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Doing well by doing good

Monday, April 23rd 2012



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 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 which helps first-time buyers to become property entrepreneurs. With TUHFs help, Josephine was able to purchase and convert her building into student housing for young women from the nearby University of Johannesburg. Her business has not only transformed her own life, but is helping these women to get a tertiary education, giving them a better chance of success too.

Josephine’s story is one of the many success stories that have been built on the foundation of impact investing.

Challenges
Those of us living 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 people living in South Africa. Statistics on unemployment, the number of matric diplomas and higher education degrees and people living with HIV and AIDS are particularly worrying.

Whilst 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.

Market-based solutions
Increasingly, people around the world are exploring how market-based solutions might complement government spending and private philanthropy in achieving social and environmental goals. Globally, there is also a growing interest among individual and institutional investors aiming to ‘do good and do well’, basically, to realise both 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 [1].

Impact investments can be simply defined as investments which are made into companies, organisations or funds with a clear intention to generate positive social and environmental impact alongside a financial profit [2]. The shift from purely grant funding into impact investing has allowed the once limited pool of money to grow and therefore have a much larger and far reaching impact.

Despite some 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 managing to outperform benchmarks of Prime +4%. The government’s most recent policies call for private investors to join efforts towards transformation. Impact investing is an opportunity for investors to achieve financial objectives, while aligning with government objectives and contributing to society.

Investing for inclusive growth
The South African network for Impact Investing (SAII) conference - Investing for Inclusive Growht - is the forum to explore what is needed for the investment industry to come on board, examples of how it can work as well as finding out who the right partners are. SAII 2012 will be held at GIBS in Johannesburg on the 7th and 8th of May 2012.

To book visit www.saiin.co.zaor contact Salma Seedat at salma@ggsa.co.za or +27 (0)21 685 9780.

Article by Laurie Scholtz, lead consultant: impact investing at GreaterCapital.



[1]
For more information on impact investing as an asset class see  JP Morgan 2010 Impact Investments: an emerging asset class

[2]www.thegiin.org