The G20’s private sector players are putting together a R2bn fund to finance early stage businesses.
SA’s presidency of the G20 platform has raised questions, as in many other instances, about whether ordinary people and small businesses would actually benefit from engagements that often feel far removed from the realities of everyday life.
On Friday, the B20 South Africa Digital Transformation Task Force said it had created a new digital inclusion fund, leveraging more than $100m (R17.3bn) to support early-stage entrepreneurs.
During a B20 event in Johannesburg, Shalini Khemla, founder and CEO of E2Exchange (E2E), said the move is a direct response to calls that the private sector needs to take “bold steps” to deliver on the promises of its recommendation to the G20.
In a document published by the task force in September, the group notes various funding challenges for technology businesses.
“Greater levels of funding from big institutions like pensions, endowments and sovereign wealth funds will need to be deployed in privately held start-ups across the continent for Africa to seize this opportunity,” the task force said.
Greater levels of funding from big institutions like pensions, endowments and sovereign wealth funds will need to be deployed in privately held start-ups across the continent for Africa to seize this opportunity.
— B20 South Africa Digital Transformation Task Force
Access to funding continues to be a big pain point for technology-backed start-ups across SA, the African continent and broader developing world.
Technology businesses usually require big investments in tech infrastructure and talent for platform businesses, while those in the sector usually need manpower while also having to pay for various licences.
“In simple terms, we propose to invest $100m in the entrepreneurs closing Africa’s digital divide while delivering strong returns,” she said.
The digital inclusion fund is a way that the recommendations made by the digital transformation task force can leave a lasting legacy, Khemla said.
The fund brings together capital from corporate, private investors, development finance and philanthropy to back early-stage companies.
The task force, chaired by Naspers SA CEO Phuti Mahanyele-Dabengwa, has earmarked the fund to focus investment in Africa connectivity, finance, healthcare, education, skills development and agriculture.
The Southern African Venture Capital and Private Equity Association (Savca) shows that capital flow to SA start-ups in 2023 reached R3.28bn, driven by investment into local technology businesses.
Data from the African Private Capital Association (Avca) shows that in 2023 West Africa attracted the largest proportion of venture capital deal volume in Africa, at 26%, driven by Nigeria, which was the most active country by volume at 19%.
With the inclusion of venture debt, venture inflows to Africa last year clocked in at $4.5bn across 603 deals — $2bn less than the previous year, Avca said.
The total for Africa was a paltry amount compared with the $144.3bn worth of venture capital that flowed through the US.
A recommendation of the B20 digital transformation task force has to “promote secure and inclusive digital public infrastructure ecosystems that incentivise private sector innovation and investment”.
Digital public infrastructure refers to shared, core digital systems, such as digital identity platforms, payment interfaces and data exchange layers, that can be owned, governed and operated by the public sector, private sector or for public benefit.
In essence, the aim is to create systems that serve as “digital rails” on which governments, businesses and entrepreneurs can build services, “much like roads and electricity grids underpin the physical economy”.
Read all the latest G20 news, plus expert views on what South Africa’s leadership of this critical forum means when it comes to shaping global policies and advocating for Africa’s interests on the international stage, on our G20 page.
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