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Cape Town becomes major tech start-up investment hub

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 10 May 2021

In 2020, a total of $88 million (roughly R1.2 billion) disclosed investments were injected into tech start-ups in the City of Cape Town across 46 deals.

So says Wesgro – the official tourism, trade and investment promotion agency for Cape Town and the Western Cape – noting it as the “highest investments made in SA” during the period.

Wesgro revealed this following the release of the inaugural ‘African Tech Ecosystems of the Future’ rankings, which mapped the tech ecosystems around Africa’s biggest cities.

Cape Town boasts a thriving tech ecosystem, being the home of tech heavyweights such as Naspers, Takealot, Aerobotics, Clickatell, GetSmarter, Yoco and Sweepsouth, to name a few.

Last month, it was announced the Cape Town-based R4.5 billion River Club Development will be the new home of Amazon. The US retail giant already has an office in Cape Town through its cloud computing subsidiary Amazon Web Services, which first established its presence in the city in 2004.

Regularly ranked among the “top emerging start-up ecosystems” as well as “top tech employment hubs”, Cape Town is now counted among the fastest-growing regions for foreign direct investment (FDI), according to Wesgro.

It explains that eight countries from across the African continent − South Africa (Cape Town), Nigeria (Lagos), Egypt (Cairo), Rwanda (Kigali), Kenya (Mombasa), Tunisia (Tunis), Tanzania (Dar es Salaam) and Zambia (Lusaka) − submitted their entries for the inaugural African Tech Ecosystems of the Future rankings.

The rankings were compiled by fDi Intelligence, a data division of the Financial Times group, and research company Briter Bridges.

They were judged according to their ability to actively sculpt their tech ecosystems with supportive regulation, funding and infrastructure.

South Africa came on top of the ranking, Wesgro reveals, achieving not only first place overall, but first place for economic potential, start-up status and business friendliness. In addition to receiving the largest number of FDI projects in the software and IT services sector, SA also recorded the second-highest number of start-ups, after Nigeria.

“Cape Town was awarded second place after Cairo for FDI strategy after displaying impressive initiative in creating the necessary infrastructure for a thriving tech ecosystem.

“The Mother City prides itself on its tech start-up scene, crediting its vibrant coffee culture with helping the start-up ecosystem evolve. Over and above its start-up incubators, Cape Town also has a nationally funded ‘Innovation District’, which aims to build a strong technology innovation community,” notes Wesgro.

In response to the ranking, Western Cape minister of finance and economic opportunities David Maynier says: "The fDi Intelligence report ranking is a confidence boost for the digital and technology sector and proof that the efforts being made by the Western Cape government, along with our partners at the City of Cape Town and Wesgro, are achieving the desired result.

“Attracting foreign direct investment to support job creation is key to our economic recovery in the Western Cape. We’re immensely proud to be ranked in the internationally acclaimed ‘African Tech Ecosystems of the Future 2021/22’ report, helping us create further awareness of Cape Town and the Western Cape as Africa’s tech capital."

Bold objectives

Cape Town has been clear about its ambition to be the tech powerhouse of the African continent, launching a campaign dedicated to this cause.

Last November, government partners along with private sector tech enablers unveiled the “Cape Town Tech Capital of Africa” initiative as a way to cement the growth of the tech sector in Cape Town and the Western Cape.

The initiative aims to create an enabling environment for technology companies from across the continent to open business locally, and access clients, funding and institutional support.

According to Wesgro, key among the aspects that make Cape Town the ‘tech capital of Africa’ is the employment ecosystem. “The Cape Town-Stellenbosch corridor contains 450 tech firms employing more than 40 000 people, making the ecosystem bigger than Nairobi and Lagos combined.”

In addition, the region is favoured by venture capitalists (VC), with the Western Cape accounting for the highest number of VC firms in the country.

Wesgro further highlights that Cape Town’s co-working spaces, developer talent, edtech hubs and digital skills training academies, universities, as well as ease of doing business make it a top contender for Africa’s tech capital status.

“The Western Cape has over 30 co-working spaces, the highest in Africa, and 715 free WiFi spots in Cape Town alone.

“Cape Town hosts 38% of the total developers in South Africa, the highest concentration of developers in the country.

“Cape Town has a high density of digital skills training academies and is the location of choice for edtech businesses that are building content for entities and educational institutions across the globe.

“The University of Cape Town retained its spot as Africa’s top university, with Stellenbosch University ranked the third best university in the 2021 Times Higher Education World University Rankings. Students from across the globe come to study in Cape Town, with many being attracted into the growing tech ecosystem.”

Wesgro CEO Tim Harris states: “It’s encouraging to see Cape Town being recognised as the tech capital of Africa. In particular, the improvements in technological infrastructure, enhancement of financial markets and education across the province, and the growing interest from private investors are an exciting signal of the region’s commitment to support start-ups.”