Exploration of Social Impact Bonds to fund social development in South Africa

Abstract

This research explores the feasibility of Social Impact Bonds (SIBs) as a funding mechanism for preventative social development and intervention programmes in South Africa. Persistent structural inequality in societies compounded by the difficulty of traditional public policies to cope with new economic and social challenges begs the question, how far the third sector can help to meet these challenges and consider taking over from public authorities in some cases. Public services is facing two major challenges; declining productivity and increasing competing needs for public expenditure. This has signaled a paradigm shift for social programmes, social finance and the third sector. SIBs are an innovative outcomes-based financial product to fund government social programmes in which private investors provide upfront capital to the service providers, the third sector, to implement interventions to improve specific, targeted social outcomes based on agreed contracts; expected savings from the intervention should exceed the project cost plus the return to the investors. For future success, think big and act small, it is easier to achieve success this way. A conducive environment is necessary, each sector requiring different conditions to be met, to increase the feasibility or probability of SIB issuance in South Africa.