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How South Africa can Support its Tech Entrepreneurs

Tech ecosystem in South Africa

Gauteng and Western Cape in South Africa are the biggest entrepreneurial hubs in Africa. although SA has not achieved its full potential, there are a vast number of tech entrepreneurs in the country. Therefore, to get to its full potential South Africa should change the mode on which they support and develop the entrepreneurs. In case that is done, it will benefit the country as a whole.

The main reason for that is that technology is taking a vital role in economies across the globe. The cornerstone of the tech industry Information and communication technology (ICT) currently makes 3% of the world economy compared to 1.5%  which was recorded 15 years back. Nations that have heavily invested in nurturing innovation based and digital cultures enjoy a vast wealth and job creation. The nations have also changed the way people live and do business. But is that the case in South Africa? If not yes then how can the country grow and support its tech entrepreneurs in a better way? Some of the answers to the many questions are contained in a research report carried out by Google and published by management consultancy OC&C. Below are seven of the ways to improve and support tech entrepreneurs in SA as extracted from the report.

Education

South Africans are well conversant with educational issues. South African pupils record poor performance in every field in education that includes mathematics to basic literacy. Moreover, graduates are always unprepared to get into the job markets. All these together with lack of exposure to successful entrepreneurs mean SA is not equipping its young entrepreneurs into becoming tech entrepreneurs. The state came out to address the issues by changing immigration policy. This was aimed at attracting highly skilled mathematics and science teachers, researchers, technicians and graduates with most sorted for degrees. But this is not seen as the best way of counteracting the 19,000 skilled professionals to OECD nations.  There is a lot that needs to be done to increase the entrepreneurial potential of school leavers in SA.

Attitude towards failure

Many South Africans venture into entrepreneurship field because of necessity, but the country has a low tolerance towards failure. If you take look at the most successful startup scenes, you will agree with the research that failure is pivotal for innovation and entrepreneurs’ long-term success. Signs are there that tech entrepreneurs in South Africa are moving towards innovation and away from necessity. There is a need for an increased number of role models to help the tech entrepreneurs.

Monitoring and management of support networks

The country has many entrepreneurial support networks that are well established. The government others run some of the networks are funded and run by the private sector. But the support networks are invaluable. There is a need for a significant degree of management of monitoring to ensure that they fully impact the involved entrepreneurs. A massive load of programs might confuse the market further. This is because overlapping initiatives may be hard for startups to overcome due to the lack of a single portal to centralize all the data.

Weeks of regulatory

SA has a straightforward regulatory network compared to its neighbors. It is said that bureaucracy is in a position to create delays and increase costs. The country is ranked 7th in the Ease of Doing Business an assessment by World Bank. The ranking reflects the high regulatory frameworks and similar high costs of carrying out businesses for necessary procedures of businesses. Very tight cross-border exchange controls, startups lacking systems to defend their intellectual property (IP) and labor laws that are less flexible are some of the regulatory networks that limit the growth and development of entrepreneurship. There is a lot that needs to be done to improve the regulatory framework that has an impact on tech entrepreneurs.

Market potential

The difference is internet connectivity where 3.2% are fixed compared to 58.6% mobile subscription. Only 245 of households are in possession of a computer. This limits the ability of tech entrepreneurs to target the consumer’s platform. B2B space is currently appealing, 12% of the country’s GDP is spent on procurement of small businesses. But the access of market is still the major challenge for tech entrepreneurs. The main reason for this is the market structure where SMMEs and private sectors are dominated by large established markets that contribute only 35% to GDP.

ICT infrastructure

The country has made good strides in ICT infrastructure in the past years, but there is still uneven distribution to the access to that infrastructure. Fibre lines that offer world-class connectivity are only accessible to those living in the right areas and who have the means. Those unable have nothing but only a few viable options. For instance, take a look at the mobile data. The data alone is in a position to offer internet connectivity to millions of South Africans. But it remains expensive and slower compared to other BRICS countries despite the recent countrywide protests. The government has set a target of 100% network coverage in the cities. This is quite important to tech entrepreneurship. There are mixed results and to achieve universal connectivity things should rapidly improve.

Access to financial capital

In the country, the Gauteng funding scene is fuelled by vast amounts of government spending and government-directed private-sector spending. Venture capitalists (VCs) and angels are not playing a significant role. Traditional angel and VCs investors fund the Western Cape scene given the many wealthy individuals living in those areas. The investment space has been slightly opened up by Tax incentives. However, investors are still facing restrictions connected to investing in startups in South Africa. Some of the limits are domestic registration requirements of the off-limits industries and startups, which include professional services and gambling, weapons, tobacco or alcohol. Furthermore, few startups are ready to IPO on the JSE that only has 3% of tech startups in its listings. This makes many startups exit using strategic acquisitions.

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Written by Denis Opudo

Am an engineer who's a tech blogger, hit me up on dennis@techinafrica.com and we base our discussion on technology in Africa and the rest of the world.
Denis the Tech guru

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