Technology

The Western Cape is supercharging South Africa’s tech revolution

BDO

For most, kicking back and relaxing is best done in the mother city. From beaches to winelands to the jewel in its crown, Table Mountain, ‘Slaapstad’ offers residents and visitors the perfect place to wind down and breathe easy. But when it comes to technology, South Africa’s tech capital is anything but sleepy.

The Business Services and Outsourcing (BSO) division of global audit and advisory firm BDO, recently hosted a discussion to unpack the phenomenal growth story of the Western Cape’s tech industry. Ranked as one of the world’s fastest-growing hotbeds of innovation with more than 500 tech firms including e-commerce giants Takealot and Amazon, the region collectively employs more than 40 000 people, a number which grows daily. This community of tech entrepreneurs, developers, creatives, investors and venture capitalists are setting the stage for a booming tech ecosystem.

Africa has been touted as the new Brazil in the technology arena – venture and technology growth investors poured an estimated $19.5 billion into Brazil in 2021, making it one of the fastest growing destinations for high growth tech businesses in the world. Although Nigeria and Kenya have taken the lead in Africa’s tech explosion, in the African Tech Ecosystems of the Future 2021/22 report, Cape Town was recognised for its achievements in the technology and digital innovation sectors and was ranked first for economic potential, business friendliness and start-up status. It is also home to approximately 70% of South Africa’s start-ups and employs more people than Lagos and Nairobi combined.

“The Cape tech industry is creating companies that are globally relevant and already employs thousands of people,” explains the event’s key note speaker, Joshin Raghubar. A pioneer in the early days of the tech boom that hit South Africa in the late 90’s and Chairman of the Cape IT Initiative (CITI), Africa’s oldest tech start-up and incubator, Joshin decided from the onset that he was going to become an active player in shaping South Africa’s tech environment as a conduit for economic growth and development for the country. Since then he has founded iKineo Ventures, a venture builder and investment firm, and has recently made waves in South African Health tech sector by facilitating the formation of venture portfolio firm Kena Health. The Kena Health App aims to be the largest digital healthcare provider in Africa offering real-world, cost-effective healthcare to millions of South Africans.

Tech start-ups have the potential to address many of Africa’s endemic challenges and form an integral pillar within the small and medium enterprise sector. They contribute to GDP, play a massive role in decreasing unemployment and have the ability to put South Africa on the global stage. 

Fortunately venture capitalists are recognising this potential. In 2020, a total of $88 million (R1.2 billion) disclosed investments were injected into tech start-ups in Cape Town. The Western Cape also has the highest number of venture capital firms, which makes it easy for start-ups to access funding and ultimately replicate Brazil’s success playbook.

But there are still challenges to be faced. One of these being infrastructure. Closing the infrastructure gap will be crucial in stabilising the continent’s varying economic performance and supporting the growth of its tech sector. It can be tough for aspiring African founders and early-stage start-ups to innovate when the necessary infrastructure doesn’t exist. Innovative strategies will be key in bridging infrastructure with solutions like aggregation models, Uber style models and gig economy models – essentially finding platforms to integrate infrastructure.

Banking too has been a challenge, but more and more open banking is helping to drive innovative new financial products for individuals and businesses. In the future banks will no longer be the sole providers of financial services and partnerships are already being developed with South Africa’s banks to tap into technologies such as blockchain, cryptocurrencies and central banking to shape digital trends and explore new solutions from within the region.

It is an extremely exciting time because technology is actually shaping what society looks like today and well into the future, and what the social outcomes can be. Now is the time for people to participate within this tech space to build an inclusive future fit society of global citizens that contribute meaningfully to the country, and the continents economic recovery.

So what is the role of BSO in this eco-system? “We see ourselves as the value add link between investor and investee”, says Imtiaaz Hashim, Managing Partner at BDO South Africa. “The investor requires credible and accurate information; the investee is trying to maximise investment capital – the space in between is where outsourced services come to the fore.” Most start-ups are confined to a small set-up with only the key team members and the founders. Outsourcing non-core services at an early level simply makes good business sense. Start-ups can rely on outsourced services for support in navigating complex functions that they may not have the capital required to staff up for. Outsourced services are specialised, reliable and tailored exclusively to support and empower entrepreneurs.







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