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Conducive Capital plans to help SMEs create jobs

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 08 Mar 2024
Conducive Capital plans to raise R1 billion in funding within the next 24 months.
Conducive Capital plans to raise R1 billion in funding within the next 24 months.

New South African venture capital (VC) firm Conducive Capital envisions playing a role in job creation, by supporting local tech SMEs to scale and create hundreds of jobs.

Conducive Capital also aims to help create unicorns in SA, in the medium- to long-term.

Launched in Johannesburg this week, the majority black-owned company says it will invest in early and growth-stage disruptive technologies that are post-revenue, capital-efficient and have healthy unit economics, with a good product market fit.

It has set a target to raise R1 billion in funding within the next 24 months, from prospective local and international partners.

The founding partners are Clive Butkow, founder and former CEO of Kalon Venture Partners, and Mitchan Adams, co-founder of Ozow, a South African fintech company, and current CEO of Aions Creative Technology.

In an interview with ITWeb on the side-lines of the launch, Adams noted SMEs are a vital engine of job creation and economic growth in SA. “We are looking at supporting about 10 to 15 companies over the next two years.

“We are looking to build sustainable businesses in order to create sustainable jobs. We don’t want to help create jobs that only last six months and then, the next thing the job is gone because people have been retrenched, which is happening all the time in SA.

“We want to build businesses that can help people start their careers there, and have long-term careers and leave the company only if they want to.”

Of the estimated 2.6 million SMEs in SA, about 37% are considered formal, according to the Online Library of the Organisation for Economic Co-operation and Development.

Government has set a target in the National Development Plan to ensure SMEs create roughly 11 million jobs by 2030. However, to meet this target, SA needs to have over 49 000 of SMEs growing at a rate of 20% per annum, according to the Endeavor jobs calculator.

Kalon Venture Partners invested in 12 local tech start-ups across various disciplines over the years – which have gone on to create thousands of jobs, combined, saidAdams.

To fulfil its job creation mission, Conducive Capital’s fortunes are dependent on securing funding.

“South Africa plays a pivotal role in the world’s economy, and we have very good infrastructure, so I don’t see why inventors would not want to invest in our businesses.

“We are planning that half of our funding will come from international funders and the other half will come from local funders,” he continued.

“The challenge we find with international investors is that they have a bad perception of SA, as a result of some of the issues reflected in the media, such as crime, load-shedding, corruption, etc.

“But we have seen some good ambassadors who leave Africa and sell their countries in a positive light abroad. I’m hoping we will be among the good ambassadors that will sell SA to the world and showcase the great talent and potential we have.”

With Africa being the fastest-growing continent in the world, Butkow foresees more unicorns entering the market, with SA forecast to have its first unicorns within the next five years.

“I'll be honest with you; it’s disappointing that we don't have unicorns in SA. But considering what I'm seeing out here now, in the next five to 10 years, we will have unicorns in SA,” commented Butkow.

“We are seeing incredible innovation every day and leapfrogging in emerging technologies such as machine learning and the blockchain space, but we are not seeing the right amount of capital to make that innovation come to life.That's why we need the capital in order to take advantage of the innovation we've seen.”

Experts previously expressed concerns that while Africa’s tech start-up scene has a small but growing list of unicorn companies, it still has no home-grown start-ups that fit the unicorn description.