The Landscape

for Social Investments

in Southern Africa

 

The Landscape for Social Investment in Southern Africa

This report, maps the landscape of social investments in Southern Africa with a deep dive focus on South Africa, Zambia, and Mozambique, and a high level assessment of Angola, Botswana, and Zimbabwe. It analyses strategies used by various international and local social investment capital providers.

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Executive Summary

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Overview of Key Social Investors in the Region

Key Findings

  • The social investment industry in Southern Africa has evolved significantly over the last decade – from the establishment of Tshikululu Social Investments in 1998, to the recent set up of the Zambia National Advisory Board for impact investment in 2019.
  • South Africa has one of the most advanced individual philanthropy and corporate giving ecosystems in the continent.
  • This research mapped close to 250 active social investors operating across the focus countries, with 71% based in South Africa.
  • The region has a higher number of active regional based family foundations and Corporate Social Investors (CSIs) compared to the West and East Africa regions accounting for 34% of the active social investors identified.
  • The lack of innovative capital in the region continues to constrain the growth of the entrepreneurship ecosystem.
  • Declining funding for the non-profit sector from international sources is necessitating the development of more sustainable and innovative financing mechanisms for NGOs.
  • Overarching frameworks and regulations to support social investments do not exist across the focus countries. South Africa has however, made notable progress in developing frameworks to promote corporate social investment and venture capital.
  • Ecosystem support services are highly concentrated in South Africa.
 

Social Investment Landscape in Southern Africa

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  • Angel investing has presented attractive investment opportunities for HNWIs, interested in supporting the flourishing start-up ecosystem.
  • The increased push for women empowerment in the region has also resulted in more women participating in philanthropy.
  • Southern Africa, while witnessing the establishment of some of the most innovative blended finance structures, lags behind other SSA regions in the number of blended finance vehicles launched.
  • Digital lending through crowdfunding and peer-to-peer platforms has been on the rise, deploying funding for various social causes through non-profits.

Key Findings :

  • The philanthropy ecosystem in South Africa exhibits an increasing level of maturity, with the establishment of key ecosystem support organisations (ESOs). The ecosystem is however, still nascent in other countries in the region.
  • The establishment of key CSR policies drives the growth and institutionalization of corporate philanthropy, particularly in South Africa; corporates are also playing a key role in venture capital financing.
  • Individual philanthropy in the region remains largely informal despite a relatively higher number of family foundations witnessed particularly in South Africa compared to other SSA regions.
  • Angel investing has presented attractive investment opportunities for HNWIs, interested in supporting the flourishing start-up ecosystem.
 

Deep Dive into Social Investors in Southern Africa

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Number of social investors in the region, by type

Key Findings :

  • DFIs invested US$ 15.84Bn in 132 deals between 2015 and 2019 focused on South Africa, Zambia, financial services, energy and agriculture.
  • Between 2015 and 2019, a total of US$ 1.17 billion was deployed into 183 sustainability themed deals by sustainability aligned fund managers (SFMs), concentrated in South Africa, Zimbabwe and financial services.
  • International and local based corporates in South Africa spent US$ 2.7bn between 2015 and 2019 in the country on corporate social investment programs with growth experienced year on year
  • CSI initiatives in Zambia and Mozambique are largely dominated by corporates in the mining and extractive sectors who support health, education, and community empowerment initiatives
  • This research mapped US$ 319.5Mn deployed across 30 transactions by Southern Africa based family foundations in the region between 2013 and 2020, with the majority focused on health care.
  • Faith Based Organisations (FBOs) in the region play a critical role in addressing developmental challenges such as skill development, health, and poverty in the focus countries.

 

 

Demand for Social Capital in Southern Africa

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Type of finanacing requirements for various types of organisations at various stages of growth

Key Findings :

  • The lack of innovative capital in the region continues to strain the growth of the entrepreneurship ecosystem.
  • In South Africa, only 7% of the population is engaged in entrepreneurship, compared to 25% entrepreneurship rate in other countries on the continent.
  • The small market size and low purchasing power in some focus countries create challenges for growth and scale-up of social enterprises and sustainable businesses.
  • Declining funding for the non-profit sector from international sources is necessitating the development of more sustainable and innovative financing mechanisms for NGOs.
  • The overall CSO sustainability index across most of the countries has shown minor improvements; the financial viability score has, however, been deteriorating for most of the countries.
  • Unlike in other countries, the government is a key partner for NGOs in South Africa, not only providing the largest proportion of funding for NGOs but also providing capacity-building support.
 

Enabling Environment for Social Investments in Southern Africa

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Key Findings :

  • Overall, the Southern Africa region boasts of a stable business and investment regulatory environment making it an attractive destination for investments.
  • South Africa has made notable progress in developing regulatory frameworks to boost the supply of social capital -it can provide benchmarks for other countries.
  • Tax incentives have been established to encourage local giving; however, bureaucratic and lengthy processes discourage organisations from applying for the same.
  • Overall, the region has a relatively lower number of innovation hubs in comparison to the other well developed social enterprise ecosystems.
  • Academic institutions are at the forefront of building the social investment and entrepreneurship sector in the region.
  • Ecosystem support for philanthropy and the nonprofit sector is well established in South Africa, but completely nascent in other countries.

 

 

Recommendations for Fostering the Social Investment Industry in Southern Africa

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