The Industrial Development Corporation (IDC) has cut its ICT investment by at least 21% in the last year. This is despite government's stated objective to invest in ICT to drive economic growth.
In its 2006 annual report, released yesterday, the IDC reports a profit of R4.3 billion, a 477% increase from R753 million. New funding approvals amounted to R4.2 billion.
A large chunk of total funding approvals went to the mining and beneficiaries sector, which received R3.42 billion. Funding for transport and financial services came second, at R773 million, a jump from R472 million in 2005.
The ICT sector was the second least supported sector in 2006, with funding approval for new business amounting to R161 million, a drop from R205 million in 2005.
Of these approvals, 83% was allocated to black economic empowerment companies, notes the IDC. The corporation also approved funding for three call centres, creating 400 jobs, it adds.
Capital allocation for the year was reduced due to the small number of applications received and the low average value per application, the IDC says.
Speed to market
Jill Sawers, a director of the Innovation Hub's Maxum Business Incubator, says ICT start-ups typically need low start-up funding, as entrepreneurs mostly need a clever idea and technical skills to develop a product. A technology start-up usually requires between R250 000 and R5 million to launch, she says.
However, there is a strong need for funding to take the product to market. "Often speed to market is the only protection small enterprises can get for their intellectual capital, as they cannot get patents for software products."
Sawers says the poor quality of applications is one of the problems faced by institutions providing small business financing. "Individuals come to us with good ideas, but they are not well thought out at all."
She says the Innovation Hub received 165 applications for incubation in the past year, with only 20 submitting a business plan. Of the 20, the hub took three. "I'd love to be able to take in at least 10 new companies every year."
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