Start-ups have their say on law
Start-up players in SA recently released findings as part of a proposal to create a start-up law, calling on the government for legislation to enable local tech-backed businesses to scale faster and compete globally without having to go offshore. “Something needs to be done,” says Matsi Modise, chair of the steering committee putting together the legislation.
Start-up players in SA recently released findings as part of a proposal to create a start-up law, calling on government for legislation to enable local tech-backed businesses to scale faster and compete globally without having to go offshore.
“Something needs to be done,” says Matsi Modise, SiMODISA vice-chair and chair of the steering committee putting together the legislation.
“As high growth, high-impact start-ups in SA, we still don’t have that traction, we’re not collaborating or speaking with one voice,” she said at a webinar where the committee unveiled its draft proposal.
Start-ups have become engines of growth around the world, with lots of capital finding its way, over the past decade, to companies such as Uber, Airbnb and TikTok.
Locally, the likes of payments specialist Yoco, and Go1, the first SA start-up to be valued at $1bn, stand out. So big is the interest in these innovative business models that Naspers, SA ’ s largest publicly listed company, dedicated more than R1bn to finding and investing in these companies locally, recently ploughing
R100m in agriculture tech firm Aerobotics, and another R120m in Hollard-backed Naked Insurance. In a world where highgrowth technology start-ups are changing our way of life and the modern economy, local players say present legislation holds back companies from reaching their full potential. Other countries on the continent, such as Ghana, Tunisia, Kenya and Nigeria, are all working to develop such acts for their start-up ecosystems.
“Some of the legislation that we have is making us uncompetitive globally. We’re looking to see if there’s something that can work in parallel or whether we have to create something brand new,” says Modise.
The collective is out for a start-up law to be enacted through an amendment or a standalone act. The steering committee consists of representatives of Digital Collective Africa, Endeavor SA, i4Policy, Loudhailer, the Southern African Venture Capital and Private Equity Association, Silicon Cape, SiMODiSA and Wesgro.
“A start-up and a small business are not the same. They are built for different reasons,” Vusi Thembekwayo, CEO of MyGrowthFund Venture Partners, recently told Business Day.
Thembekwayo, who is also chair of Silicon Cape, said: “In my mind, what we need in SA is to build unicorns (tech start-ups valued at more than $1bn) that are job creating.
“What we’ve seen are unicorns that are not necessarily job creating. The focus has been valuation growth. We have a big role to play in building businesses that serve not only commercial interests, but social impact as well. The World Bank is doing a lot of work to co-ordinate those efforts,” he said.
At the same time, proponents argue that much potential investment is not finding its way to SA.
“A lot of our start-ups, when they go through a high growth phase and get the opportunity to scale globally or start attracting funding to get to their next growth phase ... many of them are faced with the reality that they have to go offshore ... because of the realities of attracting investment to SA,” says Stephan J Lamprecht, founder of VS Nova, a management consultancy providing the steering committee with research and advisory services.
Proposed interventions and findings advocate for relaxations of legislation and policies that the group says are “impacting on the growth of, and investment into startups”, including currency exchange control and capital gains tax.
The steering committee says that other relaxations include simplifying procurement policies with which to scale up the involvement of start-ups in the national economy; direct funding of start-up businesses through automatic reinvestment of PAYE and VAT; and easing of labour and immigration laws to foster the availability of and access to talent.
In addition, there are calls for the introduction of incentives “to stimulate capital contributions from early stage funding entities”.
Findings for the draft proposal were gathered over the past six months through a combination of desktop research, focus groups and research contributed by the World Bank, one of the main sponsors of the study.
IN MY MIND, WHAT WE NEED IN SA IS TO BUILD UNICORNS (TECH START-UPS VALUED AT MORE THAN $1BN) THAT ARE JOB CREATING
Vusi Thembekwayo MyGrowthFund Venture CEO