Early Child­hood De­vel­op­ment bond launched in Cape Town

Cape Times - - BUSINESS REPORT - HELMO PREUSS

AN EARLY Child­hood De­vel­op­ment (ECD) so­cial im­pact bond has been launched in South Africa, with the aim of boost­ing hu­man cap­i­tal to boost eco­nomic de­vel­op­ment.

This bond uses an in­no­va­tive fi­nanc­ing mech­a­nism.

The pub­lic-pri­vate sec­tor coali­tion will first roll out in Cape Town and be ex­panded to the rest of the coun­try.

By the age of three, chil­dren from low-in­come fam­i­lies have heard 30 mil­lion fewer words than their more af­flu­ent peers, which is why this ECD in­ter­ven­tion is tar­geted at low-in­come house­holds.

The project is man­aged by the in­ter­me­di­ary part­ner­ship of moth­er­s2­moth­ers and Volta Cap­i­tal, work­ing closely with im­ple­ment­ing part­ner, the West­ern Cape Foun­da­tion for Com­mu­nity Work (FCW).

The trans­ac­tion is led by the West­ern Cape De­part­ment of So­cial De­vel­op­ment, in a matched fund­ing ar­range­ment with ApexHi Char­i­ta­ble Trust, and sup­ported by a coali­tion of in­vestors: The Stan­dard Bank Tu­tuwa Com­mu­nity Foun­da­tion, Fu­ture­growth As­set Man­age­ment, and LGT Ven­ture Phi­lan­thropy, so that it also makes use of the con­cept of blended fi­nance or a mix of pub­lic and pri­vate sec­tor funds.

A so­cial im­pact bond is struc­tured so that gov­ern­ments only pay if pre-de­ter­mined out­comes are achieved. The ECD project forms a pub­lic-pri­vate sec­tor coali­tion that can sus­tain­ably fi­nance ECD.

Over a three-year pe­riod, the project, through FCW, will seek to im­prove the cog­ni­tive and so­cio-emo­tional de­vel­op­ment out­comes of more than 2 000 chil­dren in the low-in­come com­mu­ni­ties of At­lantis and Delft, in the West­ern Cape.

Early child­hood is a pe­riod of un­par­al­leled op­por­tu­nity for pro­mot­ing and de­vel­op­ing hu­man po­ten­tial. The pe­riod from con­cep­tion through the first five to six years of life is crit­i­cal for the de­vel­op­ment of a child’s phys­i­cal, so­cial, emo­tional, and cog­ni­tive well-be­ing.

These ben­e­fits are life-long as they im­prove ed­u­ca­tional per­for­mance, lead to bet­ter ca­reers and higher earn­ings per­for­mance and health. Huge so­cial and eco­nomic ben­e­fits re­sult.

If suc­cess­ful, the model could be repli­cated across the West­ern Cape, and through­out South Africa, chang­ing the way so­cial in­ter­ven­tions are funded and cre­at­ing a new way for­ward for ad­di­tional pub­lic-pri­vate fund­ing op­por­tu­ni­ties.

“Volta Cap­i­tal be­lieves in­no­va­tive fi­nanc­ing mech­a­nisms like so­cial im­pact bonds can be a pow­er­ful tool to tackle press­ing so­cial chal­lenges, and we are priv­i­leged to play a role in mak­ing this land­mark trans­ac­tion a re­al­ity,” said Lily Han, the prin­ci­pal at Volta.

The Lego Foun­da­tion, which aims to build a fu­ture where learn­ing through play em­pow­ers chil­dren to be­come cre­ative, en­gaged, life-long learn­ers, pro­vided early-stage de­vel­op­ment fund­ing for the trans­ac­tion.

The World Bank last month launched its an­nual De­vel­op­ment Re­port with a spe­cial fo­cus on hu­man cap­i­tal.

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EARLY child­hood is a pe­riod of op­por­tu­nity for de­vel­op­ing hu­man po­ten­tial.

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