South African banks invest in children - then government pays them back

In the Western Cape of South Africa, a former doctor called Tracey Naledi is developing a new type of funding to help government extend essential services beyond the limits of its own resources. Under the terms of the social impact bond that Naledi is creating, investors will provide the capital for a project looking after babies, infants and their families. If, on the infants' second birthday, they are physically and psychologically healthy, the government of the Western Cape will pay a return on that investment – out of money that it will save in healthcare and remedial education further down the line.

Naledi trained and worked as a clinician before moving into public health in Botswana as well as South Africa, with a particular focus on HIV/AIDS. She briefly went to the non-profit Management Sciences for Health, but came back because she realised that, despite its deep pockets, she always ended up knocking on government's door to get things done. As well as setting up programs in areas like combating depression in pregnant women and new mothers, she founded the country's first Health Impact Assessment Unit – a body that measures the effect of government projects on public health.

Born in Johannesburg, she now lives in Cape Town and has two daughters. She talked to Apolitical about why it's so difficult to innovate in government even though everyone says it's important; how her work is a continuation of the struggle against apartheid; and what she has learned about how to lead change and make good ideas actually happen.

How are you?
I'm well. I've been reading on Apolitical about public servants doing amazing things all over the world and I'm very encouraged; it is motivating because working in the public service has its challenges, and sometimes you feel like throwing in the towel and going off into the sunset.

The old-fashioned everyday signing off bureaucratic documents would really kill me

What stops you throwing in the towel?
I feel like it's my duty. In the '80s I was in school, and we participated in the protests against apartheid and things like that, but I kind of feel cheated that I was never really in the forefront of change in the country. So this is also my way of contributing.

And actually, change starts with individuals, so I try very hard to make my work have meaning – because it's so hard working in a bureaucracy, I have to love it, I have to look at the things I'm doing and feel like, you know what, this is going to make a change. Or I'm going to try something new and see how we can do things differently, how we can do things better. The good, old-fashioned everyday signing off bureaucratic documents would really kill me. That's not what I'm about.

So you see a line of descent from the anti-apartheid struggle to your work?
It's a continuation. Apartheid in my view was really about preventing people from being the best that they can be. I'm a great believer that, as an individual, you have to take responsibility for your own life, but if you don't have a supportive environment – like if I want to go to school, but there's no school available for me, then it's the government's fault. If I'm sick and I'm willing to go to the doctor, or if I want to eat healthily, but there's no healthy food available that's cheap enough for me to buy, you can't put all the blame on individuals.

Government has to create an environment for people to make the right decisions about their health. And apartheid took away the right environment. And that's why I say part of it is I'm secretly jealous that I was not part of the leadership in the struggle. But I will contribute in another way. I happen to be in the health sector, and being where I am I have the opportunity to be very influential. So I feel a great sense of responsibility. And of privilege also. I feel quite privileged to be able to do what I do.

It's a new thing for our country, but at least we're trying it

So what is your work?
My job really is to look at the things that are driving the burden of disease, identify some of those things and develop policies that will reduce it.

You're creating a social impact bond to improve the health of very young children. Do you think these types of bond are the future for public service?
Well, I've seen the evidence, which certainly suggests so. And that's why we're trying them here. It's a new thing for our country, but at least we're trying it.

What does your bond address?
We're focussing our project on the first thousand days. From conception to two years old, that's around a thousand days. And all the evidence shows that, within that period, there's big bang for buck.

If you can invest in a child in that period and make sure their brain is fully developed, so they have all the health and nutrition that they require, you make sure the psycho-social support is there, the early learning, all that stuff, and the safety and security, in terms of them living in healthy and safe environments. If you can deal with those main components, you'll have children who are well developed by two years old and ready to take on the world.

What outcomes are you paying for?
We want to make sure that women go to the ante-natal clinic early enough, that they have at least four visits, that they do their HIV tests, there's a whole list. But the ultimate outcome we're looking for is that at two years old, the children are fully developed in height and weight and psychologically, so we'll do psychological tests and things like that to make sure they're ready to go to early childhood development centres. But we're not going to wait for two years, we've broken it up into six-month chunks.

We say we must innovate, but it's difficult to actually do that

Have you encountered any difficulties specific to this model?
Yes. In essence, we're making a commitment to pay the majority of the money a few years down the line, but we have no certainty whether the financial resources will be available then to honour the commitments, especially in this context of resource constraints. So even though we have a budget for three years only the first year is 'firm' and the rest can change. We have seen that this year, where our allocations are less than what we had expected.

Is it generally difficult to create innovations like this in government?
Yes. [Sighs, then laughs] Well, you're working with government, so we say, 'Oh, we must innovate, innovation is important, but it's difficult to actually do that, because, say, in the private sector, for any ten new businesses that start, maybe two will survive. The idea is that if you're going to do new things, you must be willing to fail. For government, that's difficult, because you're talking about public resources.

But we're getting there. I'm going through the hoops, I'm talking to all the important people. When you do things differently, particularly with procurement in our country, where there is a challenge around corruption, it becomes a bit difficult. But, you know, I'm a tenacious public servant. My experience is that you've just got to just slowly but surely work through the process and work through the structures, and make sure everyone understands what you're doing.

Nobody wants to return money to the Treasury

What are people worried about?
One of the big fears from my department is that under-spending is as big a sin as over-spending, because if you're under-spending, you're not spending the resources that are meant for the people. So if you're telling me you're only going to pay by outcomes, what if they only achieve 50% of what you ask, does this mean you're going to spend only half your money? We can't afford under-expenditure. Nobody wants to return money to Treasury, because it shows you're not doing your work.

How do you get past that paradox?
It's people, it's relationships, it's spending time with people. Everything is about how you say it and how you sell it. I've worked in the NPO sector before and the big difference is that I'm here, I'm not going anywhere, you can't get rid of me. If you say no to me, that's OK, I'll listen to your comments, and I'll come back again having addressed them. Whereas if you're on the outside, someone says no and the door closes.

What one bit of advice would you give about how to get things done in government?
Don't try and fight the system, just work with it. If they say: fill in three forms, then fill in the three forms. If you try to say, 'It doesn't make sense, I only want to fill in one form', maybe it doesn't, but that's what the process is today, so if you want your thing done today, that's what you need to do.

Have particular colleagues or mentors helped you navigate the system?
Absolutely. Nobody can survive without mentors. My very first mentor was a gentleman called Fareed Abdullah, who at the time was the Deputy Director General for the district health services. He was the man who started the first anti-retroviral primary care HIV programmes while there was still HIV denialism in our country. I was blessed enough to be in the right place at the right time, and I had the opportunity to work with him on some of that.

The lesson I learnt from Fareed is just to say, whatever you want to do, if you think it's right and it's in the interests of our people, you can do it. He was working in an environment that was incredibly hostile to what he wanted to do, but he got it done. I admire him greatly. He made me realise that you can even go against national policy if you believe in it badly enough.
Even now, I think that is a philosophy that we have in our department: to try by all means to do what we need to do. To say, 'We're not here to be paper pushers, we're not here to tick the boxes, we're here to change people's lives.'

That's what I learned and try to practice, and, yeah, we have the bureaucracy, but you try not to focus in so much on that, and just get stuff done, just get on with it and just do it, you know?

• Tracey Naledi's Social Impact Bond was approved the morning after this interview was published.

(Picture credit: Flickr/Steve Evans)