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Impact investment is an emergent field worldwide and it can play an especially important role in Africa. The aim of this study was to examine how impact investors in South Africa manage the tensions between financial returns and social impact.

The research was based on 15 semi-structured interviews with key stakeholders in the impact investment community in South Africa to understand the related challenges, trade-offs and tensions.

There are two opposing views expressed as to whether the tensions between financial return and social impact result in trade-offs. It is proposed that impact investors embrace this duality and seek to approach it through a contingency and a paradox view. The tensions can be approached by focussing on values alignment, contracting processes, engaged leadership and sector identification. The authors integrate the findings into a proposed framework for effective tension management in an impact investment portfolio.

This study was limited to selected South African interviewees. It would be valuable to extend the study to other African countries.

The issue of values alignment between investors, fund managers and investee firms is an important finding for practice. As is the four-part iterative framework for sensing the operating environment, defining impact, organising internally and defining the investment approach.

This study contributes empirical evidence to scholarship around organisational tensions, especially work in hybrid organisations. It affirms the value of a nuanced application of paradox theory. It examines these tensions through the lived experience of impact investing professionals in an emerging market context.