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Overheard at SAII

Monday, May 14th 2012

An entrepreneur who turns dilapidated inner-city buildings into affordable housing developments. Business incubation specialists. A consultant who spent years developing a set of universal indicators to allow people to measure their social and environmental impact. Heads of impact investing funds. Academics, researchers, consultants, analysts, social entrepreneurs and directors of NGOs. These are just some the people that came together for two days at the Gordon Institute for Business Science for the third South African Impact Investing conference.

Overheard by Dylan Edwards, Senior Consultant, GreaterCapital

There were so many interesting panellists that to try and summarise the whole conference here would be impossible. Here instead are few quotes, stats and ideas that got my attention...

‘Social enterprise’ stuff
“I don’t understand this ‘social enterprise’ stuff. If Raizcorp helps an entrepreneur who is supporting his family, sending his kids to school or university, employing people... isn’t that a social impact? So we don’t look at social criteria at all... I don’t know what a ‘social entrepreneur’ is” – Allon Raiz, Founder and CEO of Raizcrop (and award-winning social entrepreneur).

“Very often business incubators and other BDSs [business development services] depend on grant funding that rewards effort rather than results... and there is very little transparency about the results that different BDS providers are achieving. For example, if I am in a new city and I want to know where to go for a meal, I can get on my phone and search for restaurants. And there will be hundreds or thousands of user-generated reviews that tell me about this restaurant, and I will know that if I am looking for a business lunch with a nice atmosphere, this is the right place, but if I am looking for an inexpensive dinner it isn’t. There is no equivalent for BDS providers.” – James Mwangi, Global Managing Partner, Dalberg

Impact measurement
“There are three big names in impact measurement standards: IRIS, GIIRS and PULSE. IRIS is a system of concepts – provides standards like definitions and metrics; PULSE is a management tool, similar to SAP but purpose built for social impact measurement; and GIIRS is a rating agency for the space – like a Moody’s” – CJ Fonzi, Dalberg. In his previous role, he oversaw the development of the IRIS indicators.

“One of the big challenges we face as a sector is a shortage of intermediaries that have a diversity of skills – there are too few people that speak the languages of both finance and social development.” – Elena Mancebo Masa, Head: Consulting, Research and Evaluation at GreaterCapital

Jobs Fund
“At R8 billion, the Jobs Fund is the world’s biggest ever challenge fund.” – Najwah Allie-Edries, Head of the Jobs Fund at the National Treasury.

Pension funds
“The traditional view is that a pension fund cannot look at social considerations because it violates their fiduciary duty. But in retirement funds it is appropriate to take into account interests of the members, which aren’t exclusively financial. In addition, it’s wrong to talk of interests of “members” when members are changing. What about future members? The responsibility of the board therefore isn’t just to the current members, but to the fund itself. So I can see no legal impediment to socially responsible or impact investing for pension funds.” – Rosemary Hunter, Partner, Bowman Gilfillan.

“There is R4 trillion in South Africa’s saving pool. Combined with high rates of unemployment and massive infrastructure backlogs, this means that there is both supply and demand for impact investment. And our financial markets are sophisticated enough to provide the space for these transactions. But we are still really inefficient at allocating our savings: we are too conservative.” – Heather Jackson, head of SRI at Cadiz Asset Management

A whole new language
“In the 1990s we got a new national anthem. And as a passionate South African I really wanted to learn the anthem so that I could stand up and sing it with the rest of the country. But of course the new anthem was in a language I didn’t understand, and back then I didn’t have the time or the inclination to learn a whole new language. So instead I found people who could teach me how to sing it phonetically and explain what the song means. But when it comes to finance for small businesses, people are determined to teach them a whole new language. They don’t need to learn to speak finance, they just need the tools to get the job done” – Darlene Menzies, Founder and CEO, SMEasy.

“Our research suggests that as many as 30% of South African schools are private schools – not 4% as the official figures suggest. The vast majority aren’t places like St John’s; they are low-fee private schools, mostly in poor neighbourhoods and townships. Some of them are run from private homes or even shacks. And contrary to what many believe, parents are not apathetic: many of them go to great lengths to get their children into what they see as ‘better’ schools” – Professor Stefan Schirmer, Senior Research Consultant, the Centre for Enterprise Development.

“We made record profits last year, and despite that we had to turn down R200 million worth of deals that we should have done. And the problem isn’t the entrepreneurs, there are loads of them and they don’t really worry us. Take Josephine Tshaboeng, a former domestic worker. As one of our entrepreneurs she owes us over R5million, and I don’t lose a wink of sleep over that... I lose sleep over the deals that we can’t do because of a lack of finance. And we struggle to raise finance because banks have effectively red-lined property in the inner-city, they think it is too risky.” – Paul Jackson, the Trust for Urban Housing Finance (TUHF).

Second economy
“As a result of our history we now have a dual economy. And the business incubators and support services still haven’t really drilled into the ‘second’ economy. We need to understand what the constraints are that stop these services from entering this economy and use things like the Jobs Fund to overcome these obstacles.” Paul Zille, partner, Genesis Analytics.

“Nearly 50% of all deaths of children younger than five happens in Africa; at the same time, less than 1% of the global health spend is in Africa.” – Oliver Withers, SARPAM.

> Read more reflections from the conference on the SAII Blog