NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

MAX Pichulik is partner at Impact Amplifier.

BUSINESS DAY TV: Regulation 28 allows pension funds to invest up to 15% in alternative assets, and many could be looking for impact-investing opportunities, projects that generate not only financial returns but social gain as well. But often these investment opportunities are too complex even for funds to consider. Joining us for a look at some of the opportunities and challenges in the sector is Maximilian Pichulik, partner at Impact Amplifier.

Max … I suppose the first question is, what is a typical impact investment and what sectors generally tend to attract impact investments?

MAX PICHULIK: Sure, impact investments is a philosophy or style of investments. It used to be called an asset class but in the last two years it’s really emerged as a style of investment that you could point to every asset class and fundamentally we’ve got … it’s a very big net. In the unlisted space we can look at social private equity all the way down to social venture capital. It could be equity, it could be debt, and it could be even some forms of discounted catalytic grants that have some preferable return.

So there’s a whole range and spectrum, but the sectors — if you look at South Africa, there are obviously really big opportunities in energy. Not really the large-scale energy projects, but if you look at everything from RESOP (Renewable Energy Standard Offer Programme) solar, waste to energy, energy for the BoP (balance of plant). We know in South Africa we have high electrification rates but we’re largely still energy poor so the need for decentralised energy generation is a massive opportunity. Food security, agri-processing, the enablement of smallholding emerging farmers into large agri value chains; impact investors are very excited about that. But we’re also seeing collapses in our health system. We’ve got a massive health demand, we’ve got a lack of supply, we’ve got an education system under strain and, I believe, a whole range of products and services from entrepreneurs and, correlating to that, a whole range of financial instruments still need to be created in South Africa.