Cape Town is Home to Africa’s most Productive Tech Sector
The greater Cape Town area, including Stellenbosch, is Africa’s tech capital a report entitled Evaluation & Network Analysis of the Cape Town-Stellenbosch Tech Sector by Endeavor Insight shows.
Endeavor Insight is the research division of Endeavor, a global non-profit organisation that supports high-growth entrepreneurs and ecosystems, and have completed research on entrepreneurial ecosystems across the world. It was commissioned by the Cape Innovation and Technology Initiative (CiTi), Wesgro and the Allan Gray Orbis Foundation with the support of the Western Cape government.
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.
Why Cape Town comes up tops
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 sector employs 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.
Findings 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. Putting Cape Town on the map is internet giant Naspers, celebrated as Africa’s highest-valued tech company. Further to this Clickatell, BrandsEye and GetSmarter were noted as Cape Town-based tech companies with a strong global presence.
“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, who have similarly conducted research in tech hubs globally as part of the Global Entrepreneurship Research Network’s initiative to map entrepreneur communities.
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.
Cape Town an attractive location for launching a tech company
The top five reasons for starting a tech company in Cape Town, according to the report, 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
The Western Cape Minister of Economic Opportunities, Alan Winde 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.”
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.