Cape Town

This Is What You Need to Know about Cape Town: Africa’s Most Innovative Startup Ecosystem

Cape Town is fast cementing itself as the biggest continental hub for tech startups […] The Mother City is rightfully living up to monikers such as “The Silicon Cape” and the “Digital Gateway to Africa.” – Jacques Coetzee, ventureburn

Cape TownCape Town, South Africa has historically been known as an attractive tourist destination, and it’s quite easy to see why: excellent food, beautiful topography, and friendly people are among the reasons why this South African city is on the bucket list for many avid travelers.

The city, however, is garnering a large amount of attention for another reason: it has quickly established itself among Africa’s most advanced startup ecosystems. Many factors contribute to this: a large talent pool, solid academic institutions, and a great infrastructure, among others.

This article analyzes the emergence of Cape Town as Africa’s leading startup ecosystem from various angles, including the perceived advantages of being a startup there. Why do more South African startup companies settle in Cape Town than any other region in the continent? How has the city become Africa’s prime locale for startups?

We support this rationale by describing four components that are crucial for budding businesses, and how Cape Town measures up.

Access to Venture Capital

It takes a special kind of investor to commit significant sums of money to an unproven business. To do so is often perceived as highly risky among many in the investment community. This is where venture capital (or “VC”) comes into play.

Venture capital can be defined as “Startup or growth equity capital or loan capital provided by private investors (the venture capitalists) or specialized financial institutions…for a new or growing business.” It turns out that Cape Town has plenty of these vital individuals.

According to various studies, South Africa is the continent’s most abundant nation in terms of available VC, with Cape Town repeatedly cited as the prime locale for VC activity. Funding and finances are among the top concerns for startups, as a sizeable period of time is usually required to realize profitability.

As such, VC support makes it more likely entrepreneurs will “make the leap” into becoming a startup. VCs such as AngelHub, Venture Capital for Africa (vc4a), Knife Capital, and other reputable VC firms make the daunting process of establishing and maintaining startup operations a bit easier.

Good Business Infrastructure, Including IT

A good infrastructure is essential to business operations. This does not necessarily refer to the well-established modes of communication, transportation, utilities, water, and sewage – which are, by the way, often underappreciated elements of conducting business successfully.

Rather, infrastructure refers to  internet and IT infrastructure, both of which are world-class in South Africa, and Cape Town specifically. In 2011, the city finished an optic fiber network that spans 500 kilometers, making fast web connection both more ubiquitous and less expensive. Additionally, Cape Town is home to the most IT-based companies on continent.

Patricia de Lille, Cape Town’s mayor, states the importance of business infrastructure to the city: “We believe that we are becoming a center for global business that stretches beyond old boundaries. We seek to position ourselves as a place where the world can access Africa and Africa can access the world, providing sophisticated tertiary services, reliable infrastructure and advanced commercial and banking practices.”

An Educated Workforce, Excellent Academics

Solid academic institutions seem to permeate startup ecosystems around the globe, and Cape Town is no exception. Indeed, it is often within these very institutions where innovators build their own success stories, as Mark Zuckerberg did at Harvard.

And Cape Town – specifically, the Western Cape – is the location of some of the top universities, both in South Africa and the world. Within just a 60-kilometer radius, four such schools are present: Cape Peninsula University of Technology, University of Cape Town (UCT), University of the Western Cape, and Stellenbosch University (SU).

Both SU and UCT produce a large number of patents each year, with 59 and 52 patent applications in just the last six years, respectively. These patents are referred to as South Africa for Patent Cooperation Treat (PCT) international registrations. PCT’s are notoriously difficult to get, and are regarded as a crucial step in the commercialization of an invention that is adopted on an international scale.

A City That Appeals to Innovators

As mentioned, Cape Town is considered one of the world’s leading tourist destinations. The landscape is adorned with beaches, forests, mountains and other geographical treasures.

Besides the beauty that is Cape Town, its environment is incredibly attractive to innovators and entrepreneurs. Paul Graham, founder of the highly-successful company Y Combinator, says the following: “Most nerds like quieter pleasures. They like cafes instead of clubs; used bookshops instead of fashionable clothing shops; hiking instead of dancing; sunlight instead of tall buildings.”

While Graham may be overgeneralizing, most of the “nerds” that he is referring to will probably agree with most, if not all, of these observations. Those in Cape Town will probably state that the beautiful city offers these things and many more.

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9 of the Most Notable Female Entrepreneurs in Africa

Considered “change makers” by Lionesses of Africa, an organization supporting and showcasing the talents of female business owners, these nine entrepreneurs are dedicated to positively influencing the lives of African citizens.

Achenyo Idachaba

Achenyo Idachaba
Image courtesy Ted Conference | Flickr

The founder of MitiMeth, Achenyo Idachaba rids Nigerian waterways of hyacinth plants, a weed that plagues more than 20 states and disrupts ecosystems. Through MitiMeth, the plants, as well as other “agro-waste” and “non-timber” resources, are harvested by artisans to handcraft functional home products.

The items, which include tissue holders, ottomans, dinnerware, baskets, and vases, are then sold. In addition to creating more job opportunities in Africa, her company ensures present and future generations can enjoy undisturbed local waterways.

Sue Barnes

Sue Barnes established Subz, a company that supplies washable sanitary pads and undergarments to girls and young women throughout South Africa. She started the venture following a request to donate her products to females in an underserved area. Since founding Subz and patenting the idea, she has made it possible for girls to continue their education during menstruation, rather than missing up to three months of schooling each year.

Her product, which consists of panties with clips that make it easy to switch out sanitary pads, lasts five years and is given free of charge to recipients. Sue Barnes also uses her product to disburse valuable information on the female reproductive organs.

Judith Owigar

A recipient of the Anita Borg Change Agent Award, Judith Owigar was more recently named an International Focus Fellow. In an effort to grow women’s presence in the technology sector, she founded Akirachix in Kenya. The non-profit organization offers outreach programs as well as kid camps and community-building platforms that encourage more female participation in tech-related professions.

Additionally, Judith Owigar’s organization hosts training programs for women in Nairobi. Targeting those from underserved areas, the course admits 30 participants annually and educates women about programming, design, and entrepreneurship. Mentorship and internships are included.

Lydia Hakizimana

Owner of Drakkar Ltd, Lydia Hakizimana focuses on increasing literacy rates in the country of Rwanda. She founded the company in 2006 and works to establish libraries in health care and educational institutions that provide free books to children. Lydia Hakizimana’s non-profit partners with textbook distributor Pearson to supply books at the nursery, primary, secondary, and higher education levels.

Additionally, the company sells school laboratory equipment to support science programs. Among services offered through Drakkar Ltd are teacher trainings and Drakkar Creativity Boost, an initiative that utilizes creative exercises and games to enhance critical thinking and problem-solving skills.

Christie Peacock

Sidai Africa founder Christie Peacock leveraged her expertise in agriculture and livestock research and development into a service that helps Kenyan pastoralists and farmers maximize the care of their animals. This allows them to have a stable form of income and feed their families. Her company forms Sidai centers throughout Kenya.


The centers, a franchise, are staffed by livestock technicians, veterinarians, and other professionals in the agricultural sector to educate farmers about raising animals and to provide farmers with products to support their animals’ health. Christie Peacock has a goal of introducing additional products and services, which will consist of diagnostic tests, livestock insurance, vaccines, and feeds, in the future.

Juanita van der Merwe

In 2011, Juanita van der Merwe registered Little Green Number as a business. The marketing arm of Waste2Wow, the company promotes recycling billboards made of PVC and non-degradable material into fashionable and functional products. Juanita van der Merwe’s goal is to eliminate waste to preserve the planet’s health, all while creating jobs and reducing poverty among black women. With a goal of becoming a profitable commercial brand, Juanita van der Merwe and her team look to sell funky purses and bags worldwide as a registered exporter.

Shona McDonald

With history dating back to 1992, Shonaquip is led by Shona McDonald. Ms. McDonald is the first woman to establish and head a wheelchair business in Africa. Winner of the Cape Chamber of Commerce Exporter of the Year Award, she helps people with disabilities gain mobility through the use of wheelchairs and posture management systems. As a result, their quality of life is improved.

To ensure her products products meet the needs of users, she provides professional assessments, fittings, customizations, outreach clinics, and technical support and maintenance. Additionally, Shona McDonald established The Uhambo Foundation to provide a place to connect with support groups and obtain valuable resources that empower families and children living with disabilities.

Dr. Victoria Kisyombe

Recognized by the World Economic Forum and the World Bank, Dr. Victoria Kisyombe makes it possible for entrepreneurs, specifically female widows and girl business owners, to launch ventures throughout Tanzania. Through Sero Lease and Finance Ltd (SELFINA), a company she founded in 2002, she leverages micro-leasing to help others acquire land and assets, thus improving borrowers’ creditworthiness.

She supports lessees with the leasing of livestock, catering equipment, bicycles, and sewing machines, among other tangible items. Further, qualified lessees may obtain financial leases and be eligible for a sales and leaseback program, which allows a recurring customer to sell items back to SELFINA and lease them again over time. As of 2016, Dr. Victoria Kisyombe has positively influenced the livelihoods of more than 440,000 people, of whom nearly half no longer live in poverty.

Winnifred Selby

Along with her colleague and co-founder Bernice Dapaah, Winnifred Selby created Afrocentric Bamboo. The company offers a form of affordable and reliable transportation that can withstand the rough and high terrains of Ghana. Ms. Selby designed the bamboo bikes as a single structure to give strength and stability to her product. Priced at $100, the bikes give owners a viable solution for traveling to work, help create jobs, and reduce harmful emissions entering the earth’s atmosphere.

Why is Africa a perfect scenario for innovative startups?

Africa is known for its abundance and opportunity. Being the world’s second largest continent, it is richly endowed with a variety of resources. But it needs to set aside its intra-continental differences in order to maximize the opportunities available from growing foreign interest. Africa is attracting increasing interest from the international financial community. The spotlight is now on our continent and Africa must rise to the occasion.

Africa has a dynamic history shaped by great migrations, wars, slavery, colonialism, and even the Cold War. But now Africa is reclaiming its place on the world stage. Often seen by observers as a single country, Africa has a complicated history and is often misunderstood. It is extensively diverse – in geography and climate; in cultures and traditions; in economic production, distribution, and consumption; and in social and political structures and practices. During the last decades, with much innovation and initiative, Africa is finally grabbing the world’s attention, with more international companies setting up offices here, increased banking interest, and strong stock market performances. All its major regions have recently experienced strong economic growth, driven in part by its wealth of natural resources. 2008 marked the decade that Africa’s energy and mining industry came to life, bringing an unprecedented oil export boom.

Africa has been the second-fastest-growing region in the world over the past 10 years, with average annual growth of 5.1 per cent over the past decade, driven by greater political stability and economic reforms that have unleashed the private sector in many countries. Poverty is also on the retreat. A new consuming class has taken its place: since 2000, 31 million African households have joined the world’s consuming class. At the point when household incomes exceed $5,000, measured at purchasing power parity, consumers begin to direct more than half their income to things other than food and shelter. The continent now has around 90 million people who fit this definition. That figure is projected to reach 128 million by 2020.

By 2035, Africa’s labour force will be bigger than that of any individual country in the world, which offers the continent a chance to reap a demographic dividend, using its young and growing workers to boost economic growth.

Today 40 per cent of Africans have some secondary or tertiary education. By 2020, it will be nearly half. But African countries still need further progress to remain economically competitive. While 33 per cent of Africans in the labour force receive secondary education, 39 per cent of workers in India and 66 per cent in China receive education at this level.

The experience of other emerging economies shows that Africa could accelerate its creation of stable jobs dramatically. When they were at a similar stage of development as Africa today, Thailand, South Korea and Brazil generated jobs at double or triple the rate of Africa’s. This would lift millions more Africans out of poverty and vault millions of others into the consuming class. It would also cut the time needed to reach East Asia’s percentage of stable employment by more than half, from over 50 years to just 20 years.

Africa has about 60 per cent of the world’s unused cropland, providing it with a golden opportunity to simultaneously develop its agricultural sector and reduce unemployment. On current trends, African agriculture is on course to create 8 million wage-paying jobs between now and 2020.

Africa needs a jobs strategy, not just a growth strategy. Countries need explicit programmes to create jobs, targeted at labour-intensive sectors that enjoy comparative advantage. Governments, working with private companies, need to improve access to finance in those sectors, build the necessary infrastructure, cut unnecessary regulation and bureaucracy and create a more business-friendly environment, and develop the skills needed to support the industries of the future.

With a billion people in Africa, a growing middle class, fast economic growth compared to much of the world, and the rapid expansion of both internet and mobile penetration, White argued there are many new market opportunities for these startups.

What’s more, those opportunities extend beyond Africa’s borders. While this certainly was accelerated by a need on this continent for alternatives to traditional financial statements and credit bureaus, it has applications to individuals regardless of where in the world they reside.

What’s more, those opportunities extend beyond Africa’s borders, argued Aaron Fu, managing partner for Africa at Nest, a Hong Kong-based VC firm. He cited SuperFluid, a Kenyan startup Nest is incubating, which uses non-traditional data sources to assess people’s financial health. “While this certainly was accelerated by a need on this continent for alternatives to traditional financial statements and credit bureaus, it has applications to individuals regardless of where in the world they reside.”

Startup in africa_cecilia ibru
Image courtesy of Dennis Skley at Flickr.com

African governments are also doing more. Rwanda has created a special visa for technology entrepreneurs. Kenya has launched Enterprise Kenya, through which the government plans to back tech startups itself, and has revised its company acts, including one that has been in place since 1948. The Nigerian government, a strong supporter of DEMO Africa, has launched a publicly funded incubator in Lagos and plans to back startups itself.

Exciting Support for Women Entrepreneurs in Africa

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At the opening of the 2015 Global Entrepreneurship Summit in Nairobi, President Barack Obama of the United States and President Uhuru Kenyatta of Kenya announced new investments in African businesses led by women. The White House hosted the first summit six years ago and has since made supporting developing startup ecosystems an important part of its engagement agenda. This year’s summit, the first held in sub-Saharan Africa, brought around 1,000 leading entrepreneurs and investors to Nairobi to discuss the future of startup ecosystems around the world. In particular, the discussion focused on how existing startup hubs can interact with and support emerging ones throughout Africa.

At the 2014 Global Entrepreneurship Summit, President Obama announced a goal of raising $1 billion in investments to promote entrepreneurship in emerging economies. In 2015, he reported that this goal had been achieved with the help of banks, philanthropists, foundations, and the US government. Moreover, President Obama promised that half of the funds would support entrepreneurship projects undertaken by youth and women.

The money will benefit entrepreneurs and businesses in sub-Saharan Africa through the following initiatives overseen or supported by the US government:

  1. The Overseas Private Investment Corporation (OPIC) will provide $200 million to Equity Bank Group to lend in foreign currency to youth and women operating small- and medium-sized businesses over the course of the coming five years.

 

  1. OPIC signed a memorandum of understanding to provide financing to Goldman Sachs 10,000 Women and the International Finance Corporation’s Women Entrepreneurs Opportunity Facility, both of which support women entrepreneurs.

 

  1. OPIC’s $50 million Portfolio for Impact program will provide two years of support to smaller and earlier-stage companies focused on generating a positive impact in sub-Saharan African.

 

  1. The US Department of State will launch several new Global Innovation through Science and Technology (GIST) initiatives, including the GIST Startup Boot Camps, GIST TechConnect, and GIST STEM Women’s Village Workshops. Collectively, these programs will engage more than 10,000 African innovators, with a special focus on women, by July 2016.

 

  1. A third Women’s Entrepreneurship Centers of Resources, Education, Access, and Training for Economic Empowerment (WECREATE) will open in Mali with the support of the Department of State’s African Women’s Entrepreneurship Program (AWEP), StartUp Cup, and the Caterpillar Foundation. WECREATE is already active in Zambia and Kenya. By October 2016, the three centers are expected to train and certify at least 630 female mentors.

 

  1. The Essential Capital Consortium Fund, recently launched by Deutsche Bank, will receive a $25 million Loan Portfolio Guarantee from USAID to support social enterprises in energy, health, and financial services, with a focus on sub-Saharan Africa.

 

Inspired Support for Female Entrepreneurs from the Private Sector

President Obama’s pledge to support entrepreneurship, especially among women, was answered by additional investments. Explaining that women are entrepreneurial powerhouses with the potential to create massive change, he called for organizations around the world to support to female entrepreneurs and businesses led by women. At the time of the 2015 Global Entrepreneurship Summit, private companies around the world had donated $700 million to fuel the next generation of entrepreneurs, and had offered to train and mentor more than a million future business leaders. The most notable contributions include:

  1. The Mara Foundation pledged to work with a million women and youth entrepreneurs in East Africa through its Mara Mentor Platform, which offers free coursework, one-on-one mentorship, e-learning opportunities, and even financing through Mara Ad-Venture Investments. In addition, women and young people gain access to networking events and internships.

 

  1. Over the course of three years, Chase Bank Kenya will make $580 million available to entrepreneurs with small- and medium-sized enterprises, with a special emphasis on lending to youth and women. This initiative also focuses on those entrepreneurs who do not have access to traditional financing.

 

  1. The Global Entrepreneurship Network (GEN) announced the launch of GEN Kenya, which will include an investment of $100 million in local programs to develop startup ecosystems.

 

  1. The Coca-Cola Africa Foundation (TCCAF) will invest $4.5 million in a new program to empower youth by teaching them key business skills. The so-called Youth Empowered for Success (YES!) program will ultimately offer employment and mentoring to 25,000 young Africans, both girls and boys. YES! targets marginalized youth populations in six African countries and uses TCCAF’s considerable technological and strategic partnerships to offer exciting opportunities.

 

  1. Understanding the challenges of securing funding at the critical seed stage, Village Capital announced that it would earmark $13.2 million to support early-stage startups working to address major societal problems. While this funding is available to entrepreneurs around the world, VilCap Investment estimates that it will benefit around 25 Kenyan entrepreneurs.

All of this investment in the African startup ecosystem promises to fuel growth and ensure that the people who face the largest hurdles have a fair chance at establishing and growing their own businesses. Presidents Obama and Kenyatta see entrepreneurship as one of the keys to economic development in Africa, and it is exciting to see so much international support for the continent’s business sector.

 

Entrepreneurs Need More Freedom to Travel around Africa

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While the startup ecosystem in Africa has expanded exponentially in recent years, African entrepreneurs continue to face a number of roadblocks, especially in terms of securing funding and finding access to business education. However, another major obstacle has not received as much attention: the relative lack of connection and coordination between nations throughout Africa. Entrepreneurs seeking to expand their operations or simply travel to other countries to make business connections often face a wide range of hardships.

The Difficulties of Securing Visas

 The creation of business incubators and accelerators throughout Africa has put a spotlight on the issues involved with obtaining visas to travel between African nations. When entrepreneurial programs open their doors to people around the continent, many begin to see the difficulties. While traveling within a country or a region with specific travel agreements, such as the Economic Community of West African States (ECOWAS) is less difficult, obtaining visas to enter these regions from other countries can prove challenging and expensive.

The situation becomes even worse when one considers that not all African nations have embassies from other African countries. For example, no Nigerian embassy exists in Madagascar. Recently, three Malagasy entrepreneurs trying to enter Nigeria were forced to obtain visas on arrival, which come with extremely high processing fees, after the Nigerian embassy in Johannesburg, South Africa, was unable to offer assistance.

The visa situation in Africa makes it extremely difficult to develop trade agreements and other bilateral relations, and it hampers attempts at developing tourism. For the entrepreneurial ecosystem to continue developing, the gates between countries should be open. Often, visa fees vary wildly from country to country, which creates artificial lines of cooperation. Entrepreneurs face a number of other challenges when obtaining visas, including weeks of waiting even after approval, high processing fees, and limited information on immigration, so the process is often pursued blindly. In addition, application centers often keep inconsistent hours.

At present, many African nations offer visas on arrival, allowing visitors to obtain a visa when they arrive at the airport, rather than requiring them to apply for and receive a visa before their trip. This is a less restrictive policy, but visas on arrival are often accompanied by high fees. These and other visa restrictions have led to a curious situation in which travelers from Europe or the United States typically have an easier time entering African countries than Africans do. For example, South African citizens have visa-free or visa-on-arrival access to 95 countries, but only 17 of these are in Africa. European Union and American citizens can enter many African countries with relative ease, while Africans face high fees and major restrictions.

Inhibited Travel throughout the African Continent

 Residents of other continents often have an easier time getting to African countries than Africans do for another reason: underdeveloped travel infrastructure. Intra-African flights can cost up to $1,000, because there are relatively few direct flights, and fuel taxes and other government-imposed fees can be high. A citizen of an African country may be able to fly to Europe for less expense than flying to a city in a neighboring country, because the latter flight often involves a transfer in a far-off destination. The high cost of intra-African travel can stifle innovation and collaboration by making it economically impossible to move between key locations. As a result, knowledge transfer and skill development is hindered.

To move forward, Africa needs more investment in low-cost airlines that serve the entire continent, like Europe’s Ryanair or EasyJet. Tanzania’s Fastjet is one of the few budget carriers fulfilling this role. The airline offers direct flights connecting Tanzania’s capital of Dar es Salaam to a handful of cities in other African countries, including Entebbe, Uganda; Harare, Zimbabwe; and Johannesburg, South Africa. The airline also commenced service to Nairobi, Kenya, in January 2016.

Travel is inhibited not just for people, but also for goods. Without the ability to move goods cheaply, trade cannot develop. Export and import restrictions restrain growth by making it difficult to purchase raw materials and to move finished products. With seamless borders, the volume of transactions between African nations would increase exponentially and drive economic development. This sort of collaboration can only occur when African governments begin working together for the benefit of all Africans, not just the citizens of their respective countries.

Looking Toward the Future

 Greater economic empowerment can occur if the African Union places more importance on trade and free movement within Africa. The union has done much good by promoting democracy, sustainable development, security, and peace. But more work is necessary to keep business growing throughout the continent. Certain European Union (EU) policies may provide good examples for the African Union to follow. For instance, the EU enacts key trade policies that encourage the movement of people, goods, and services within member countries. In 22 out of the 28 EU member states, a section known as the Schengen Area, passport and border controls do not exist. Similar policies in Africa could drive economic development and encourage unprecedented collaboration and knowledge-sharing among African innovators.