The State of Innovative Finance in South Africa

AVPA
August 18, 2023

South Africa’s SDG Index Score is 63.7 out of 100, ranking 108 out of 163 countries, and is only on track to achieve two SDGs (gender equality and responsible consumption and production) by 2030. The country continues to struggle with social challenges, from rising youth unemployment, and strains on its utility infrastructure, particularly in the electricity and water sectors, to unacceptable levels of stunting malnutrition. Like most other African countries, these challenges are compounded by limited government resources, and declining foreign aid, necessitating alternative financing options.

The private and financial capital markets, globally valued at $450 trillion, could bridge this funding gap, with South Africa's well-developed financial markets offering great potential. The Global Impact Investing Network (GIIN) specifically identifies South Africa, Kenya, Ghana, and Nigeria as ecosystems prime for impact investment, with South Africa being the leader on the continent.

Private capital markets and innovative structures like blended finance and catalytic pooled funds are necessary to bridge the funding gap. AVPA, in collaboration with the FirstRand Empowerment Fund (FREF) and Deloitte, has undertaken a comprehensive study to understand the state of Innovative Finance in South Africa. This research maps out South Africa's current Innovative Finance landscape, identifying bottlenecks and opportunities for innovation, scalable interventions and areas of future research. 

The diverse challenges, robust financial markets, and quality tertiary institutions position South Africa to lead Africa's impact economy. This report provides an expert overview of Innovative Finance in South Africa with the findings guiding interventions that further enable capital mobilisation and deployment.