When Josephine Thaboeng heard that the owners of
the block of flats where she worked wanted to sell, she smelled opportunity.
The banks, however, were not willing to take a risk on the former domestic
worker who had only a Standard 6 (Grade 8) education, about R8 000 in
savings and no experience in running a business. But an estate agent referred
her to the Trust for Urban Housing Fund (TUHF), a company that helps first-time
buyers to become property entrepreneurs.
With the help of the TUHF, Thaboeng was able to purchase and convert her building into student housing for women from the nearby University of Johannesburg.
Her
business has not only transformed her own life, but is helping these women get
a tertiary education, giving them a better chance of success.
Her tale is one of the many success stories built on the foundation of impact investing.Those of us in South Africa know that we live in a truly magnificent country with diverse cultures, rich heritage and breathtaking landscapes.
However, there are
some fundamental social issues affecting many South Africans. Statistics on
unemployment, the number of Matric diplomas and higher education degrees, and
people living with HIV and Aids are particularly worrying.
While the government and civil society play an integral role in addressing these issues, new innovative and scalable solutions are needed in order to overcome these massive and complex social problems.Increasingly, people around the world are exploring how market-based solutions may complement government spending and private philanthropy in achieving social and environmental goals.
Globally, there is a growing interest among individual and institutional investors aiming to ‘do good and do well’ to realise social and financial returns on their investments.
These investments
have been used for such diverse purposes as improving access to affordable
housing, improving healthcare, the advancement of low-fee private education and
the development of small businesses.
It is in this context that impact investing has emerged as a new asset class in its own right.Impact investments can be simply defined as investments that are made into companies, organisations or funds with a clear intention to generate positive social and environmental impact alongside a financial profit. The shift from grant funding into impact investing has allowed the once limited pool of money to grow and have a much larger, far-reaching impact.
Despite current perceptions that investing into this asset class results in lower returns due to a trade-off of financial return for social return, the financial returns remain highly competitive, with some funds in South Africa outperforming benchmarks of prime +4%.The government’s most recent policies call for private investors to join efforts toward transformation. Impact investing is an opportunity for investors to achieve financial objectives, while aligning with government objectives and contributing to society.
Laurie Scholtz
Lead consultant: impact investing
GreaterCapital
www.thegiin.org
For more information on impact investing as an asset class, see JP Morgan 2010 Impact Investments: an emerging asset class
