Where SA should focus

The next Uber is unlikely to come from this country, which may justify a shift in the approach to investing in start-ups

It shouldn’t come as a surprise that creating a new technology business can be extremely difficult. For this reason, new research suggests that SA should identify sectors in which it sees potential to become a global leader, and focus attention and resources on these.

“Fast-tracking Our Ecosystem”, a report released by business consulting company Elevation last month, says health-care technology, financial technology (fintech) and renewable energy are the three areas where SA should invest resources. These are the most likely sectors in which SA can contribute to world-class research and commercial activity, it says.

Start-ups, mainly in technology, have sprung up in recent years thanks to the greater availability of bandwidth. Fintech enterprises — aimed at making banking easier and more accessible in real time — have had the biggest growth.

While a little less than 40% of national GDP is generated by small, medium and micro enterprises, a tiny proportion of that comes from high-growth, high-impact ventures or start-ups, says Elevation MD Jason Levin.

Globally, Levin says, innovationled businesses are growing at 4.5%, against overall economic growth of only 2.6%.

But can start-ups find the right support in SA?

SA has more than 300 incubators and entrepreneur development organisations and a few industry bodies.

The Elevation report says

ACTIVE TECH AND INNOVATION START-UPS

that is almost as many incubators, accelerators and start-up support providers as Israel (one of the biggest producers of start-ups in the world) and India together.

However, reactions to the type and quality of SA’S incubators are more negative than positive. Some entrepreneurs suggest their approach is short-sighted and ineffective. Local funders tend to be more risk-averse than their international counterparts — and are less willing to commit funds to an untested idea.

Other stumbling blocks include regulations and policy; limited access to capital; a disconnect between the private sector and government; and a low tolerance for failure.

There are also structural concerns about SA’S economy. A skills deficit as a result of an education system that is largely ill-equipped to produce entrepreneurs of a high calibre is cited as a challenge.

Schalk Nolte, the founder of online security start-up Entersekt, says there is a lack of confidence in SA as a tech hub. There is also an opinion that someone in Silicon Valley will inevitably also think of your idea, or has already, and that