South Africa’s unemployment and inequality conundrum is a pressing concern that has persisted far longer than it should. It’s a systemic issue that extends beyond the capabilities of government bodies and development funders to resolve, especially in the shadow of economic downturns and fiscal limitations.
However, a new path emerges, paved by technology and impact investing, which are proving to be not just problem solvers but also opportunity creators. They offer unprecedented avenues for job creation and socio-economic development.
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The Global Impact Investing Network’s (GIIN) 2022 Report: Sizing the Impact Investing Market suggests that the size of the global impact investing market had officially surpassed the $1 trillion mark. This highlights the increasing recognition of corporate impact investing practices.
Debunking the misconception that technology will result in job cannibalisation is pivotal. Technology is proving to be a powerful catalyst of economic opportunity – consider solutions like Yoco and Setana Capital that are transforming the financial landscape, providing financial services to remote, underserved and unbanked communities while concurrently generating multi-layered employment opportunities.
Similarly, EdTech start-ups such as Zaio and WeThinkCode are not just filling gaps in the education system but cultivating a new workforce of tech professionals. Pele Energy Group contributes to change in the green energy infrastructure sector by increasing energy supply, developing, building, investing, and operating renewable energy generation facilities, and increasing economic participation, thereby spurring an industry teeming with income-earning opportunities.
AgriTech start-up, Khula!, has built an ecosystem of three platforms that address challenges across the agricultural value chain, creating value for their suppliers and customers without eliminating existing employees and generating thousands of new jobs.
However, the challenges we face are considerable. The recent State of the Nation Address (SONA) noted our profound energy crisis, deep-rooted unemployment, particularly among the South African youth, and an urgent need to rebuild the economy. These issues are often highlighted as bottlenecks to sustainable growth. Addressing these requires a strategic shift from traditional investment patterns to emerging industries and new categories for positive impact.
Our focus should be on strategic investments that pave the way for technological potential. Impact investing is emerging as a leading solution. It marries profit with purpose, investing in ventures that support underrepresented groups, foster diversity, drive innovation, and stimulate economic growth.
A notable example of this approach is the recent investment in Zoie Health, an all-black, all-woman-led team crafting a high-impact tech solution to revolutionise women’s health care or Amazi Beauty, a conscious brand led by women of colour for women of colour, bridging the beauty training and unemployment gap in the beauty industry.
Central to this strategy is the use of patient capital – investments with an understanding of delayed returns for long-term benefits. This isn’t just a funding strategy; it’s a commitment to sustainable transformation. Patient capital acts as catalytic capital, creating a ripple effect that attracts further investment and de-risks the investment for more commercial investors.
Impact Investors need to balance their risk, time, and returns, giving businesses room to innovate and prosper. Illustrated by our investment into the ambitions of Amnova Tech, a production technology start-up developing sustainable additive manufacturing technologies and industrial-grade Hybrid 3D Printing systems. Their technologies are used for various rapid prototyping, batch production and large-format manufacturing services, which can empower Africa as a global leader in sustainable manufacturing and advanced technology development.
While we invest a significant portion of our resources towards job creation, it’s essential to acknowledge the economic offset of job destruction. According to the World Economic Forum’s Future of Jobs Report 2023, employers anticipate a structural labour market churn of 23% of jobs in the next five years, underlining the need to diversify from traditional into digital, knowledge-based industries.
The European tech sector’s growth is set to continue growing by 10% year-on-year until 2025, as per the European Start-Ups Report, which is a case in point. The South African BPO sector, which has experienced a compound annual growth rate of around 25% between 2015 and 2021, as per the South Africa National GBS Quantification & Investment Report 2021/22 by BPESA, also highlights the significant potential of tech-based sectors.
Nonetheless, today’s boom might become obsolete in the ever-changing innovation space. Thus, our entrepreneurs and young professionals must be equipped with a broad set of digital skills and the ability to adapt to changing markets. Early-stage investors need to work with these entrepreneurs to upskill and reskill them, provide non-financial support and act as ‘catalytic’ investors.
Both financial and non-financial investments are needed to drive the growth of future-proof industries. This calls for funding, mentorship, coaching, integration into business networks, access to markets and active upskilling of people – particularly young founders – to equip them to compete and trade in a globalised, digital world.
While the road ahead is strewn with both challenges and opportunities, the focus should be on tackling issues such as regulatory frameworks, infrastructure development, and digital literacy. With strategic investments and unwavering commitment, these hurdles can be overcome.
Impact investing in South Africa today should concentrate on our nation’s most valuable asset – its people. We need to equip, skill, upskill, reskill, train, and develop our people so that they can create relevant businesses and redefine industries where we could not only be globally competitive but become global industry leaders. This will not only create income earning opportunities but also careers and categories of economic growth, enabling sustainable impact in our society.
Read More: Zoie Health closes pre-seed round to fund expansion and growth
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