Occasionally we enter the fray of general impact investing which exists contiguous to the SIB world. I have to say today there is a zinger of an article which is worth reading. You may not like it but you must read it!
First up news from South Africa on SIBs.
As always all feedback will be welcome.
(Alas my movements last evening left me in my low bandwidth zone during the SIB webinar – any feedback from that is welcome too!).
Social Investment Bonds For South Africa – Report
Pro Bono Australia
SIBs hold tremendous potential for government to increase effective support for struggling entrepreneurs in South Africa, according to a new report.
The report, a policy paper entitled Exploration of Social Impact Bonds for SME Development, was put together by the Bertha Centre for Social Innovation and Entrepreneurship at the University of Cape Town Graduate School of Business, Genesis Analytics and Social Finance (the UK organisation that developed the SIB model).
“SIBs are innovative financing instruments that are designed to help governments explore and expand effective social programmes among a pre-defined target group,” Jane Newman, International Director at Social Finance, said.
“They bring rigour, innovation and flexibility to social programmes by focusing on agreed outcomes, testing new innovations and building responsive programmes that are managed to deliver the best results.”
Following a grant by the Flanders International Cooperation Agency (FICA) and the South African National Treasury in September 2013, the research group explored the applicability of SIBs as a financing instrument in South Africa.
In particular, the scoping study sought to assess issues relating to the design of, and gauge the interest of key stakeholders in, a SIB providing business development services (BDS) to SMEs so as to stimulate economic development and job creation.
In South Africa, a study conducted in 2010 by Abor and Quartey estimated that 91 per cent of formal business entities in the country are SMEs and that these enterprises account for approximately 55 per cent of GDP and 61 per cent of employment.
Yet, the 2012 Global Entrepreneurship Monitor (GEM) report estimates that only 2 per cent of South Africans own businesses that have been established for over three and a half years, indicating a high failure rate among SA start-ups.
One aim of Business Development Services is to address the obstacles faced by businesses so as to decrease the chances of business failure. As such, the facilitation of BDS focused specifically on catalysing economic and employment growth is a high priority area, the report said.
Is ‘Impact Investing’ Just Bad Economics?
Phil DeMuth – Forbes
There was an entertaining article in this Sunday’s New York Times Style Section about a gang of rich kids who got to go on a field trip to the White House to “empower” them and let them schmooze about their charitable projects (possibly now to include the DNC?). My favorite line was a description of 26-year-old zillionaire Zac Russell, who wore a “loosely fitting suit without a necktie that contrasted with the stately White House surroundings.” I recall how President Ronald Reagan refused to take off his suit jacket or loosen his tie in the Oval Office even when he was hot because he did not want to insult the dignity of his surroundings with undue casualness. Fortunately, these trustafarians know how to chillax.
A topic that generated “intense interest” among the young Tuts and Tuttesses was something called “impact investing.” While no one knows exactly what this is, it has to do with a special kind of investing that generates both a dividend for society as well as a payback for the donor – doing good by doing well. But – is it for real?
Presumably what is meant here is something more than simply starting a profitable business. A venture fund like Sequoia Capital is not a charity, at least by intention. Their goal is to make money for investors. This I get. In so doing, Sequoia does enormous social good, helping to launch companies like Apple and Google. The man who builds a factory builds a temple, said Calvin Coolidge.
Impact investing is not just an outright gift, though, either. If I slip a five dollar bill to a man with his hand out on the street, or write a check to the Kuklapolitan Opera, I’m not exactly expecting a ROI. I don’t calculate how I might benefit from the multiplier effect from the $5 or the additional number of Der Ring downloads Apple might sell. It’s just a gift.