South Africa Impact Bond Innovation Fund

Over a quarter of children under five in South Africa are nutritionally stunted (height 2 standard deviations below the international average) which has a direct effect on cognitive development. Coupled with that, only about half of population of 3-4 year-old children are participating in any early learning programme, approximately half of which have demonstrated quality in terms of school readiness. 

Thus, less than quarter of children can read for meaning by the end of Grade 4. An audit of early childhood development (ECD) access for children between the ages 3 and 5 years by both the national and Western Cape Provincial government in 2013/2014 showed that between 60 and 70% of these children do not attend registered ECD centres. This means that they cannot take advantage of the means tested stipend that is offered by government as one of the only forms of state support to this age group in early learning. 

Currently the subsidy covers 20 hours per week per eligible child between the ages of 2 and 5 years with ratio of staff 1:12 for children 2-3 years and 1:20 for children 3-4.5 years. A much smaller percentage of the overall budget is spent on home and community-based programmes as the monitoring of these programmes is limited and thus effectiveness is not known. Most of these services are delivered by NGOs, whilst the reception school year has moved into primary schooling under the direction of the Department of Basic Education.

ECD programmes have been found to improve children’s cognitive, social, psychological readiness for school and are associated with long term economic productivity and relational stability. Along with human resources, finance and robust M&E systems, large scale programmes are needed to support early learning and nutrition for this age group to give them the best opportunity possible to thrive at school. 

A $2.5 billion funding gap has been identified if South Africa is to achieve universal coverage by 2030, requiring both public and private resources to close; this would see an additional 1.3 million children receiving ECD services. Community-based programmes can be used to close the gap on both human resourcing and coverage as ECD centres scale up. And if home and community-based programmes demonstrate sufficient quality, a case can be made for significant government funding to be spent on these models of delivery. 

The evidence thus far indicates that support is required to improve the quality of this low-cost model of early learning. The Foundation for Community Work (FCW) is a development and resource ECD organisation that promotes the holistic development of children within the context of their families and communities, through innovative, integrated, and sustainable interventions and programmes. 

The Family in Focus Programme is a home visitation programme where community caregivers work with parents or caregivers and children in the home to deliver ECD programming focusing on the needs of pre-school aged children.  

The Intellidex final evaluation report (2021) covered the performance of this project up to October 2020. The Innovation Fund impact bond delivered above market returns during this period, with investors earning, on average, annual returns of 14% (the maximum possible return was 16%).

On the outcome achievement side, the Intellidex report found that the Innovation Fund impact bond delivered on social returns. It was relevant to beneficiaries’ needs and was successful in meeting its immediate aims. 4,000 preschool-aged children (and their caregivers) were provided with free early learning programming in their homes (this is double the target number of children).

The quality of the services was indicated by children’s scores on the Early Learning Outcome Measure (ELOM): a recently developed test to determine the extent to which ECD programming is adequately preparing children for grade R. Though the ELOM targets were missed, improvements were achieved on this score by the intermediaries and service provider. The ELOM targets represented the true outcome measure in this project. That is, rather than simple output measures (number of children provided with services and number of sessions attended), the ELOM measures what that programming achieves for the children receiving it. However, less than 10% of the entire schedule of outcome payments were linked to this performance target. Returns to investors were therefore hardly affected by the underperformance against the ELOM target. Instead, the bulk of the payments were linked to recruitment and attendance targets that delivery agent FCW (Foundation for Community Work) stood very little chance of missing based on their extensive track record prior to the Innovation Fund impact bond.

Source:Intellidex final report on the Innovation Fund Impact Bond (April, 2021)