The recent move by the National Treasury — a longtime bastion of ethical principles — granting Eskom a partial exemption from section 55(2)(b)(i) of the Public Finance Management Act and Treasury Regulation 28.2.1 for a period of three years was a disappointing development for the country.

Even though the exemption has been withdrawn — for now — this surprising move sends an unfortunate message to investors that South Africa is not serious about accountability. This concern gets elevated if an entity like the Treasury is seen to be sending such a signal.

This is a problem because, quite evidently, the country is crying out for investment and labour-absorbing growth. We urgently need to leverage impact investing, an innovative form of private capital-led and socially driven investment that enables businesses to generate benefits for society alongside financial returns.

This, with the aim of addressing inequality, plugging infrastructure gaps, boosting education and health, improving unemployment, and even fixing the ongoing electricity crisis that plunges much of the country into unsustainable darkness for hours at a time.

While not a silver bullet, impact investing could solve many of South Africa’s problems — but not without the right environment in place. Policy certainty is paramount and sacrosanct for private capital to take the much-needed lead. This seems to be increasingly lacking and has become South Africa’s most debilitating Achilles heel.

The origin of the need for private capital-led growth lies in the adoption of the SDGs (Sustainable Development Goals) and in the recognition that states had failed in the delivery of the MDGs (Millennium Development Goals) and a commitment not to fail in the delivery of the SDGs. The role of the private sector was heightened in this agenda, in particular the Africa-based private sector. This gave rise to SDG 16 (peace, justice and strong institutions) and 17 (partnerships for the goals).

Five years ago, I was fortunate enough to lead a group of visionary and selfless South Africans to the Impact Summit of the Global Steering Group for Impact Investing in Delhi, India.

Discussion and debate abounded, and the overarching message was that, unlike environmental, social and governance (ESG) investing, impact investing is rooted in action.

It identifies a real-world problem, harnesses the strengths of both investor and investee and continuously measures the impact created. It is not a charitable exercise, but a mindset shift from focusing only on profit to focusing on profit optimisation while delivering positive measurable outcomes for society — solving world problems. It truly offers a win-win for everyone.

To make sure that the country does not miss out on the value that this kind of approach offers, I believe that we urgently need to unearth the obstacles that are hobbling impact investment, not just in South Africa, but on the entire continent, and map out how to move forward.

One of the major hurdles to investment is low absorptive capacity, which has been defined as the ability of a country to benefit from knowledge and technology spillovers as a result of foreign direct investment. Recent evidence suggests that the quality of governance — including aspects such as transparency, control of corruption, the rule of law, and financial sector supervision — affects a country’s ability to benefit from international capital flows.

Put simply, no investment intervention will work if a country lacks a supportive policy framework and the political will to drive transformation and improve the lives of all citizens. Boosting absorptive capacity depends on two main drivers: political leadership and accountability. Our latest litmus test is the most recent pact on a just transition. The indications on this front are not encouraging.

Over the years, there has been growing concern from the private sector about policy uncertainty and poor governance. Similarly, our public sector lacks the necessary leadership and accountability to deliver a professional service. Many public servants lack the skills and/or professionalism to do their jobs to the best of their abilities, and often seem to serve their political principles over society.

The professionalisation of the public sector, as demanded in the National Development Plan, would go a long way to building trust between government and the public as well as assuring potential investors their resources are in safe hands.

With the inaugural Africa Impact Summit, to be held in Cape Town this July, we have an opportunity to change the country’s and the continent’s governance and investment trajectory. The summit will seek to provide a platform for thought leaders from across the continent to share on-the-ground insights from national and regional perspectives, while drawing on the diverse global impact investing community excited about the opportunities Africa presents. In particular, it is to set the stage for private capital leadership in development.

The opportunities are there: in South Africa, there has been some blurring of lines between the traditional roles of government and the private sector. In some sectors, such as health and education, private companies have stepped into gaps left underserviced by the government. Collaboration between the government and private investors would only enhance and grow these impactful interventions.

However, without a fertile policy and investment environment tended by accountable leadership, investors will be reluctant to plant seeds here.

The summit aims to bring together stakeholders across government, civil society and business to stoke conversations, share visions, and shine the spotlight on impact investing. It is an opportunity we cannot afford to miss — an opportunity to use impact investing as the Marshall Plan for the continent. DM