Impact investing is increasingly becoming an effective driver of socio-economic development in South Africa, particularly in the education space, Africa Global Funds has learned. 

Lala Steyn, Head of the Schools Investment Fund located in the Impact Funds business unit of Old Mutual Alternative Investments, said that impact investing is helping to facilitate the provision of high-quality education, while still yielding attractive returns for investors over the long-term.

 “What is important to understand is that the improvements being made through impact investing in education aren’t intended to create a divide between the private sector and government. It isn’t an ‘us versus them’ scenario, but rather a collaboration to build a better society,” she said. 

“The aim behind these impact funds is to ultimately support government in delivering quality education for pupils from historically disadvantaged backgrounds – in most cases working very closely together as partners in making this possible,” she added.

There are great success stories with schools funded by impact funds, but these lie in the approach taken. 

“Schools require leadership and effective management to be successful. The schools also have an additional layer of support through a management company tasked to manage and support a group of schools, said Steyn.

“These funds also have feet on the ground to help ensure that these schools yield positive results. These school operators are passionate about providing quality education to their learners,  understanding that quality education is their best marketing tool,” she added.

A recent report by the Organisation for Economic Co-operation and Development (OECD) ranked South Africa’s education system as 75 out of its 76 member states. 

Despite a large portion of the national budget being allocated to education, the South African Department of Education does not have a sufficient budget to deal with the demand for new schools. 

Steyn said that the challenge to improve the schooling system in the country doesn’t solely lie within the public sector. 

“While the government continues to try and find solutions to the shortages and gaps, there is an opportunity for the private sector to further step into the circle and lend their support,” she said.

“Currently, about 75-80% of the budget is allocated to the payment of teachers’ salaries, leaving insufficient funds to be allocated for the development and improvement of infrastructure itself. Finding a short- and long-term solution to this challenge is paramount, and the private sector can work more closely with government to establish and operate schools,” stressed Steyn.

The Schools and Education Investment Impact Fund of South Africa was the first impact fund of its kind in South Africa and is a “shining example of impact investing for quality education”, according  to Steyn.

The fund managed by Old Mutual Alternative Investments was established by the Old Mutual Life Assurance Company and the Government Employees Pension Fund through its asset manager the Public Investment Corporation. 

Recently the Eskom Pension and Provident Fund became the third investor.

“Impact funds are playing a huge role in solving some of the country’s education obstacles, providing tangible results and having a positive impact on society as a whole, while still yielding attractive returns for investors. It is through cooperation initiatives of this kind that we will be able to start seeing the light at the end of this proverbial ‘education crisis’ tunnel,” said Steyn.