More and more the world seems to be catching on to the breaking news that the government on its own cannot solve the challenges in society – especially not in capitalist societies. Governments around the world fund of organisations and businesses in countless endeavours to realise their potential in boosting development. These grants are aimed at combatting challenges such as absorbing school drop outs into the economy andempowering disabled people.However, the problem with these grants is that more often than not, there is no monitoring or evaluation to conducted with them in order to find out whether they make positive changes in society or not, countries such as Canada and South Africa are perpetrators and thus also victims of this. This idea of government grants to organisations and businesses in the name of development is an interesting one.
Dr Siobhan Harty, from the Canadian government’sSocial Policy Directorate, explained that the implementation of this idea is very much a result of innovative thinking which is now being highly encouraged in Canada and in other developed countries such as the United States and the United Kingdom. The latest idea in encouraging cooperation in development between the government and the private sector is that of Social Impact Bonds (SIBs) – in SIBs the government transfers the financial risk to the private sector. At the end of a project the government, depending on whether the project was a success or not, will reimburse the parties that carried out the project with a profit added on top. The advantage to this is the efficiency of the private sector, which the government lacks and now seeks to lend by means of SIBs. (One could see this as a form of outsourcing.) SIBs are the most recent and currently also the most complex and difficult form of SIBs that one can find.
With the introduction of SIBs has come a challenge to define the role of governments and the private sectors of those countries that wish to apply them. The UK, currently the leader in the application of SIBs is currently attempting to define these roles. In developed countries this may be a viable model for development projects. But is this model suitable for developing countries as well? One could start by considering the fact that in reality; the private sectors of developing countries such as South Africa are dominated by international companies. In the case of SIBs it is the same international (or foreign-owned) companies that stand to gain more. Locally owned businesses will not reap as much fruit from this initiative as they would wish to. Moreover, is the developing countries’ context suitable for SIBs? Yes these SIBs promote collaboration, the sharing of ideas and so forth. But are developing countries ready for almost ‘passive’ governments? Is outsourcing development a good idea for many war-torn and troubled states? I doubt that Social Impact Bonds could be as beneficial in these countries as they could be in the developed lands.