23 Feb 2025

Putting our money where it counts: Early childhood development

Focus team

Investing in early childhood development is not just an act of compassion, it's a strategic investment in South Africa's future, and it’s an investment that both the private and public sector are increasingly recognising and rallying behind.

Receive Focus insights straight to your inbox

* indicates required field.

Sending...

Please complete all required fields before sending.

Thank you

We look forward to sharing out of the ordinary insights with you

Sorry there seems to be a technical issue

7-10% per annum in returns

Investing potential of ECD

Investing in ECD has the potential to yield 7-10% per annum in returns, according to research from Professor James Heckman. "The formative years from birth to age five are critical for cognitive, emotional, and social development," explained the Minister of Basic Education, Siviwe Gwarube.

Minister of Basic Education, Siviwe Gwarube speaking during an ECD event at Investec Bank

Siviwe Gwarube, Minister of Basic Education

Investments made during this stage yield the highest returns, impacting educational outcomes, economic productivity, and societal well-being.

81%

of Grade 4 learners in South Africa cannot read for meaning

She was speaking at a recent breakfast hosted by Investec, Bana Pele partners, and the Oppenheimer Memorial Trust aimed at galvanising investment into ECD.

Investing for better educational outcomes

Effective ECD programmes become even more impactful given the challenges faced by the majority of South Africa’s school children.

Only 35% of children in South Africa have access to an early learning program, and without sufficient early development, children quickly fall behind the curve. This is evident in a 2021 study by the Progress in International Reading Literacy Study (PIRLS), which showed that 81% of Grade 4 learners in South Africa cannot read for meaning.

South African students also consistently score low in international assessments like the Trends in International Mathematics and Science Study (TIMSS), with learners ranked last among the 59 countries in the 2023 assessment.

The situation is exacerbated by the country’s high drop-out rate, with the Department of Basic Education (DBE) reporting that only about 60% of students who start Grade 1 reach Grade 12.

Faced with this reality, investing in ECD is the key to driving substantial improvements in long-term educational outcomes and boosting school completion rates.

The government recognises this and has prioritised ECD in the National Development Plan (NDP), shifting oversight for ECD from the Department of Social Development to the DBE to improve the quality of education and amplify the focus on child learning outcomes.

Using data to inform policy and investment

The DBE has since implemented and achieved various milestones, including the launch of the Thrive by Five Index, South Africa’s first nationally representative survey of preschool children.

The survey findings show that of the approximately 1.3 million three to five-year-olds in ECD programmes, only 45% are regarded as on track in terms of cognitive development.

To address this crucial need, the department established the Early Childhood Care and Education to address access to Early Learning Programmes (ELPs) and improve the quality of existing programmes.

Government and philanthropy have already contributed roughly R565m towards this initiative, which includes support for training, resources and other intermediary agencies that support community-based programmes that will impact 100,000 children as part of Phase 1.

However, much more is needed, with adequate infrastructure critical in establishing safe environments where young children can grow and learn.

Prioritising the most vulnerable

Unfortunately, South Africa has a major infrastructure backlog, with research from 2014 highlighting that most ELPs need equipment and infrastructure improvements to meet minimum registration requirements to access ECD subsidies.

The ECD Census 2021 also found that of the 42,420 ECD centres across South Africa, at least half were unregistered, making them ineligible for DBE subsidies.

The need for resources is greatest within programmes run in townships and informal areas. As such, there remains a significant need for additional funding and support beyond that provided by the government.

“In response, the DBE has embarked on an ECD 2030 Strategy, which aims to expand access to quality ECD, prioritising the most vulnerable children, by investing in teacher training and development, enhancing infrastructure, and aligning policies to support holistic child development,” explained Minister Gwarube.

“Making further progress in improving the daily lives of most South Africans remains a key national goal,” affirmed Investec CEO, Fani Titi.

“Witnessing the pervasive improvements in living standards — the just dividends of our hard-won democracy – are contingent on an acceleration of effective measures to lift the constraints on our country’s economic growth; not just in the interest of higher GDP, but also to ensure we develop as a society that can realise and harness the potential of its people.”

According to Titi, the country requires greater efforts aimed at equalising opportunities in education to address the legacy social challenges that still plague society.

Accessing state subsidies

In response to the DBE’s call to action, the private sector is mobilising alongside the government and civil society to collaborate on a mass registration drive for ELPs.

Bana Pele (Setswana for “children first”) is a three-part mass registration drive aimed at addressing the application, compliance and registration of over 20,000 unregistered ELPs across the country by December 2025, which would enable state-funded support to flow to these ECD providers.

The private sector also has an opportunity to support an infrastructure fund that aims to raise R150 million to close existing health and safety and infrastructure compliance gaps, which would help make ECD providers eligible for the R17-a-day subsidy per child from the DBE.

As a partner in the programme, Investec is excited about the impact these investments will have on ECD.

“Investec is passionate about education. We believe quality education is the key to reducing inequality, which is very close to our heart as a business because our purpose is to live in society, not off it,” stated Setlogane Manchidi, Head of Corporate Social Investment at Investec South Africa.

While Investec’s corporate social investment strategy and associated efforts have, in the main, focused on supporting high school maths and science education and facilitating access to quality tertiary education, Manchidi says the company recognises the significance of ECD in laying a solid foundation for future learning.

Setlogane Manchidi, Head of Corporate Social Investment at Investec South Africa.

Setlogane Manchidi, Head of CSI, Investec

We believe that when we give children the best start in life, we contribute towards creating enduring worth by improving their chances of active economic inclusion and a better quality of life.

Disclaimer

Disclaimer

The information furnished in this report, brochure, document, material, or communication (“the Communication”), has been prepared by Investec Bank Limited, acting through its Investec Corporate and Institutional Banking division (herein referred to as “Investec”). This Communication does not constitute: a research recommendation, investment, legal, tax or other advice; and is not to be relied upon in making an investment or other decision. The intended recipients should consider the information contained herein to be objective and independent of the interests of the trading and sales desk concerned. Opinions and any other content including data and market commentary in this Communication are provided for information purposes only.

The information contained herein has been obtained, where required, from various sources believed to be reliable and may include facts relating to current events or prevailing market conditions as at the date of this Communication, which conditions may change without notification to Investec and/or the recipient. This is a summary of relevant information and should not be considered as complete.

This Communication may not be considered as “advice” as contemplated in the Financial Market Act, 19 of 2012 and/or the Financial Advisory and Intermediary Services Act, 37 of 2002 as it does not take into account your financial position or needs. Please note that Investec provides products or services to you other than financial products or financial services that are not regulated under FAIS and therefore you may not be afforded the same protections in respect of those additional products or services that may apply in respect of the provision of financial products or services in terms of FAIS.

This Communication may also not be seen as an offer to enter into or conclude any transactions. In relation to the information Investec does not guarantee the accuracy and/or completeness thereof and accepts no liability in relation thereto.

You should make your own independent evaluation of the relevance and adequacy of the information contained herein and make such other investigations as you deem necessary, including, where relevant, obtaining independent financial advice, before participating in any transaction in respect of the securities referred to in this document.

Any opinions, forecasts or estimates herein constitute the personal judgement of the party who compiled this Communication as at the date of this document. Thus, this Communication reflects the different assumptions, views and analytical methods of the specific individual/party who prepared this Communication. As such, there can be no guarantee that future results or events will be consistent with any such opinions, forecasts or estimates.

Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied is made regarding future performance.

There may be risks associated with the information, products or securities, including the risk of loss of any capital amounts invested or traded due to market fluctuations.

There is no obligation of any kind on Investec or any of its Affiliates to update this Communication or any of the information, opinions, forecasts or estimates contained herein.

This Communication is confidential for the information of the addressee only and may not be reproduced in whole or in part, nor shall it be copied, redistributed or circulated, or disclosed to another unintended party, without the prior written consent of the relevant entity within Investec. In the event that you contact any representative of Investec or any party in connection with the receipt of this Communication, you should be advised that this disclaimer applies to any subsequent oral conversation or correspondence that occurs as a result of this Communication.

Any subsequent business you choose to transact shall be subject to the relevant terms and conditions thereof.

Neither Investec nor any officer or employee thereof accepts any liability whatsoever for any direct or consequential loss arising from any use of this Communication or its contents.

Investec Corporate and Institutional Banking is a division of Investec Bank Limited registration number 1969/004763/06, an Authorised Financial Services Provider (11750), a Registered Credit Provider (NCRCP 9), an authorised Over the Counter Derivatives Provider, and a member of the JSE. Investec is committed to the Code of Banking Practice as regulated by the Ombudsman for Banking Services. Copies of the Code and the Ombudsman's details are available on request or visit Investec COBP.