It is no secret that one of the core pieces of President Cyril Ramaphosa’s economic growth plan regards technology. So big is this agenda that a fourth industrial revolution commission, consisting of business and technology leaders such as Telkom’s Sipho Maseko, was formed in 2019 to formulate policy ideas for SA to participate in the global tech boom.
The pandemic of the following year is likely to have halted much of this work but also emphasised the vital role technology plays in the economy.
While much of that focus has been on issues such as radio frequency spectrum, digital migration, online education and digitising government processes, promulgating a viable start-up act would unleash innovation and go far to meeting the objectives of a tech-led economy.
The primary idea behind start-up acts is to make it easier for these newly established businesses to operate, while also increasing incentives for entrepreneurs to start a venture, investors to put money into companies and the government to lend support where it is needed.
In the US, companies such as Apple, Microsoft, Amazon and Google have all crossed the $1-trillion mark in terms of their market caps. That is three times SA’s GDP of about R5-trillion in 2020, all while employing hundreds of thousands of people. They were all once start-ups.
Start-ups have become engines of growth worldwide, with billions in capital finding its way in the last decade to companies such as Uber, Airbnb and TikTok.
Leg up
Locally, the likes of payments specialist Yoco and e-learning system Go1, the first SA start-up to be valued at $1bn, stand out.
However, not enough is being done to spur the creation, growth and scaling up of such businesses in the local environment. Silicon Valley is known to have had a big leg-up from the US government in its early days.
Naspers, SA’s largest publicly traded company and a top-10 technology investor globally, has often spoken up, calling on the government to reduce red tape to allow for greater investment in technology businesses.
As a company that specialises in ploughing billions of dollars into tech start-ups worldwide, that should say something about the gaps that are likely to be keeping greater investment from SA’s shores.
Even the head of the JSE recently told the Business Day Spotlight podcast that more could be done to attract high-growth technology companies to the country, with SA not having participated in the global technology rally of the last year as much as other countries.
Switched listing
These factors can manifest in local companies moving their operations or listings offshore in search of greater valuations and larger pools of capital.
An example is Karooooo — the owners of Cartrack, one of the fastest-growing local tech companies — which switched its primary listing to the Nasdaq just as it approached the $1bn valuation.
Earlier in September, start-up players in SA released findings as part of a proposal to create a startup act, calling on the government for legislation to enable local tech-backed businesses to scale faster and compete globally without having to go offshore.
Proposed interventions and findings advocate for the relaxation of legislation and policies the group says are affecting the growth of and investment into start-ups.
The group says the government could tinker with its procurement policy to make it easier for small companies to get involved, directly fund their early stages through automatic reinvestments of PAYE and VAT, and ease labour and immigration laws to foster the availability of and access to talent.
In a world in which high-growth technology start-ups are constantly changing our way of life and the modern economy, the current legislation holds back companies from reaching their full potential.
While the country is facing a situation in which nearly one in two adults eligible to work doesn’t have the opportunity to be employed, fostering growth in technology would go a long way to addressing these issues.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.