Unlocking the potential of impact investing in sustainable entrepreneurship : a South African focus

Abstract

This study explores how impact investments can support sustainable entrepreneurship in South Africa by balancing financial returns with positive social and environmental impact. The research, which includes interviews with impact investing experts and sustainable entrepreneurs, finds a common commitment to both financial and social goals, but it also identifies a need for stronger alignment on mission priorities, particularly in terms of impact measurement. Entrepreneurs frequently lack formal mechanisms for measuring impact, whereas investors struggle to establish consistent benchmarks across multiple sectors. The study emphasizes entrepreneurs demand for more comprehensive support, such as access to networks and technical assistance. Entrepreneurs, on the other hand, view governance systems, particularly investor board engagement, as restricting, emphasizing the importance of adaptive investment partnerships. The study also looks at the risks and rewards of impact investing, showing that, while investors face financial, regulatory, and impact assessment risks, they also see significant environmental, social, and economic benefits. This alignment of goals between investors and entrepreneurs is a possible avenue for South Africa's long-term economic success. Key recommendations include developing blended financing models in venture capital to close the funding gap for early-stage sustainable businesses. By improving these models and refining support tactics, impact investments can better match financial and social missions, allowing sustainable entrepreneurship to generate significant societal change and economic development in South Africa.