Funding | Ilifa Labantwana

Increasing funding for ECD

Several studies have demonstrated the potential returns South Africa stands to gain from investment in quality ECD services. A 2017 study estimated that if all children were on track in terms of physical growth, South Africa could add R62 bn/year to its Gross Domestic Product.

Another study found that, if universal access to ELPs resulted in a fully literate working population, South Africa’s GDP could grow by about a quarter as a result. A properly equipped national home visiting programme could save the health sector about R30 bn over 10 years according to a 2018 study; it would also add R427 bn to the country’s GDP through the multiplier effect of increased employment and the added productivity of a healthier population.

The challenge

About 5% of South Africa’s public budget is spent on ECD service delivery each year. Most of the funds are allocated towards maternal and child healthcare and the Child Support Grant (CSG), only 6.5% of ECD spending goes towards early learning, nutrition support and support for primary caregivers. No funds are directed towards supporting women who want to set up new ELPs.

Restricted access to the state early learning subsidy, along with its limitations in meeting the full cost of provision, force parents to be the primary source of funding for ELPs, even though more than half (55.5%) of all South Africans live below the poverty line.

Reliance on parent fees threatens the sustainability of ELP operations, limiting their ability to plan for quality provision or grow their services. It is also an impediment to scale as it discourages potential practitioners from entering the sector. The consequence of this is a highly unequal ELP terrain, in which the quality of programmes varies significantly.

Timeline of activities

2017

We supported the National Treasury and the Department of Social Development (DSD) with the establishment, motivation, design, costing and planning for the administration of the landmark ECD Conditional Grant. The Grant, introduced at R813mn for 2017/2018 and 2018/2019, is divided into two components: a subsidy component and an infrastructure component.
Under the infrastructure component of the ECD Conditional Grant, the Maintenance Grant (MG) is the first – and only – national fund earmarked for upgrading and maintaining the infrastructure of ELPs. SEIS informed the design of the MG.
We supported the National Treasury and the DSD with estimating the cost of universal access to ECD to inform long-term resource planning.
Bulk registration of playgroups unlocked R6mn in government funding, subsidising 1,365 children.

2018

We spent time mapping and understanding the subsidy process and used this knowledge to develop ECD subsidy guidelines with the DSD to simplify administration of the subsidy for government officials and ELPs alike.

2019

Under the subsidy component of the ECD Conditional Grant, we lobbied and supported the government to enable non-centre-based programmes to access the subsidy.
The low-cost new-build ECD centre pilot resulted in the infrastructure component of the ECD Conditional Grant being extended to new builds.

2021

We completed a high-level public funding mapping exercise, which identified potential public funding sources for ELPs at various stages of their development. We followed up with a three-year financing roadmap for ECD which estimated the costs to reach universal access to ELPs and showed how different pots of public funds can be unlocked for the expansion of ECD services.

2023

NPO registration was dropped as a requirement for ELPs to receive the ECD subsidy.
ECD subsidy guidelines were approved by Department of Basic Education (DBE).

2024

We historically supported DSD, and subsequently the DBE, with annual budget bids to National Treasury, resulting in the value of the ECD Conditional Grant increasing four-fold since its inception, reaching R1.6 bn in 2024.

The big shifts

The rigorous and evidence-based technical support we provide to the government has resulted in a slow but steady increase in the number of poor children accessing subsidised ELPs. Our financing work has contributed to the number of subsidised children in ELPs increasing by almost 25% from about 507,000 in 2016/17 to some 634,000 in 2023.
Ilifa’s work contributed to the infrastructure component of the conditional grant growing to R157 mn in 2024/25, and equally important, the grant is now also targeted at unregistered ECD programmes.
The ECD subsidy guidelines have been approved by the DBE and we are supporting provinces with their rollout. Our efforts to reduce the administrative burden linked to accessing the subsidy led to the removal of NPO registration as an eligibility requirement for the ECD subsidy.

Crossing the Bridge

To further enhance our financing work, we will work on designing innovative approaches that bring together and increase both public and private sector investment in ECD and advocate for ECD as a key driver of human capital development. We will also continue exploring appropriate payment mechanisms to enable these funds to reach their intended beneficiaries. We will also boost our budget advocacy efforts, including through the Real Reform for ECD Coalition and the Budget Justice Coalition, to create a groundswell of public pressure for improved ECD budgeting and expenditure.