Another round of international investment to SA tech industry

The SA Startup Act Movement (SUA), an initiative to support high-growth startups in the country, has entered a third round of investment by the British High Commission.

Another round of the UK-SA Tech Hub comes just months after the formation of the Government of National Unity (GNU) coalition, which is explained to be another reason for another round of the investment.

Milisa Mabinza, Director of the UK-SA Tech Hub, says since the establishment of their role to support the country’s high-growth startups, they have seen results that have impressed them.

UK-SA Tech Hub

The UK-SA Tech Hub was established with the purpose to drive the efforts of the SUA to spur local government to amend and implement policies that better support the exponential growth of South African startups – to the benefit of the entire economic ecosystem and job creation.

“Following the elections, we believe the GNU paves the way for more rapid change with regard to policy reform, given that a coalition government can effect changes more efficiently on a provincial level and are pleased to be involved in such important legislative change,” adds Mabinza.

The SUA, a collective of SA startup investors, incubators, accelerators, and founders led by a steering committee made up of leaders in SA’s entrepreneurship development sector, plays a vital role in steering the policy framework in South Africa and bringing about policy reform that effects SMEs’ ability to do business in this country.

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Government announcements about tech

She says over the recent months, the government has made announcements concerning the legislation that will have an impact on the startup ecosystem.

“The update in the exchange control circular, for example, has been pivotal, easing restrictions on capital flows, which greatly aids startups looking to attract foreign investments and expand globally.”

She highlights that the SA Startup Act Movement secretariat has over the past years sought to identify a host of other legislative hurdles that hamstring SMEs’ ability to grow by engaging with national treasury and government, as well as other key stakeholders on red tape issues.

“It has been advocating for visa reforms since 2014 and has been clear on its position that an influx of diverse, highly skilled, and innovative entrepreneurs would offer the country significant benefit.”

The gap between skills available and jobs required

She quotes the W&RSETA, saying that the gap between the skills available and the jobs requiring them [skills] could cost the country an estimation of R1.6 trillion in unrealised economic potential this year.

Matsi Modise, chairperson of the SUA, says the Digital Nomad Visa will make a significant impact in addressing the skills shortage that the country is facing, especially tech-related talent.

“Scarce skills, such as those in engineering, information technology, healthcare, and finance, are in high demand, and high-growth startups offer potential job opportunities for these global workers, who, in turn, pass on their skills and knowledge to the local workforce.”

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Startup Act is on the horizon

Modise points out that the SUA recognises that policy reform is at the core of creating a thriving SME ecosystem and has long advocated for the establishment of South Africa’s own Startup Act.

“A dedicated Startup Act would address the challenges faced by startups in the country and act as a foundation to support these businesses.” Modise adds that the need for a Startup Act is important as digital transformation continues to reshape industries and create new opportunities.

“In addition, it would have a far-reaching impact on attracting long-term investments such as the UK SA Tech Hub, which will support the country’s broader economic aspirations.”

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Key policy reforms

“The key policy reforms that the SUA has been lobbying for to address the challenges facing high-growth startups are:

• The current IP legislation imposes onerous and costly restrictions on transferring IP offshore – a core requirement for startups to attract capital from the global VC market;
• The cumbersome and costly exchange control restrictions imposed when a startup establishes their global headquarters—likewise a requirement to raise capital from the global VC market. Practical interventions that will contribute to an inclusive payments digitalisation programme have been developed and are being implemented in 2024;
• Capital gains tax, which is triggered well before the startup’s potential future liquidity event, making it more costly for SA startups compared to other nations; and
• A Startup and Remote Worker Visa to attract international high-growth startup founders and enable entrepreneurs to hire a handful of highly experienced foreign talent to share their knowledge and expertise with their teams and drive growth. The Digital Nomad Visa was introduced in May 2024.”

“We are invested in the SA Startup Act Movement for the long run, and we want their goals to be realised and come into effect. We understand the enormous contribution that SMEs make to the country’s economic development,” adds Mabinza.

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