Financing The Health Divide A Social Impact Bond Is A Good Place To Start

By: Dr Jenny Coetzee & Minja Milovanovic

For decades, South Africa’s response to the HIV epidemic has been subsidised by foreign donors despite a government commitment to universal health coverage. Admittedly, although significant  progress can be attributed to domestic investments, international partners have played an important role – including the United States President’s Emergency Plan for AIDS Relief (PEPFAR) programme.

More than US$8 billion has been invested in South Africa by PEPFAR since its inception in 2003.  Just last year, the US provided US$453 million (R8.5 billion) in direct funding to the South African government under PEPFAR – accounting for 17% of the government’s funding allocated to South Africa’s HIV response. Significantly, this excludes funding of much-overlooked other recipients within the broader health related services ecosystem.

While international donor funding has unequivocally saved millions of lives, it has also concentrated power and decision-making in the hands of external actors. Consequently, this entrenched situation leaves recipient countries, such as South Africa, extremely vulnerable when geopolitical and funding priorities shift.

The R3.2–6.5 billion (exact value yet to be determined) funding gap exposed by the current US funding freeze is proof that the tried-and-tested global health funding mechanisms are unsustainable in the current guise.

It goes without saying that this is not just about money. It’s about who is ultimately in control of the global health funding ecosystem and whether these funding structures perpetuate inequities rather than addressing them.

Recently, Professor Ntobeko Ntusi, the President and CEO of the South African Medical Research Council (SAMRC), called for a reconceptualization of global health, along with a dismantling of skewed financial, epistemic, and power dynamics. The present HIV funding crisis offers a unique opportunity to do just that.

The abrupt freeze of USAID and PEPFAR funding in South Africa is not just a financial setback, it’s a reckoning. Millions of South Africans rely on these programmes for essential HIV prevention, treatment, and care. It’s common cause that throttling of external funding is extremely detrimental to the progress South Africa has made in its efforts to control HIV.

Although short-term funding was secured through to the end of March 2025, meaningful long-term support and fresh solutions remain unclear. The deafening silence surrounding a well-articulated response to mitigate this issue – and an innovative one at that – seriously risks undermining the severity of the HIV epidemic.

South African doctor
South African doctor

There were 152 000 new HIV infections recorded in 2023. The disruption and cutbacks of USAID and PEPFAR risks a public health catastrophe: rising infections, increased mortality, job losses in the healthcare and other often-overlooked, related sectors, as well as the collapse of community-based interventions. The HIV care continuum will decline as a consequence of reduced funding. Studies suggest that lifetime cost per person might decrease, but only as result of reduced life expectancy. The overall cost to society will be devastating.

A different funding model

Much has been and will continue to be spoken, written and debated over on this topic. But as the crisis deepens, and we realise there is no going back, we need to call for an alternative mechanisms of funding.

The days and weeks following ‘the freeze’ have been littered with rumblings of discussions between government and private stakeholders on how to address the loss of funding. However, we are yet to see a roadmap that guides our next steps.

If South Africa is to truly own its HIV response, it needs a new financing model – one that is outcomes-driven, locally controlled, and financially sustainable.

One option would be a Social Impact Bond designed to meet the criteria of being an innovative financing mechanism focussed on addressing one of the country’s most pressing challenges.

The conversation needs to start somewhere. What better place than an investments that provides a measurable social or environmental impact, as well as a financial return, and mitigates the risk of political shifting sands.

Here’s a simplified rendition of how a social impact bond could work:

  • Private investors provide upfront capitalto fund critical HIV services.
  • The government repays the private investorbased on predefined health outcomes (e.g., HIV testing rates, treatment adherence). The repayment takes place within specified timelines and with an agreed return on investment based on the achievement of outcomes.
  • All outcomes are monitored by an independent evaluating body that, based on outcomes, triggers repayments.
  • To minimise some risk for private investors, we envision a blend to financing that makes provision for a concessional loan, along with philanthropic grants (think Solidarity Fund 2.0).

 

This model shifts the immediate risks and mounting pressures away from government while ensuring services continue without further disruptions. In the long term, the model provides for a natural transition of HIV programmes into the broader department of health ambit. It redistributes power through allowing South Africa to take full control of the health value chain, aligns financial incentives with health outcomes, and builds long-term resilience.

The model also aligns with B-BBEE and Section 18A tax incentives to attract corporate investment in health as a shared national priority. Social impact bonds are not new to South Africa, with a number of such investments having been implemented in the past. In fact, the SAMRC is currently overseeing one.

The HIV response in South Africa is a microcosm of broader global health inequities. Wealthy nations control the purse strings, dictating health priorities in the Global South. When funding dries up, it is the people on the ground who suffer and not the decision-makers in Washington, Geneva, or London.

If we are serious about reconceptualising our local health, the time for patchwork solutions is over. We must move beyond donor dependency and build self-sustaining, locally driven financing solutions. A social impact bond is one such tool.

This is more than a funding challenge, it’s a question of health sovereignty. It’s time we bridge the gap ourselves. If you’re an impact investor, policymaker, or corporate leader, now is the time to step-up and be counted. The future of South Africa’s HIV response, and the precedent we set for global health financing, depends on it.

Dr Jenny Coetzee & Minja Milovanovic are the founding partners of African Potential, a social impact and sustainability focused public benefit organisation. They have over 35 years collective experience on the frontlines of the HIV, violence and TB epidemics in South Africa, working among some of the country’s most marginalised and vulnerable populations