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Ramaphosa urged to support start-up innovation

Read time 4min 30sec

Representatives from the South African Start-up Act Steering Committee met with president Cyril Ramaphosa last week, to discuss issues such as creating a framework to support start-ups on innovation and new technologies to spur competitiveness in the sector.

The virtual meeting, attended by individuals from various organisations invested in the growth and support of local entrepreneurs and businesses, sought to discuss what is required to eliminate the red-tape obstructing the growth of SA’s SME sector.

The Start-up Act is a proposal that aims to advance economic development in SA. It seeks to create a framework for the creation and development of start-ups based on creativity, innovation and the use of new technologies to create strong added value and competitiveness at national and international level.

Among the attendees were representatives from the South African Start-up Act Steering Committee, comprised of AfricArena, Digital Collective Africa, Endeavor South Africa, i4Policy, Loudhailer, Southern African Venture Capital and Private Equity Association (SAVCA), Silicon Cape, SiMODiSA and Wesgro.

During the conversation, several key challenges emerged as common themes. These included administrative complexity; the red-tape that constrains growth and ability of tech start-ups; labour regulations; and a critical funding gap and the inability to access finance due to lack of formalisation, proven track record and collateral or adverse credit history.

Interventions were proposed for creating an enabling regulatory environment, establishing a level playing field and developing a digital intervention programme for SA.

Matsi Modise, founder of and investor in Furaha Afrika, vice-chairperson of start-up support vehicle SiMODiSA, and chairperson of the SA Start-up Act Steering Committee, indicated to the president that there is no better time than now for SA to re-position itself as a gateway for high impact, high growth technology entrepreneurship on the continent.

“South Africa is losing a lot of talented entrepreneurs due to an outdated and disabling policy framework. In order for South Africa to be an attractive destination for investors, talent and entrepreneurs, we must implement a Start-up Act, which will be an all-encompassing pathway for the country to be an African start-up nation.”

Last month, the committee released a Start-up Act draft position paper, which details research findings, gathered over the past six months, based on focus groups and research contributed by the World Bank, shedding light on the start-up landscape in SA.

Among the suggestions in the position paper is that innovation-driven start-ups with a turnover of less than R100 million should be exempt from the limitations of existing policies and the red-tape that constrains their growth and ability to contribute to job creation.

During the discussion, president Ramaphosa noted: “With regards to the South African Start-up Act, I would like us to consider that... If we are serious about promoting entrepreneurship, we need to think about how we boost start-up activity.”

Tim Harris, former Wesgro CEO and board member of tech start-up body Digital Collective Africa, added his input: “There is an urgency to implement these proposals now because SA's tech leadership on the African continent is under threat, even as the world is waking up to the potential in the market.

“I was in Europe last week with a group of young African tech entrepreneurs, and it was clear that momentum is shifting to Kenya and Nigeria. South Africa is losing its competitiveness on the continent.

“But we still have the deepest capital markets in Africa, so we need to reinstate the 12J tax system to crowd this capital into venture capital and get our entrepreneurs funded. Our institutional and infrastructure base remains the strongest on the continent, which means we can attract, nurture and grow IP-driven companies in the tech sector.”

Another issue raised during the meeting is the need to foster a vibrant ecosystem for start-ups – this requires addressing systemic constraints and regulatory barriers, in addition to direct enterprise support and funding.

Tanya van Lill, CEO of local venture capital fund SAVCA, said: “Our venture capital fund managers get a lot of criticism that they don’t invest in enough businesses or entrepreneurs, but the fact is that there just aren’t enough VC fund managers in SA with big enough funds to make the investments that are needed and to invest in the vast number of entrepreneurs that are looking for funding.

“One of the biggest challenges they cite, is that they battle to fundraise themselves – so even the venture capital industry battles to fundraise.”

Other crucial enablers include developing skills in digital and tech, addressing late payment of SMMEs through a mechanism for purchase order financing, and tackling other causes of business failure.

Upon wrapping up the meeting, it was agreed that a partnership approach would be crucial for strengthening linkages between government and organisations in the sector and for developing solutions collaboratively.

Once input to the Start-up Act position paper is collated, it will be finalised and officially submitted to government.

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