Investing in a Brighter Future: The Case for Impact Investors in Early Childhood Development

My third and last suggestion for setting ECD on a new trajectory is to attract the category of funders known as impact investors. These are investors who are determined to generate social and environmental impact as well as financial returns. They include individual, philanthropic and institutional investors and their financial return expectations vary widely.

The investment case for ECD is obvious. Ilifa Labantwana estimates that 330 000 new jobs would be generated by meeting the 2030 goal of full access to ECD services for all children in South Africa. And these are predominantly micro-enterprises led by women and promote social cohesion.

At a global level, it has been estimated that if children in low-income countries were to complete primary school with functional literacy and numeracy and participate in the levels of secondary and post-secondary education enjoyed in high-income countries, they can expect lifetime incomes five times higher than their parents, which would exceed the total cost of their education by a factor of 12.  Acclaimed Nobel laureate James Heckman has demonstrated convincingly that programmes targeted at pre-school children deliver a better return on investment than investments in schools and tertiary education. And a study led by Heckman demonstrated that every dollar spent on high-quality birth-to-five programmes for disadvantaged children in North Carolina delivered a 13% per annum return on investment. The programmes included nutrition, access to healthcare and early learning and significantly, they paid for themselves several times over. Obviously, one cannot assume that the same sort of return on investment will be achieved in other programmes elsewhere but the study does show what is possible with well-designed ECD programmes in disadvantaged communities. 

And of course, history tells us that inequality fuels unrest: as educational inequality increases, so does the probability of unrest. And unrest is likely to be greatest where the gap is widest between the expectations of young people about the opportunities that should be available and the realities they face.

The Standard Bank Tutuwa Community Foundation has been a trailblazer, at the forefront of creating and supporting sophisticated financial structures which provide a results-based return for investors in ECD programmes. These types of structures – and catalytic organisations like Tutuwa – make it possible for a range of local and international impact investors to support the drive to provide every child in South Africa access to quality early learning opportunities.