The greater Cape Town area, including Stellenbosch, is Africa’s tech capital. This, according to a report entitled Evaluation & Network Analysis of the Cape Town-Stellenbosch Tech Sector by Endeavor Insight.
The unveiling of their research was done recently, at the Bandwidth Barn in Woodstock.
What is Endeavor all about?
Endeavor is a global non-profit organisation that supports high-growth entrepreneurs and ecosystems.
How was the Endeavor Insight report compiled?
The report, which aimed at discovering the present state of the Cape tech entrepreneur community and identify where the opportunities for growth lie, was commissioned, with the support of the Western Cape Government, by the Cape Innovation & Technology Initiative (CiTi), Wesgro, and the Allan Gray Orbis Foundation.
Interviews were done with 150 local technology entrepreneurs and more than 450 local tech founders and their companies were researched.
Karen Gabriels, Head of Finance and Operations for Allan Gray Orbis Foundation, said:
“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.”
Why is Cape Town regarded as a tech capital?
According to the research, 450 – 550 entrepreneurial companies in the Cape Town-Stellenbosch area, employ between 40,000 to 50,000 people. This is more than double that of the tech sectors in Lagos and Nairobi, which respectively employs 9000 and 7000 people.
Comparable to Nairobi’s 1% and Lagos’ 2%, 3% of local companies have reached scale (100+ employees).
Ian Merrington, CEO of Africa’s oldest tech incubator, the Cape Innovation and Technology Initiative (CiTi), commented on one of the report’s key recommendations; that of increasing 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.”
He also went on to say that
“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”.
According to research, of the 500 plus entrepreneurial companies in the tech sector, 20% are in e-commerce and SaaS sectors, and 15% in fintech (financial tech).
Internet giant Naspers, Africa’s highest-valued tech company, Clickatell, BrandsEye and GetSmarter are Cape Town-based companies with strong global presence.
A proudly Capetonian achievement
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,” stated Rhett Morris, Director of Endeavor Insight.
Findings highlight how interconnected the Cape’s entrepreneurs are, with regards to mentorship, investment, employment and inspiration.
Cape founders of scaled tech companies, 100+ employees, seem to have an ongoing engagement with the ecosystem, 30% of founder-to-founder mentorship originate from these companies, compared to 4% in Nairobi and 12% in Lagos.
A look at combating the challenges facing tech in the city
Although the Cape tech sector has demonstrated innovation and growth, it still has challenges. Among the primary challenges is access to talent.
This problem seems to occur in Johannesburg as well as in other African cities. Access to equity, finance and customers were all mentioned as challenges entrepreneurs faced.
Tim Harris, WesGro CEO added that although the report showed that the Cape is a place of innovation and the future, it can do more to unlock its full potential in order to become one of the top tech destinations in the world.
He shared that his investment promotion team has aided in securing over R1bn in investment in the Cape tech sector over the last five years.
The Western Cape Minister of Economic Opportunities, Alan Winde, weighed in on the findings in a statement:
“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.”