PIC/IISA Impact Investing Report aims to close the knowledge gap
Economy / 21 November 2019, 10:00am / Helmo Preuss
JOHANNESBURG – The Public Investment Corporation (PIC) SOC Limited and Impact Investing South Africa (IISA) launched the first Africa Impact Report 2019.
The report is aimed at closing the knowledge gap, which needs to be addressed in order to advance impact investing on the African continent. It does so by advocating a sound investment case for African economies, so that impact investing becomes a catalyst for collaboration between governments and private investors.
Impact investing has the explicit intent of generating measurable social or environmental benefits alongside sound financial returns for investors. Impact investments provide capital to address social and/or environmental challenges.
Sholto Dolamo, Executive Head: Research and Projects Developments at the PIC, said the report would improve the knowledge base for impact investing.
“The PIC appreciates the opportunity to contribute to develop a body of knowledge that can meaningfully inform investment decisions and feasible opportunities for impact investing. As a long term investor, the PIC believes impact investing must be elevated as a strategic investment priority if we want to progress towards achieving the United Nations (UN) 17 Sustainable Development Goals (SDGs),” he said.
The IISA is working to identify focus areas and a set of strategies to support growth in South Africa’s impact investment market. The IISA will be hosting the Global Steering Group (GSG) Summit 2020 in Johannesburg next year and are partnering with Kenya, Zambia, Nigeria and Ghana to shape a Pan-African agenda for the Summit.
The report presents a summary of impact investment-related information, research and recommendations from a range of government and private sector sources. It also presents a baseline assessment of progress made with respect to the UN SDGs and the African Union (AU) Agenda 2063, macroeconomic growth prospects, capital availability and sector-specific opportunities.
The report outlines the needs for further work to be done to identify solutions to these gaps to ensure Impact Investors into Africa can appropriately benchmark their return, risk and impact requirements. It identifies Infrastructure bedrock, Industrialisation catalyst and Intra-regional trade for economic independence and inclusivity as being critical to achieving impact investing in Africa.
Chairman of Impact Investing South Africa, Elias Masilela, said the role of impact investing was critical in terms of helping to eradicate poverty and inequality.
“This is a major turning point in investing thinking in South Africa and for the continent. The impact investing movement is mindful that governments around the world have failed to make meaningful progress towards implementing the Millennium Development Goals and there is no room for failing with the SDGs. The need, not only for a private sector partnership but also leadership, is at the heart of this movement.
The role of pension funds and asset managers, such as the PIC, is critical in the realisation of our societal aspirations such as the eradication of poverty and inequality. It is essential to conscientise policy makers, the owners and the allocators of capital about the urgent need to invest appropriately to reduce social and economic gaps. We need to double our focus on investments that have a positive human impact. We cannot delay any further. If we do, we would have failed society and ourselves,” he said.
An Early Childhood Development (ECD) social impact bond launched in 2018 aimed to boost human capital in line with the World Bank’s focus on human capital as a key enabler in a country’s economic development. This bond uses an innovative financing mechanism that represents the first Social Impact Bond focused on ECD to be launched in the Global South.
The World Bank last year launched its annual Development Report with a special focus on human capital. It created a human capital index and South Africa was ranked 126 out of 150 countries for which sufficient data was available to construct the index. This meant it was ranked below all our neighbours except for Lesotho, for which there was not sufficient data available for a ranking.
Africa is only fairly on course to achieve three of the seventeen SDGs. These are Life on Land, Climate Action and Equality. Besides the lack of data, where the SDG’s are unable to be tracked accurately, there is a considerable SDG financing gap.
This gap is considered to be between $500 billion to $1.2 trillion annually. Furthermore, more evidence has found that SDG 7 (affordable and clean energy) is acting as an enabler to achieve other SDG objectives.