prevention of mother to child transmission of HIV, exclusive breast feeding, a reduction in growth stunting, and improved cognitive, language and motor development.
This project represents a culmination of work at national, provincial and local level to unlock public sector funding for outcomes based contracts. In 2014, the Centre published a National Treasury (NT) funded paper with Genesis Analytics and Social Finance, which investigated the suitability of Impact Bonds as a financing instrument for results-oriented business development services for small and medium sized enterprises in South Africa. The Government Technical Advisory Unit (GTAC) is currently reviewing a document addressing the legislative compliance of the instrument, which will be published in due course.
We have also published A Guide to Impact Bond Investing, which was developed in conjunction with Bowman Gilfillan. Our sector specific projects include working with the Department of Basic Education and specifically Fundza Lushaka on pre-service teacher training, the City of Cape Town on workforce development, the Department of Higher Education and Training on tertiary student support, the Jobs Fund on job creation in high impact SMEs, the Department of Health on prevention of HIV and the Department of Culture and Sport on after-school academic support. The Flanders Government, European Union, The Lego Foundation and The Innovation Edge have all contributed to this body of work.
For more information on our SIB’s work please see our publications and press coverage here:
- A Guide to Impact Bond Investing
- Pioneers Post: Designing Social Impact Bonds in developing countries
- Business Day: How Social Investment can bridge the gaps
- Stanford Social Innovation Review: Bringing Impact Bonds to the global southImpact Bonds Webinar: South African perspectives and progress
- CNBC Africa: Africa’s first Social Impact Bonds