Social impact bond for job creation

Yellowwoods and Harambee Youth Employment Accelerator, together with the Gauteng Provincial Government and the private sector, including The Standard Bank Tutuwa Community Foundation, have incubated an innovative impact bond called Bonds4Jobs, which was profiled in a breakout session at The Trialogue Business in Society Conference 2019.

The organisations behind this South African youth employment bond include:

  • Yellowwoods, a global investment firm focused on creating inclusive growth on the African continent.
  • Harambee Youth Employment Accelerator – This organisation was founded by Yellowwoods to address the supply-demand mismatch in the entry level labour market by implementing demand-led work-readiness programmes, and partnering with employers, government, labour and industry bodies.
  • Bonds4Jobs, an outcomes-based financing platform founded and incubated by Yellowwoods and Harambee. Its sole mandate is to act as a financial intermediary for the inclusive youth employment bond, in partnership with Harambee as performance manager.

Impact or pay-for-performance bonds are a funding model for up-skilling solutions where investors provide working capital to organisations that skill excluded youth and get them into jobs in growth sectors. The model guarantees a real return on investment for investors spend on skills development, and government only pays to the extent that the results have actually been delivered. As such, in Bonds4Jobs, the performance metric for the Harambee Youth Employment Accelerator is that they need to place the young people into jobs and not just train them.

Gauteng Provincial Government use Tshepo 1 Million, a youth skills empowerment initiative, as the channel for partnering with Harambee on the Bonds4Jobs initiative. Tshepo 1 Million targets unemployed residents of Gauteng, aged between 18 and 34 years old with at least a Grade 10. Furthermore, the individuals must be first time work-seekers with no more than 12 months’ work experience.

The challenge

Jak Koseff, of the Gauteng Provincial Government, indicated that the youth unemployment challenge in South Africa is massive – for every 100 children who start school, only six get some kind of undergraduate qualification within six years of leaving matric.

There are three main contributors to youth unemployment in South Africa: State failure through poor education provision; market failure from exclusionary recruitment practices and lack of clear proxies for candidate potential and work-readiness; and poverty and inequality leading to high costs of job seeking which are unaffordable for most (e.g. data and transportation costs).

R200 billion is spent annually by the public and private sectors on post-school education and skilling with poor conversion into economic opportunity. As such, the panellists noted that solving youth unemployment does not require more money – rather, it requires smarter ways to spend existing money.

The opportunity

Bonds4Jobs therefore aims to provide a set of solutions that can be implemented in the short to medium term. These solutions include:

  • Re-directing existing spend on skills to models that work – Bonds4Jobs only requires payment to the extent that the results (youth placed in jobs) have actually been delivered.
  • Focusing on the provision of entry level skills in growth sectors and employers experiencing skills scarcity. The programme requires secure confirmation of demand from employers before training, in order to force the effectiveness and relevance of training. Growth sectors include: tourism, green economy, agro-processing, digital tech, business services and installation, repair and maintenance, and the social economy.
  • The provision of alternative pathways to skilling which do not require tertiary qualifications, and are cheaper, quicker and market responsive. For example, when upskilling youth for a trade, provide eight to 10 weeks of site readiness, and complete the rest of training on the job.
  • Micro-credentialing following global trends of shifting from macro-qualifications to micro-credentials and continuous learning.

Current performance and next steps

In the first year of the four-year pilot study, Bonds4Jobs aimed to achieve 600 outcomes within the year (i.e. youth job placements). The 600 job placements were achieved after nine months, and all the investors were paid back their money with interest. As such, the programme looks to be performing successfully to date.

Once the four-year pilot is completed, it is hoped that the programme will have demonstrated that Bonds4Jobs is an effective use of money to reach the required outcomes. Following this, the long-term sustainability of the model depends on securing the state as the long-term outcomes funder at scale, continuous efforts to identify and activate demand for human capital, and a robust, well-managed and credible financing platform.

IMAGE: Flr-Jak Koseff (Gauteng Provincial Government), Dianne Woodward (Harambee Youth Employment Accelerator), Lerato Lehoko (Yellowwoods Investments and Bonds4Jobs), Zanele Twala (The Standard Bank Tutuwa Community Foundation)

Article written by Damian Watson

Photo taken by Cobus Oosthuizen

2019-05-21T17:14:49+00:00 May 15th, 2019|Business in Society 2019, Uncategorised|