Is Cape Town Africa`s tech capital?

Source: Biz Community, 02/08/2018

A report commissioned by the Cape Innovation & Technology Initiative
(CiTi), Wesgro, and the Allan Gray Orbis Foundation - with the support
of the Western Cape Government - reveals that the greater Cape Town
area, including Stellenbosch, is Africa`s tech capital.
The report, by Endeavor Insight, entitled Evaluation & Network
Analysis of the Cape Town-Stellenbosch Tech Sector, aimed to discover
the current state of the Cape tech entrepreneur community and identify
where the opportunities for growth lie. The report is based on
interviews with 150 local technology entrepreneurs and research into
more than 450 local tech founders and their companies in the Cape Town
and Stellenbosch area.

“With South Africa’s current unemployment challenge, the Allan Gray
Orbis Foundation believes the study was important so as to understand
the tech entrepreneurial ecosystem in Cape Town which has a great
potential to accelerate meaningful jobs creation,” comments Karen
Gabriels, head of finance and operations at the Allan Gray Orbis
Foundation.
What does the report reveal?

The report reveals that the Cape entrepreneurial tech sector is
significantly more productive than other African cities, employing
more than double the people than Lagos and Nairobi combined, with
450-550 entrepreneurial companies employing between 40,000 to 50,000
people. In comparison, the Lagos and Nairobi tech sectors employ 9000
and 7000 people respectively, while a promising 3% of local companies
have reached scale (100+ employees), comparable to Nairobi’s 1% and 2%
in Lagos.
Time to invest in talent development

With the potential for greater job creation in the digital economy, a
key recommendation from the report was an increased focus on
investment into talent development.

“As an integral catalyst for the ecosystem’s growth, we are hearing a
similar challenge across African tech sectors �` sourcing specialised
talent for digital teams is seriously limiting business growth. The
report was great validation that the CapaCiTi Tech Skills and
Job-readiness programmes we drive are completely market relevant to
assist entrepreneurs, corporates and governments to understand and
better solve their talent constraints to growth,” commented Ian
Merrington, CEO of the Cape Innovation and Technology Initiative (CiTi).
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Findings also revealed that of the more than 500 entrepreneurial
companies in the tech sector, 20% are working in e-commerce and SaaS
sectors, with 15% working in fintech.

“The dynamism, productivity and high-impact companies of Cape Town’s
tech sector make it stand out as one of the most successful models in
sub-Saharan Africa. It has generated the continent’s most highly
valued tech company as well as other software businesses that have
reached scale, exited for significant sums, or grown to become leading
businesses on the continent,” commented Rhett Morris, director of
Endeavor Insight, which has similarly conducted research in tech hubs
globally as part of the Global Entrepreneurship Research Network’s
initiative to map entrepreneur communities.
A vibrant interconnectedness

The research highlights the vibrancy of the Cape’s tech entrepreneur
community and an interactive network map produced alongside the report
illustrates the interconnectedness of the Cape’s entrepreneurs with
regards to mentorship, investment, employment and inspiration. Cape
founders of scaled tech companies (100+ employees) continue to engage
with the ecosystem, with 30% of founder-to-founder mentorship coming
from these companies, compared to only 12% in Lagos and 4% in Nairobi.

The top five reasons for starting a tech company in Cape Town included:
• It is an inspiring place for entrepreneurs to network
• Cape Town is perceived as a tech hub
• Vibrant local tech business community for startup support
• A globally competitive lifestyle that promotes innovation; and
• Strong universities and major companies that help bring talent to
the city
Alan Winde, the western cape minister of economic opportunities, said,
“Cape Town has made a name for itself as a tech city through the hard
work and innovation of its tech entrepreneurs, and investments by
major international tech firms. It is because of this, and the
enabling environment created in the Western Cape, that the sector is
responsible for supporting 40 to 50,000 jobs. Nurturing this sector
and developing a wide skills base to be able to sustain this market is
more important than ever before as we enter the Fourth Industrial
Revolution.”
There are still challenges

While the Cape tech sector has shown significant growth, dynamism and
innovation over the last decade, there were challenges noted by
companies interviewed. Chief among these are access to talent - a
problem also encountered in Johannesburg and other African cities.
Second to this was access to equity and finance, although the Cape was
performing better than Nairobi and Lagos in this regard. Lastly,
access to customers was noted as a problem being faced by these
entrepreneurs.

Tim Harris, Wesgro CEO, commented, “This report shows that the Cape is
the tech capital of Africa �` a place of innovation and the future. It
also shows us that we can do even more to unlock its full potential
and become one of the top tech destinations in the world. The tech
sector will be a key driver of economic growth and job creation over
the course of the next 10 years and we look forward to watching this
ecosystem flourish. Already our investment promotion team has helped
land over R1bn in investment in the Cape tech sector over the last
five years. We look forward to growing this investment total even
further.”