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The world becomes a better place when human beings – whether inside or outside of corporate settings – behave in a way that benefits society as a whole. In past decades, businesses have not needed to engage with any drivers other than the bottom line, but those days are long past – they too need to start operating in a way that has a positive impact on society.

 

Each continent and country has its own issues, and while the developed world tends to focus more on environmental issues, in Africa – and South Africa – the focus is skewed more towards social impact. As President Ramaphosa noted in his weekly newsletter on 14 February, in South Africa the private sector employs about three-quarters of the country’s workers – social development and transformation, therefore, are a crucial responsibility for South African businesses.

 

We have all seen the damaging effects of Covid-19 on our economy. Unemployment has increased significantly – with the youth most gravely affected. In the fourth quarter of 2021 unemployment rates reached a high of 35.3%, and subsided a little in the first quarter of 2022. However, among the youth, 63.9% of those aged 15 to 24, and 42.1% of those aged 25 to 34 years remain unemployed. That means that of 10 million young people aged 15 to 24 years, 7.7 million are inactive in the labour force with a further 37% not in employment, education, or training and discouraged from finding a job. 

South Africa has a stark shortage of adequately skilled individuals – and here many of our young people are constrained by circumstance, not choice – to fill the many roles associated with building a strong economy. At Thuso Incubation Partners, therefore, we believe it is imperative that we partner with like-minded managers who, through their investments, keep skills development top of mind. 

To close the skills gap, we need to improve the numbers of young people who complete their basic education, and provide more affordable tertiary education. Statistics SA data reveals that the largest proportion of unemployed youth by education level are those with less than a matric (50.1%) and those with a matric (40%) in comparison to graduates and those with other tertiary education (2.8% and 6.7% respectively).

In addition, according to the SAVCA 2020 Private Equity Industry Survey, just 9% of the fund managers are female-owned and 38% are black-owned. Separately, PricewaterhouseCooper’s annual Women in Work Index, which measures female economic empowerment across 33 Organisational for Economic Co-operation and Development (“OECD”) countries, has highlighted that there has been a regression in the progress made for women in work, back to 2017 levels, as a result of the pandemic. In South Africa, the rate of unemployment among women increased by three percentage points from 2019 to 2020.

Gender pay disparity continues to be burdensome, and one of the hurdles for women is access to traditionally male-dominated industries such as finance. Moreover, access to these industries is further impeded by access to finance from formal institutions because of sexism and discriminatory processes. 

 

A study by the Cherie Blair Foundation for Women, for instance, has shown that the capital sourced by women entrepreneurs comes from:

  1. Their own personal savings or selling assets (69%);
  2. Friends or family have supported them (44%);
  3. Banks (16%); and
  4. Angel investors or private equity firms (3.2%).
We have an opportunity now to transform the investments industry – not through tick-box DEI exercises – but through educating young people, creating jobs, and helping communities, paying particular attention to those who have traditionally marginalised, such as the youth and women. While there has been some progress over a number of years, we need to be aiming for a much more transformed group of investment peers, and employ a much more representative group of people.

One such example is our underlying manager's investment into an accredited professional driving academy, where the academy provides candidates with on-the-job training. On successful completion, if the student is absorbed by the employer, their earning potential is between R10,000 and R25,000 a month. The portfolio company absorbed 15 black learners from that cohort at the end of their learnership. 

It is evident that the need for investment in high quality, affordable education is imperative now more than ever, as it spurs innovation. As part of our ethos, we aim to have a positive impact in the communities we serve by building a portfolio that is intrinsically driven to provide skills development to their employee base.  

 

Lastly, in order to meet the target of having South Africa’s high carbon-emitting sources reduced by half, and catalysing the charge towards a greener, cleaner future, we have partnered with a variety of real assets funds on our platform. The key focuses for us in driving environmental sustainability include the adoption of clean energy, reduced carbon dioxide emissions, and the manufacture of biodegradable and recyclable products. 

The recent economic shock has given economies an opportunity to refocus investments towards more sustainable solutions and a low carbon future. The stream of sustainable energy projects being developed by both private and public sectors, opportunities for investment in midstream energy assets to support a just energy transition, and expansion capital across the digital infrastructure sector – both data centres and fibre – all speak to strong investment opportunity in the sector.

The world becomes a better place when human beings – whether inside or outside of corporate settings – behave in a way that benefits society as a whole. It’s imperative that South African businesses not only focus on environmental issues, but social development and transformation.



By Mmitji Letsoalo