Project: South Africa Early Childhood Development Outcomes Fund
State of development: Current
Stage of development: Early stage
Type of instrument — Impact Bond: No; Outcomes Fund: Yes; Social Impact Incentives (SIINC): No; Social Impact Guarantee: No; Payment-by-results (no pre-financing): No; Technical Assistance and Market-building program: No; Other: 
Part of a larger outcomes-based financing program: No 
Total expected project development time: >24 months 
Expected length of project (years): 3
Rationale for using outcome-based finance: South Africa’s Early Childhood Development (ECD) sector faces significant challenges, including limited access to early learning programmes (ELPs), inconsistent programme quality, and poor developmental outcomes for children, especially in underserved communities. Over a million children aged 3–5 lack access to ECD services, with urban areas experiencing supply shortages and rural areas struggling with low demand. Quality varies widely, as many ELPs lack resources, training, and effective performance monitoring. Developmental outcomes are low, with nearly half of children in ELPs falling short of key milestones, and socio-economic disparities further exacerbating these issues. Additionally, many ELPs are unregistered, limiting their access to government subsidies needed for sustainability.

To address these challenges, the Department of Basic Education (DBE) and the Education Outcomes Fund (EOF) are developing a programme focused on improving access, quality, and developmental outcomes. This approach incorporates extensive stakeholder input, innovative tools for quality assurance, and measures to streamline subsidy access, aiming to achieve universal access to quality ECD by 2030.
Role of the domestic government — Outcomes funder: ; Service provider: ; Member of project committee: Yes; No formal role: ; Other: 
Feasibility study: Yes
Social/developmental challenge: 1. Many age-eligible children have no or limited access to ECD services. Currently, over one million children in South Africa between the ages of 3-5 have no or limited access to ECD services. The cause of the perceived access gap differs across geographies; in densely populated urban areas, there are an abundance of age-eligible children in demand of early learning programmes but a limited number of early learning programmes. As such, access gap in such areas stems mostly from shortage in the supply of ELPs. In rural areas where there is abundant land but few age-eligible children, access gap can often be attributed to a lack of demand. 

2. Quality of existing early learning programmes is highly variable. There is not yet an established, reliable assessment system for the quality of early learning programmes. Depending on the socio-economic contexts they operate in, ELPs vary in their abilities to access ancillary support, such as resources for practitioner and management training. ELPs also differ in their abilities to conduct systemic performance monitoring and tailor services to meet the diverse demands of children participating in the programme. 

3. Child development outcomes in existing early learning programmes are low. The 2022 Thrive by Five Index Report, for instance, showed that only 45% of children enrolled in an ELP in South Africa are on developmentally on track for both physical growth and early learning. 53% of all children are falling short of at least one of the developmental milestones for their age and are deemed at risk. 4% of all children face significant barriers to meeting developmental milestones in both physical growth and early learning and are deemed at high risk. 

4. Early learning programmes face barriers to accessing the government subsidy, which is key to ensuring sustainability of the service delivered and outcomes achieved. The 2021 ECD census showed that 60% of centre-based ELPs are not registered. To meet this challenge, DBE is working to streamline the registration framework and process to make it easier and more straightforward for ELPs to register and receive the subsidy. 
Expected intervention model: The primary objectives of this programme is to expand access to and improve quality of ELPs in disadvantaged communities to ultimately improve child development outcomes. To achieve these objectives, the programme will contract Resource and Training Organizations (RTOs)  to help establish new, high-quality ELPs and support existing ones with training, registration, and additional resources. By doing so, the programme will complement and strengthen DBE's ongoing efforts to build system capacity and expand quality access to ECD services.
Policy sectors — Employment and private sector development: ; Education: Yes; Social protection: ; Criminal justice: ; Health: ; Agriculture: ; Environment and climate change: ; Water, Sanitation and Hygiene: ; Energy: ; Humanitarian: ; Early Childhood Education: Yes; Other: 
Primary SDG goal: 4
Target population: Children aged 0-5 enrolled in low-fee, full-time ELPs
Targeted number of unique service users or beneficiaries: Initial calculations suggest the programme can reach around 100,000 total children in about 1,500 new and existing ELPs over 3 years. 
Country income classification of beneficiaries — Low-income: ; Lower-middle-income: ; Upper-middle-income: Yes; High-income: 
Notes: Data for this pipeline instrument was last updated in November 2024. 
Delivery location: South Africa