chevron icon Twitter logo Facebook logo LinkedIn logo YouTube logo download icon quote icon posted icon clock icon author icon arrow icon arrow icon plus icon Search icon location icon location icon document icon menu icon plus-alt
South Africa Impact Bond Innovation Fund
Key Facts and Figures
South Africa Impact Bond Innovation Fund
Key Facts and Figures
Children's crayons

The Innovation Fund Impact Bond was the first early childhood development SIB to be launched in South Africa. It seeks to improve early childhood learning and development outcomes in the Western Cape.

Key facts and figures

  • Launch date

    Jan 2018

  • Duration

    3 years

  • Maximum outcome payments

    $1,467,000

  • Target population

    3-5 year old children living in the low-income areas of Atlantis and Delft in Cape Town. These areas are two of multiple urban and rural areas that FCW work in. The sample does not represent universal coverage in these areas.

  • Outcome payers

    Department for Social Development (DSD) in the province of the Western Cape; ApexHi Charitable Trust; (equal amount of funding provided with government payment based on outputs and donor payment based on outcomes)

  • Provider

    Foundation for Community Work (FCW) through its Family in Focus (FIF) home visiting ECD programme.

  • Investors

    The Standard Bank Tutuwa Community Foundation; Futuregrowth Asset Management; LGT Venture Philanthropy

  • Technical assistance

    UCT GSB Bertha Centre; Social Finance UK (impact bond design and procurement)

  • Intermediaries

    m2m; Volta Capital

  • Evaluator

    Creative Consulting & Development Works

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.  

There are no interim results made public as yet. 

Outcomes framework

SouthAfricaImpactBondInnovationFund_Outcomes.png

Timeline*

*The Impact Bond Innovation Fund was originally intended to fund and test two transactions using the shared services of intermediaries and a syndicate of joint investors. Although the Department of Health (DoH) Impact Bond failed to launch, the length of timeline is partly due to the coordination that was needed between Impact Bonds.

Project insights

  1. Manage cost and complexity from the outset 

    The scope of the initial project was very ambitious with both the DSD and DoH wanting to develop an impact bond (IB) with different sets of stakeholders and outcomes. So, although the intention to share the services and transaction costs of intermediaries and investors across both IBs held the potential to bring down those costs, ultimately the coordination between the two transactions caused undue delays and complexity. 

    The withdrawal of the DoH implementer within one month of service delivery commencing also then posed a risk to the rest of deal as investors were expecting a larger investment size, spreading their risk across two interventions. 

    Fortunately, the intermediaries were able to restructure the financing arrangements satisfactorily but not without significant time delays and skilled stakeholder management. In addition, the outcomes selected for the DoH bond were numerous and partially contributed to the reluctance of the implementer to be held to results-based scrutiny and accountability. 

    Thus, it would have made sense to focus on a single, simple transaction before trialling with an additional department, cohort and intervention. 

  2. The public and private sector are seeking ways to collaborate 

    The appetite for collaboration in this initiative was high. The public sector was not only interested in augmenting inadequate and shrinking budgets, but also recognise that most NGOs do not receive the support they require to improve management, programme quality and thus scale of programmes. Civil society organisations were interested in multi-year sustained funding, core funding to strengthen their underlying systems and an opportunity to demonstrate the success of their interventions. Donors are keen to work with government because that is where sustained funding comes for programmes that work. Investors in South Africa have both a moral and regulatory mandate to invest in social programmes, but there is insufficient quality deal flow to address the appetite. 

    Thus, although this was a complex collaborative arrangement, there was a high degree of flexibility and compromise in the journey to launch. For example, the outcome funders advanced some capital outside of the contract to enable an extended ramp up period, the outcome targets were altered to reflect a delay in the launch, even the institutional investors remained at the table despite a change in deal-terms, and the intermediaries committed time and effort beyond their budget to ensure the transaction happened. 

    The process demonstrated the lengths that each stakeholder group would go to ensure the strengths of each were maximised for the good of the whole and there is encouragement to continue to refine and simplify the process.  

  3. Significant operational improvements have been achieved as result of outcomes focus 

    FCW has had the opportunity, funding and support to make several important changes to improve its ECD interventions. They have replaced paper-based collection system with an electronic system resulting in real time monitoring and more reliable data collection. 

    The number of caregivers and children to be visited by home visitors has been reduced to improve the quality of implementation, better reach targets for frequency and duration of home visits, and ensure better data collection practices. 

    The training programme for Home Visitors has been revised to now offer the home visitors a formal career path in ECD as well as improve their ability to engage with caregivers and children, strengthen safety nets around children, and refer families for professional support. 

    In addition, FCW now provides ongoing psycho-social support for Home Visitors to help them cope with the stresses of violence and crime in the communities in which they live and work. In response to high attrition rates of home visitors FCW has increased the monthly stipend for each home visitor.  

Interview with Dr Susan de Witt, Bertha Centre 

What are the challenges of developing a SIB that are unique to South Africa?
What have been the main drivers and enablers for DIBs in South Africa?
What are your top tips for engaging with governments and outcome funders in South Africa?

Downloads and Resources

Early Childhood Development - Data Template

Download XLSX