Johannesburg, 07 Sep 2012
South African tech start-ups have a long way to go before they can enjoy the success of their international counterparts.
This is according to Sean McPhee, corporate finance partner at Deloitte, who says that, with any new company, initial capital investment is one of the greatest challenges, as investors have to back a person and an idea rather than a material business. “In the end, it's a bet, with investors having no guarantee if the business they are funding will be a success or a failure.”
According to him, because SA has no equivalent of America's Silicon Valley, new tech companies face an uphill battle to secure funding and become successful - particularly in light of the fact that many South Africans still lack access to basic technology.
Internationally, he says the situation is vastly different.
Despite the economic challenges facing the world, the Chinese economy has enjoyed positive growth, a bonus for small tech businesses in the region. One of the conclusions drawn from the 2011 China Deloitte Fast 50 competition was that the tech industry is facing “unprecedented financing opportunities” and that the development of new technologies is essential due to the enormity of the market.
Similarly, insights from last year's Central Europe competition highlighted that both business and commercial sectors will become more virtual in the future, with Ahmed Hassan, TMT industry leader of Deloitte Romania, stressing that cloud computing is an inevitable step in the progression of corporate IT solutions.
But SA is still in the fledgling stages of technology adoption, says McPhee, and while smartphone penetration is moving the country forward, there are several issues that need to be addressed before SA's tech SMEs can match the success seen internationally.
At present, roughly four million South Africans have access to technology, McPhee says, and the ramifications of this are that many South Africans still don't trust technology. “They prefer to deal with tangible things that they can touch and feel”, he points out, adding that, as access improves, a change in this mindset will be inevitable.
For McPhee, in the meantime, new tech companies can benefit from the exposure garnered by appearing on the Technology Fast 50 index and from the support offered by Deloitte as part of the competition.
“Yes, the South African market is small, but that doesn't mean that success isn't possible,” he says.
There is just one week left to enter the South African Deloitte Technology Fast 50 programme. For more details, click here.
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