Financial services firm Nedbank and its partner black-controlled and -managed investment company Brimstone have, through the Black Business Partners (BBP) Legacy Programme, invested R15-million in the US Agency for International Development (USAID) CATALYZE EduFinance Fund.

The R110-million fund helps to improve access to capital for early childhood development centres (ECDs) in South Africa to enable these facilities to enhance their education offerings and improve the learning outcomes for students between two and five years old, the partners say.

The investment in CATALYZE EduFinance is both transformational and impactful, helping to enhance the quality of education from grassroots through to tertiary level, Nedbank CE Mike Brown says.

CATALYZE EduFinance aims to support new and existing ECDs in South Africa so that they can offer high-quality education that lower-income families can afford.

Primarily through private sector investors, the fund will raise approximately R110-million in capital. Over a five-year period, 500 to 1 000 ECDs in South Africa are expected to benefit from this investment and will also receive financial training and support.

The CATALYZE EduFinance project mobilises blended finance, through the strategic use of USAID funds. Private capital leveraged with funding from USAID will address the substantial funding gap for education and improve learning outcomes, the fund says.

Further, the fund builds on successful projects implemented for many years in India by education investment firm Kaizenvest, which manages private equity funds to invest in entities that are driving learning innovations.

Kaizenvest will be managing the fund to ensure successful implementation in South Africa and has also committed to investing funds from its own balance sheet to the project. The firm has a wealth of experience in education financing and executing innovative learning programmes around the world, the BBP says.

The fund, which is now open for investors, is expected to close at the end of 2024.

Additionally, CATALYZE EduFinance aims to further promote education outcomes through its rewards and recognition model, which also provides a first loss guarantee for the fund. This incentivises learning outcomes using cash and non-financial recognition incentives for high-performing ECDs. This will allow ECD operators to benefit directly from improved learning outcomes, the fund notes.

Meanwhile, the 2021 ECD Census emphasised the ECD sector’s critical need for additional resources and support. Currently, only 58% of three-year-old and 75% of four-year-old children have access to early childhood learning opportunities countrywide.

Additionally, the 2022 Thrive by Five22 research showed that only 44.7% of young children between four and five years old are on track with early learning.

Greater investment in ECD is needed to help all young children reach their potential and school readiness for primary school, the partners emphasise.

"Nedbank is fully committed to supporting the education sector and strongly believes that it is a pivotal component of creating a prosperous and thriving South Africa.

"The Department of Basic Education recently announced that two years of ECD will be compulsory for all children before they enter the formal school system in grade one. This fund has come at a critical time and is well positioned to help the school system achieve this goal," says Brown.

"Early intervention through initiatives such as CATALYZE EduFinance are essential to improving outcomes within the education system. The fund addresses literacy at an early age and lays a useful and important foundation for further learning in the formal school system," adds Kaizenvest sub-Saharan Africa programme director Zanele Mocumi.

"USAID is proud to invest in ECD and education outcomes. We call on business leaders to partner with us and invest in childhood education for a brighter, prosperous and more resilient South Africa," USAID mission director Leslie Marbury says.