The IATF2021 Conference segment of the second Intra-African Trade Fair (IATF2021), ended over the weekend in Durban, South Africa, with African Export-Import Bank hailing the contribution of the trade fair to addressing the challenge of African businesses transacting business with counterparts within the continent.
In a closing statement, Amr Kamel, Afreximbank’s Executive Vice President for Business Development and Corporate Banking, said that the decision to establish the IATF had been reached following surveys by Afreximbank which showed that lack of information about how and who to do business with within Africa, was a recurring challenge for most businesses. The IATF2021 Conference offered important opportunities for exchanging information and ideas in line with the objective of establishing trade pathways across Africa to bring the AfCFTA to life, said Mr. Kamel.
Ebrahim Patel, Minister of Trade and Industry of South Africa
“We must continue to create innovative financial products that will see the improvement of the AfCFTA,” he added, explaining that the conference was a proof of the impact which Afreximbank continued to have in Africa.
Earlier, in a session on investment into Africa, participants expressed great optimism about Africa’s future with Charles Robertson, Chief Economist of Renaissance Capital, telling the audience that “Africa continues to outperform other markets in the midst of a global recession.”
Mr. Robertson highlighted the importance of adult literacy rates in a country’s ability to reach its full industrialisation potential and said that that measure could be used to quickly identify which countries on the continent showed the most immediate room for growth. Describing Morocco, Egypt, Ghana, Nigeria, Zambia and Tanzania as the frontrunners, he said that African countries with the lowest literacy rates ran the risk of falling behind in the industrialisation process.
Abdou Souleye Diop, Managing Partner at Mazars, singled out Morocco as a benchmark for how an African economy could stimulate a region’s economic growth, noting that the country was attracting both global and regional foreign direct investment and making itself a business, transport and economic hub.
“Morocco has the fastest growing economy that presents real investment opportunities in the automotive, textiles, digital and agro-industries,” stated Mr. Diop. “What Morocco did differently is that it prioritised the private sector locally and identified Moroccan industrial champions to promote.”
According to Mr Diop, the greatest hindrance to the realisation of the goals of the AfCFTA is likely to come from inhibited movement of people. African governments must therefore sign a free movement of people agreement in order to ensure that Africa’s intellectual property did not bleed into other continents that might be more accepting of African labour, Mr. Diop urged.
Ndiarka Mbodji, Founder & Chief Executive Office, Kowry Energy GmbH, in his contribution described the inconsistency of energy supplies as one of the greatest challenges to Africa’s industrialisation. He urged African countries to define the right energy needs for themselves and to ensure that there was low-cost energy available at the point of manufacturing, particularly for SMEs, in order to ensure that the industrial sectors would grow.
Lekau Sehoana, CEO of Drip SA, which manufactures and distributes footwear and plans to leverage the opportunities brought about by the AfCFTA, argued that African SMEs should retain the ability to control how consumers engage with their products right up to the point of purchase and delivery. In his words, retaining that ability is vital to determining how the products reach new markets across the continent and how new consumers engage with the brands.
In the final session of the day, Ebrahim Patel, Minister of Trade and Industry of South Africa, presented the various interventions which his ministry has in place to support traders doing business in the country.
Paulo Gomes, Founder of Paulo Gomes & Partners, called for increased collaboration between the private and public sectors, adding, “we need to revisit our economies and introduce ethics and values, and layer this with thinking out of the box, if we are to fully leverage trade opportunities.”
Organised by Afreximbank in collaboration with the African Union and the AfCFTA Secretariat, the seven-day IATF2021 provides a platform to promote trade under the AfCFTA, and features over 6,000 buyers, sellers, and other stakeholders participating to share trade, investment and market information as well as trade finance and trade facilitation solutions designed to support intra-African trade and Africa’s economic integration. IATF2021 ends on 21 November 2021.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
After closing an R20-million ($1.3m) seed funding round led by AECI and ESquared Investments, award-winning agritech Khula! has announced the launch of their new app in a statement. The investment was made in June of last year, but Khula chose to keep the round quiet in order to coincide with the launch of their Khula! Inputs App.
Karidas Tshintsholo (CEO), Matthew Piper (CPO) and Jackson Dyora
“AECI is exactly the kind of investor we were looking for at this early stage — we did not want an investor at the table who was ONLY going to ask us how we’d performed in a specific quarter, we wanted a long term partner that would execute with us. A partner with a great reputation in the industry and with an incredible distribution network; a partner whose long term success was tied to a business model like ours. And AECI fits that description perfectly for us,” commented CEO Karidas Tshintsholo said in a statement.
Why The Investors Invested
“Khula! has very attractive fundamentals, a sizable addressable market, app development capabilities, key agri-business networks and a management team that wishes to work with AECI as their preferred agri-input and technical advisory partner,” stated Quintin Cross, Managing Director of AECI Plant Health.
“This is an exciting opportunity for AECI to digitally reposition itself in the agri- input market space while leveraging our product, technical and distribution capabilities. It aligns well with our corporate social responsibility and community outreach and supports the 2030 Sustainable Development Goals of Zero Hunger, Responsible Consumption and Production and Job Creation for a better world,” he said in closing.
E Squared has also been actively investing in South Africa since 2018. The VC recently made a R9.2-million ($612k) investment in WeThinkCode, a South African edtech startup as well as a $1m seed funding round in Synatic, a data automation software startup based in Johannesburg. The VC supports Allan Gray Fellows at different stages of their business cycle. The support includes patient capital as well as post-investment assistance.
In all Allan Gray, Africa’s largest privately owned investment management company founded by deceased South African billionaire, Allan Gray, and which is focused on generating long-term wealth for investors, appears to be the uniting force for other investors in this round.
During the pilot, over 3000 farmers signed up, and Khula! had the opportunity to collaborate with key industry partners to successfully implement it. Three Khula! platforms were created as part of the pilot, all aimed at making the B2B agricultural supply chain easier, more efficient, and cost-effective for farmers.
The Khula! Fresh Produce Marketplace connects farmers to suppliers and allows them to sell in bulk; the Khula! Funder Dashboard connects investors with farmers; and the Khula! Inputs App connects local farmers to local and international suppliers and service providers.
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
Global logistics firm DHL Forwarding has invested the sum of $8.2 (126 million rand) in its new facility in South Africa which boasts of 10,000 square meters of warehousing space, doubling the existing capacity to meet future demand. The facility which is located near the Oliver Tambo International Airport Johannesburg sees the global logistics firm signing exclusive ten-year lease for approximately 13,000 square meters of office and warehousing space at the newly-developed Skyparks Business Estate.
Clement Blanc, Managing Director, DHL Global Forwarding, South Africa
In a strategic move that reinforces its commitment to the country, DHL Global Forwarding is investing ZAR 126.5 million into a new facility in Johannesburg. Aimed at cementing its market-leading position in South Africa, the new 13,000 sqm facility will be located within the bonded zone at Skyparks Business Estate – a hair’s breadth from the O.R. Tambo International Airport.
Clement Blanc, Managing Director, DHL Global Forwarding, South Africa said, “While it’s too early to fully grasp the economic impact of the current pandemic, our confidence in investing ahead of the curve is abetted by our diverse service portfolio and long-established foothold in Africa. As the world’s largest free trade (http://bit.ly/38G1YAp) area moves toward economic integration, our five-year strategy (http://bit.ly/3oDkcbc) to sharpen our core business offerings and accelerate digitalization will further our growth in the region and specifically, in South Africa.”
Twice the size of its current set-up, this new facility will consist of a 10,000 sqm warehouse that enables the leading forwarder to consolidate all its customers’ warehousing requirements. There will be an exclusive and specialized cold chain (http://bit.ly/3oIIssA) facility that consists of three adjustable temperature controlled refrigerators geared to handle the life science and healthcare products in and out of South Africa. The warehouse will also support other value added services including cross-docking, storage for air, ocean and road freight services, and a platform for breakbulk cargo (http://bit.ly/3bzKaZk).
“Custom-built to our world-class specifications and located in proximity to the airport, arterial thoroughfares and upcoming industrial parks, this new facility will be the game-changer for DHL in the country. We are well-poised to focus on delivering excellence to our customers as we surround ourselves with the critical infrastructure that is needed to enhance our productivity and efficiency,” added Blanc.
Even as the South African economy is expected to inch forward by about 1-2% (http://bit.ly/2K7UTiv) in the next two years, industry observers are optimistic that the government’s commitment to improve investment and efforts to revitalize townships and industrial parks will reap much-needed benefits. Equally, a flourishing e-commerce sector will drive greater demand (http://bit.ly/35udHQk) for retail warehousing and distribution space, especially for perishables and fast-moving consumer goods.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Barring any last minute changes, South Africa is set to introduce a new law that will require state agencies and paratastals to sub-contract to Small, Medium, Micro-Enterprises Enterprises (SMMEs) a minimum of 30% of the value of every contract for contracts that are above R30 million ( $2 mn). At the second annual South Africa Investment Conference, Cyril Ramaphosa, South Africa’s President said that this new piece of legislation would be known as the Public Procurement Bill.
“Under the soon-to-be-finalised Public Procurement Bill, every organ of state that receives a tender must sub-contract a minimum of 30% of the value of the contract to SMMEs that are at least 51% black-owned,” Ramaphosa said.
Ramaphosa said that this public procurement is being used to promote local production, and that SMMEs will benefit from designated products when they participate in public procurement systems.
A New Tax Regime For SMMEs Too
He added that the tax regime for SMMEs is also being simplified.
“An example of this is the requirement for annual rather than biannual tax returns. Grants received by SMMEs are also tax-exempt,” he said.
“Enhancements have also been made to the venture capital company tax regime to encourage investment in small businesses and junior mining companies.”
Comments
With this proposed legislation, South African startups should be gearing up for some of the biggest deals ever on the continent. In simple terms, for every government contract awarded to any organs of the South African government, startups would get about 30% of the whole contract sum, provided that the total value of the contract is up to $2mn. This would no doubt boost the South African startup ecosystem, and encourage more startups to spring up.
Startups in South Africa are therefore advised to keep track of the proposed legislation and watch when it becomes law. This is also an opportunity for them to position their businesses, get the necessary business documents ahead of the opportunities to be presented by the proposed legislation.
Apart from South Africa, Nigeria recently issued new regulations — Guidelines for Nigerian Content Development in Information and Communications Technology as amended — that require all indigenous or Nigerian Companies who have secured IT projects or contracts with any Nigerian Federal Public Institution or Government owned companies either fully or partly, of which the gross value of the project is Five Hundred Million Naira (N500,000, 000, 00)or above to engage on the project, a Nigerian startup or incubation team for the purpose of R&D on the project, as well as engage Nigerian graduates with IT background as interns on the project.
The Guidelines apply to all Nigerian Federal Ministries, Departments and Agencies, Federal Government Owned Companies(either fully or partially owned) Federal Institutions and Public Corporation, Private Sector Institutions, Business Enterprises and Individuals carrying out business within the Information and Communications Technology sector in Nigeria.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
With the launch of a pilot phase of a new business portal called Biz Portal by South Africa’s Companies and Intellectual Property Commission (CIPC), registration a business in South Africa can now be completed in a day, as against the 40 days registration period previously in place.
The single integrated company registration platform will enable entrepreneurs to register a business within a day in South Africa, which is a dramatic improvement on current turnaround times of 40 days recorded by the World Bank in its ‘2020 Ease of Doing Business’ report.
“The portal is a pioneering and innovative project for government e-services. It will improve the time and ease for young people to start new enterprises.” Trade and Industry Minister Ebrahim Patel said at the launch of the portal
Here Is All You Need To Know
According to the World Bank’s Ease of Doing Business Report, South Africa has slipped from 32nd in 2009 to 82nd in 2019, and further down to 84 in the World Bank’s Ease of Doing Business 2020 Report
“While South Africa has undertaken some reforms over the past decade, its ranking declined over the period,” Patel said, in August, 2019.
“As the World Bank Survey at times affect investor perceptions of a country, there has been a focus on country improvement in the rankings.
“More importantly, some of the indicators used in the Survey coincides with our own domestic goals to make it easier for small and medium businesses to start up and stay in business.”
Using Biz Portal South Africans Can Obtain Business Certificate, Domain Name, Tax ID Number, Bank Account. All In One Place
Through collaborating with the South African Revenue Services, the Unemployment Insurance Fund (UIF) and the Compensation Fund (CF), Biz Portal has made it possible for applicants of private companies to obtain:
Company registration
A tax registration number
Domain name registration
Broad-based black economic empowerment certificate ( B-BBEE Certificate)
Compensation Fund registration
Unemployment Insurance Fund registration
A business bank account.
The three-month pilot phase of the system will be strengthened to make provision for other services related to running and maintaining a business.
“From a customers’ perspective, there is no need to visit multiple government institutions, saving them time and money. Such seamless registration services will enable entrepreneurs to focus on transforming innovative ideas into beneficial products and services, which will contribute to the creation of jobs in our country,” Patel said
Minister Patel notes that the Biz Portal entails company registration functions that have already been tried and tested for several years within the CIPC’s E-services environment.
This will also cater for options in terms of registering for UIF and Compensation Fund Reference Numbers.
Four major banks are participating on the platform. Depending on the nature of the agreement, the customer will be able to make a direct payment in relation to the registration services at the end of the transaction, be routed into a safe banking platform to apply for a business account or opt for their personal details to be passed on to a bank of their choice.
In the pilot phase, the system is being tested and strengthened.
How to register on the Biz Portal
The South African public is encouraged to test this new portal while it is been piloted over the next three months. The Biz Portal is the tool for the registration of a business in South Africa and live. The URL is: bizportal.gov.za
Improving Ease of Doing Business
In August this year, Patel said that Invest South Africa, with the technical support of the World Bank, has prioritised five of the ten indicators based on the Doing Business report.
These include:
Enforcing of contracts;
Getting access to electricity;
Resolving insolvency;
Getting credit;
Protection of minority shareholders.
A road map has been developed with short term reform action plans (6–8 months) and medium to long term (18–24) months.
“The Department of Trade and Industry together with National Treasury have been working with the World Bank and the private sector to increase the pool of respondents and have hosted workshops to familiarise respondents with the survey questionnaire as it is detailed and requires an understanding of the case study and the core assumptions related to the methodology, “he said.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
South Africa’s Taste Holdings (TASJ.J), owner of Starbucks and Domino’s Pizza franchises in South Africa has come to the end of the road on its food business. Taste Holdings said on Friday it was abandoning the food business, and had already sold its 13 stores of the coffee chain to a consortium for 7 million rand ($464,000).
Here Is All You Need To Know
In a statement, the company said it was also in discussions around the sale of Domino’s and its two other food businesses, restaurant chain Maxi’s and The Fish & Chips Co, as part of a new strategy to become a solely luxury retail group.
Its statement said the Starbucks outlets had been sold to a company called K2019548958 (South Africa) Proprietary Limited, a consortium whose members were not identified in full.
Taste said following the sale of the food assets, including the Starbucks stores and 48 Domino’s outlets, it would focus on its remaining luxury retail portfolio, including jewelers Arthur Kaplan and World’s Finest Watches. That, however, is also loss-making.
Consumer-focused firms from banks to retailers have been struggling in South Africa, where a stagnant or contracting economy, unemployment of near 30% and rising living costs have left many with little extra cash
In total the group has the following number of stores open for their various brands as at end February 2019: Steers: 643 Wimpy: 559 Debonairs: 672 FishAways: 266 Mugg & Bean: 247 Gourmet Burger Kitchen (UK): 80 Fego: 35
Unwilling Investors In A Struggling Economy
Taste Holdings had been trying to turn the Starbucks and Domino’s businesses around after putting their expansions on hold a year ago amid losses — making Taste one of a string of retail firms hurt by a troubled South African economy.
In a statement, the company said that after months of canvassing potential partners and capital providers, it had become evident that the money required to fund its plan could not be secured with the current business structure and market conditions.
“Taste’s board of directors has therefore revisited the previous strategy and has decided that it is in the best interests of the Company and all stakeholders to exit the food business,” the statement said.
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Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
Women-led startups in Southern Africa can now pitch to Enygma Ventures, a R100-million ($6.8) venture capital (VC) fund which will invest up R2-million in women led startups from the Southern African Development Community (SADC).
Here Is All You Need To Know
The fund was founded by husband and wife duo Sarah and Jacob Dusek who are the founders of US adventure-hospitality firm Under Canvas.
The US-based fund will be run locally by operating partners and husband and wife team Lelemba and Sandras Phiri of the Africa Trust Group.
Engyma Ventures will hold a three to six-month investor readiness programme in January
Lelemba Phiri, who is the Africa Trust Group principal said the sector agnostic fund will hold a three to six-month investor readiness programme which will kick off at the end of January next year.
List of Southern African countries
How To Apply
Applications are open to women-founded or led ventures and will close on 1 December.
To be considered for the programme, applicants must have scalable SADC-based businesses with a proven revenue model and business concept.
In addition, the ventures must have demonstrated growth and be looking for early-stage or growth capital.
First Batch of Investment Will Be In 10 Women-Led Startups
Phiri pointed out that Enygma Ventures is the first VC fund that is focused on investing in women startups in the Southern Africa Development Community region.
“We’re taking 10 women entrepreneurs in this first cohort and depending on how ready they are at entrance we will look to invest within that six months,” she said.
Sarah Dusek, commenting in an earlier statement, said she is understands the unique struggles and challenges of building a big business, being a founder and CEO herself.
Added Dusek:
“We want to help women think big. We will create flexible financial solutions for them with efficient and strategic deployment of capital whilst also providing helpful tailored support.”
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
For users of land or property investors in South Africa, a new bill has been signed into law by South African President Cyril Ramaphosa. The new law code-named ‘‘the Electronic Deeds Registration Systems Act of 2019’’ will enable property deeds (land or house papers) to be processed electronically. In other words, documents involving land or property transactions in South Africa can now be registered online from any part of the world. This is a remarkable feat and a potential improver in the ease of doing business for South Africa.
Also signed into law include the Overvaal Resorts Limited Repeal Bill of 2019, the Property Practitioners Bill of 2019, and the Film and Publications Amendment Bill.
Here Is All You Need To Know
Electronic Deeds Registration Systems Act of 2019
The Electronic Deeds Registration System Act provides for the development of an Electronic Deeds Registration System — also known as e-DRS — through which South Africa will take advantage of the benefits offered by internet access, e-commerce and global computerisation in the management of security of property title.
The new system will enable the electronic processing, preparation and lodgement of deeds and documents by conveyancers and the Registrar of Deeds.
“It will also enable the registration of large volumes of deeds effectively; improved turnaround times for providing registered deeds and documents to clients; countrywide access to deeds registration services; enhanced accuracy of examination and registration; availability of information to the public, and security features including confidentiality, non-repudiation, integrity and availability,” South Africa’s Presidency spokesperson Khusela Diko. said.
This is set to greatly enhance security of title and the acquisition and disposal of fixed assets.
Potentially once the electronic system has been put in place, this may land a death blow to conveyancing lawyers or notaries public who previously notarised land documents.
Notable Provisions of the Law
Under the new law, potential registrants of property title deeds in South Africa shall now do so online, instead of having to visit a physical land registry. The Chief Registrar of Deeds is vested with the duty to develop, establish and maintain the electronic deeds registration system using information and communications technologies for the preparation, lodgment, registration, execution and storing of deeds and documents.
Under the new law, any deed registered under this method is as valid as though it has been physically registered,executed and filed. More specifically, the law provides that subject to section 14 of the Electronic Communications and Transactions Act, a deed or document generated, registered and executed electronically and any other registered or executed deed or document scanned or otherwise incorporated into the electronic deeds registration system by electronic means is for all purposes deemed to be the only original and valid record.
Potentially once the electronic system has been put in place, this may land a death blow to conveyancing lawyers or notaries public who previously notarised land documents. The new law provides that once the electronic system has been put in place, the preparation and lodgement procedures involving notaries public will be discontinued in respect of all deeds, documents or deeds registries. Consequently, the implication of this new provision would be that any deed or document electronically executed or registered, shall be deemed to have been executed or registered in the presence of the Registrar by the owner or by a conveyancer authorised by power of attorney to act on behalf of the owner, without needing to the notarisation of the notaries public.
The new law will also make conduct of searches or enquiries into land titles in South Africa easier. To that effect, South Africa’s Minister of Rural Development and Land Reform has been empowered to make regulations regarding the procedure and manner for accessing the electronic deeds registration system for information purposes.
Percentage of foreign buyers snapping up South African property. Source: Private Property
The property market in the country also stands to gain from the newly signed Property Practitioners Act of 2019, which repeals the 43-year-old Estate Agency Affairs Act of 1976 (Act 112 of 1976).
“The Bill that the president has assented responds to the dynamic needs of the real estate industry and is aimed at improving the functioning of the property market, which includes regulating the buying, selling and renting of land and buildings,” said Diko.
Among other innovations, the Act establishes a Property Practitioners Regulatory Authority and provides for the appointment of the Board of this regulatory authority.
The Act also puts in place better monitoring mechanisms, including requiring inspectors to obtain warrants to enter premises.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
According to data curated by Maxime Bayen, GSMA Ecosystem Accelerator’s Insights Director, just in the last 7 months, January to July 2019, African startups have succeeded in raising close to $225 million in funding. While South Africa had 33.3 per cent share of the startups invested into in Africa during this period, Nigeria’s shares represented about 24%. Maxime Bayen pulled together a total of 44 start-ups from nine African countries for his enquiries.
The list was mainly dominated by startups from South Africa, Nigeria, and Kenya. While South Africa saw a record number of 15 startups on the list, 10 startups were from Nigeria while 8 were from Kenya. Uganda got three, Ghana and Egypt got two, while Mauritius, Zimbabwe and Zambia one each.
According to data curated by Maxime Bayen
Here Is Why The Above Facts Are Interesting:
Although 2019 is not yet over, it does appear that Nigeria has displaced and is now leading others, including Kenya (Africa’s top startup funding destination in 2018) as the top ecosystem with the highest amount of funding this year. However, should 2019 end with Nigeria’s total fundraising amount still below $250 million (including Kobo360’s $20m recent funding from Goldman Sachs), Nigeria comparably would trail Kenya’s performance in 2018. Kenya in 2018 raised a record $348 million in startup funding, the highest ever amount raised by any African startup ecosystem in years. The current year figure would also mean that 2018 was the best year for African startups in terms of the total funding raised.
The above facts are also interesting because even though Nigerian startups secured the most funding, more South African Startups secured funding above $1 million compared to other startup ecosystems, with over 30% of the startups that raised funding above the $1 million threshold in Africa found in South Africa.
Below, we consider why more startups in South Africa are raising funds compared to other startup ecosystems.
A Large Presence of Local Investors And Equity Funds
South Africa unlike, other African startup ecosystems, has a very large presence of local investors such as venture capital funds, angel investors and other private equity funds who are increasing their stakes in local startups.
Indeed, while other African startup maintain little or no presence of sigificant early stage investors, South Africa has more of these ventures. Top South African companies in 2016, for instance, launched the R1.4-billion SA SME Fund, a VC fund to co-invest alongside various investors (not solely VC investors). SA SME Fund CEO Ketso Gordhan further said the fund would invest over R1-billion or 75% of its R1.4-billion funds in black-owned small and medium-sized enterprises, including tech startups.
Just recently, South Africa’s SME Fund and the government’s Technology Innovation Agency (TIA) also announced a public-private partnership to co-invest R350 million across three venture capital funds. A Memorandum of Understanding (MOU) was signed between TIA and SME Fund at the Innovation Summit in Cape Town on Friday 13 September, 2019. The partnership sees over R350 (over $23 million) invested in three venture capital funds. These fund managers will invest in a portfolio of early stage businesses and provide capital, as well as other support, to the entrepreneurs, to help them commercialise technologies and grow their businesses. The South Africa’s SME Fund’s mandate to the three fund managers includes a requirement that they invest at least 50 percent of the fund into businesses owned by black entrepreneurs.
Source: the latest Southern African Venture Capital and Private Equity Association’s (Savca) Venture Capital Industry Survey
Notable active VCs in South Africa include AngelHub Ventures which today provides pool funding, expertise and networks to foster startup growth. The firm has supported startups such as GoMetro, Snapplify and AmaLocker. 4Di Capital through its Early-Stage Technology Fund 1 is aimed at startup investment opportunities with big growth potential at the seed and early stages in the mobile, enterprise software and web sectors. 45i Capital apart from running Grindstone Accelerator, has invested in Sensor Networks and Aerobotics. Knife Capital’s recent achievements include the exit of radar startup iKubu to Garmin in 2015. In 2017 Knife Capital invested in its first international deal, increasing its investment in 2018 in healthtech 5nines Technologies.Business Partners in 2012 launched a R400-million VC fund. Armed with that, it made investment in 19 South African startups. Business Partners funds startups in the clean energy, agri-processing, biotech and ICT sectors up to R25-million. Kalon Venture Partners has invested in companies such as SnapnSave, i-Pay and The Sun Exchange. See this article for more information. Edge Growth has a pool of over R900-million of early stage venture capital and has invested in more than 45 deals since launching its first fund in 2010. Its investment include funds for startups Sweepsouth, Mobenzi, Pioneer Academies and Everlytic. Invenfin is an early-stage venture capital fund that looks at ventures across all industries. Some notable portfolio members include ArcAqua, Ad Dynamo and Bos Brands.
The table below shows that more South African investors invested in local startups than any other African local investors doing same for their local startups between January and July, 2019.
Additionally, South Africa Receives More Share of All Private Equity Investments in Sub-Saharan Africa
In addition to the numerous local investors, South Africa is also receiving a wave of investment from international investors and private equity firms. According to Asoko Insight , South Africa is the main target of investment on the continent with 39% of the total offices set up by these investment firms. Kenya comes second with 14% and Nigeria is third with 13%.
The Increasing Role Of Crowdfunding
2019 has quite been significant for South African startups, with Intergreatme and Beerhouse raising substantial sums from Uprise.Africa, a crowdfunding platform in record-breaking deals. Crowdfunding refers to raising money from the public (who collectively form the “crowd”) primarily through online forums and social media. At a time when most African countries are yet to open their doors up to crwofunding, South Africa is increasing the chances of startups raising capital through this means. Enabled by the friendly legal framework on crowdfunding in South Africa, Africa’s first equity crowdfunding, Uprise.Africa, and South African alternative exchange ZAR X recently entered into an agreement that will see the mini stock exchange list any up-and-coming entities, which have already successfully raised capital via crowdfunding, and freely trade their shares on the open market. Not only could the arrangement be the funding gap filler that fledgling South African entrepreneurs desperately seek, but it could bring the local capital market to the people. The partnership also solves the fundamental flaw of all other pre-IPO models, namely that once a company has issued the shares they remain fairly illiquid, with investors having their funds tied up until that company looks at going public. Tabassum Qadir, co-founder, and CEO of Uprise.Africa says they plan to conclude at least three deals a month.
“We are simplifying venture capital through this mutually beneficial partnership for both entrepreneurs and investors,” Qadir says.
Reducing The Risk Exposure of South African Startup Investors Through Legislation
One significant role government has played in enabling more inves in South African startups is the introducing in 2009 Section 12J tax incentive, which gives tax relief to investors for investing in qualified Venture Capital Companies (VCCs). The objective of section 12J is to create and maintain employment and to grow the economy and ultimately the tax base. The incentive allows investors who make investments in approved VCCs — that then invest in qualifying small companies — a tax deduction. Section 12J was introduced with a “sunset clause” that takes effect on 30 June 2021. It is not clear whether the incentive would be extended.
By operation, Section 12J, enables venture capital firms to upon investment in an approved venture capital company (VCC), claim an income tax deduction in respect of the expenditure actually incurred to subscribe for VCC shares. For example, if an investor subscribes for shares in an approved VCC for R100,000, that taxpayer will be entitled to an income tax deduction of R100,000 against taxable income.
Historical VC Investments in South Africa (2009–2018) — Source: the latest Southern African Venture Capital and Private Equity Association’s (Savca) Venture Capital Industry Survey
Historical VC Investments in South Africa (2009–2018) — Source: the latest Southern African Venture Capital and Private Equity Association’s (Savca) Venture Capital Industry SurveyStatistics reveal that the value of venture capital investments grew by 33% to R1.160 billion in 2017. The popularity of these investments is clear, and understandable given the high tax burden on individuals without it. In fact, in 2018, about 41% of all deals by value were in startup capital.
Other notable South African startup ecosystem boosters include a large presence of incubators and other private equity firms.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
It appears the protest against foreigners in South Africa is far from over. This time, the South African government appears to be leading it. According to South Africa’s Employment and Labour minister, Thulas Nxesi, South African government will clamp down on employers not complying with the country’s labour laws by unlawfully hiring foreign workers.
Here Is All You Need To Know
At a departmental ceremony recently, Nxesi said that the influx and employment of displaced foreign nationals in South Africa was not of their making and that the situation was ‘getting out of hand’.
“We cannot in this day-and-age continue with the employment of foreign nationals, and think there will be peace if you are going to take low-level jobs of low-skilled people and give it to displaced people,” he said.
The minister said the intention of employing displaced people was a deliberate act by unscrupulous employers to pay them ‘starvation wages’.
“The intention is to employ displaced people and pay them starvation wages, make them to work long hours, make them to sleep on top of the shops.
“The intention is very simple — it is designed to boost profits through cheap labour,” said the minister.
Nxesi identified hospitality, restaurant, construction, and security as sectors exploiting the displaced foreigners. He said the ‘phenomenon’ was now extending into the retail sector.
“These are not scarce skills jobs. These are jobs that local people can be able to do. Inspectors must deal harshly with employers not complying,” he said.
New legislation
Nxesi’s speech follows confirmation that the Department of Small Business Development is working on a new law that will restrict foreigners from working in certain sections of the economy.
Justice and Correctional Services Minister Ronald Lamola told a fundraising gala dinner hosted by the Kgalema Motlanthe Foundation on Thursday night that his small business development counterpart, Khumbudzo Ntshavheni, was developing legislation in relation to foreign nationals doing business in South Africa.
SOUTH AFRICA’S DEPORTATION RATES OF FOREIGN NATIONALS, 2014/15
“(The minister) is also developing legislation in relation to foreign nationals doing business in our country — which sectors of the economy can they play in and where and how? That is the kind of legislation she is busy with and we are hoping that soon it will be released for public engagement,” Lamola said.
Lamola said the reality was that foreign nationals were needed in certain sectors of the economy for it to grow.
“The legislation will also have to cover and be realistic to such kind of dynamics because we are not going to wake up and have a massive deportation of Zimbabweans, Mozambicans and Lesotho nationals,” Lamola said.
“We need to put in place legislation that will be able to set aside and strike a clear balance that will help us to still grow the economy for the benefit of everyone in South Africa, but still be able to say there are sectors that we need to regulate and be clearly stated that no foreign national can run this kind of a business”.
Lamola denied this was protectionism.
“Because South Africa is the most industrialised economy on the continent, we are going to be the biggest beneficiaries of the Africa Free Trade Agreement. We don’t have the luxury of closing our borders altogether.”
Attacks on foreigners broke out in Johannesburg, South Africa late August 2019, which saw the destruction of more than 50 shops and business premises mainly owned by Africans from countries in the rest of the continent. Cars and properties were torched and widespread looting took place. The violence against African nationals may be a reaction to extra competition for jobs and services in Africa’s most-industrialized economy.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
