South Africa's Own 'Silicon Valley'

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Taking a look at South Africa's emerging tech sector - the strongest in Africa

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When researching the South African Tech Ecosystem

Key Ideas

* This article is sourced from BusinessTech. [ Edits by Ighlaas Carlie ].

South Africa's Own 'Silicon Valley'

South Africa is becoming an increasingly attractive destination for global companies to set up headquarters. According to FDI Intelligence data, Cape Town is a top destination for international tech companies, with over 40,000 people employed in the sector.

With more foreign businesses operating in South Africa, skilled labour has become an extremely in-demand commodity. While infrastructure and cost savings definitely play a big role in attracting foreign investment, the country's most attractive resource are its people.

“South Africa offers a high-calibre, untapped talent pool for international businesses. Between unemployed graduates and people who don’t have any formal qualifications, but have all the relevant soft skills and potential, it’s not difficult to build a strong and successful local team,” - Mike Bignold, founder and chief executive of CostCertified.

CostCertified provides cost estimating software for the residential construction industry. The company set up offices in Cape Town and began its local hiring process weeks before anyone from the CostCertified team had arrived in South Africa. From location scouting to conducting Zoom interviews, the entire process was virtual – which posed a number of opportunities and challenges.

“We found that some of our candidates were apprehensive about the speed at which they received offers. CostCertified is a hyper-growth company, and once we decide someone is a good fit, we fast-track the employment process to get them started ASAP. For South Africans who are used to four-week-long hiring processes at huge firms, this can come as a surprise or seem questionable – but eventually, they come around,” he said. South Africans tend to be wary of opportunities that seem 'too good to be true', as there are plenty of scammers operating in the country.

“Our strategy is not to solely focus on experience or education, but rather to get to know our employees in order to fully maximise their strengths and value. This presents an opportunity to accelerate their careers significantly,” says Bignold.

South African employees are particularly sought-after for sales and customer care roles. First and second-language English speakers have characteristically neutral accents that make it easier to connect with customers across the world.

Major multinationals like Amazon and Panasonic have identified and leveraged this opportunity since 2004 – but with more businesses moving in every year, companies now have to work harder to differentiate themselves and attract talent.

“Creating an environment where employees genuinely want to spend their time is a simple and effective way to attract talent, promote productivity, and generate positive word-of-mouth reviews. This doesn’t mean bean bags and ping pong tables – it’s about ensuring that each employee feels they are doing purposeful work, learning new skills, and that they share the values of the company,” said Bignold.

Foreign Investment

The 2021 report from FDI Intelligence, a data division of the Financial Times group, highlights Cape Town as one of the world’s fastest-growing regions for foreign direct investment (FDI).

The ranking also awarded South Africa first place in Africa for economic potential, start-up status, and business friendliness.

In addition to receiving the largest number of foreign direct investment (FDI) projects in the software and IT services sector, South Africa also recorded the second-highest number of start-ups, after Nigeria.

Cape Town was awarded second place after Cairo for FDI strategy after displaying impressive initiative in creating the necessary infrastructure for a thriving tech ecosystem.

“Extending beyond Cape Town, the Western Cape boasts a robust tech ecosystem,” according to Wesgro representatives, the Western Cape’s official tourism, trade and investment promotion agency.

“The Cape Town – Stellenbosch corridor contains 450 tech firms employing more than 40,000 people, making the ecosystem bigger than Nairobi and Lagos combined.”

Other key aspects that make Cape Town the ‘tech capital of Africa’ include:

  • Tech start-ups: At the end of 2020, there were 550 tech companies in Cape Town.
  • Investments: In 2020, a total of $88 million (R1.2 billion) disclosed investments were injected into tech start-ups in Cape Town across 46 deals.
  • Venture capital firms: the Western Cape has the highest number of venture capital firms, which makes it easier for startups to access funding.
  • Co-working spaces: The Western Cape has over 30 co-working spaces, the highest in Africa. There are also 715 free WiFi spots in Cape Town alone.
  • Developer talent: Cape Town hosts 38% of the total developers in South Africa, the highest concentration of developers in the country.
  • Coffee culture: Cape Town boasts a deep and diverse coffee culture across 100's of stylish outlets.
  • EdTech Hub of Africa: Cape Town has a high density of digital skills training academies and is the location of choice for EdTech businesses that are building content for entities and educational institutions across the globe.
  • Home to world-class universities: The University of Cape Town retained its spot as Africa’s top university. Stellenbosch University was ranked the 3rd best University in South Africa, by the 2021 Times Higher Education (THE) World University Rankings. Students from across the globe come to study in Cape Town, with many being attracted by the growing tech ecosystem.
  • Ease of doing business: According to the latest World Bank research report on Doing Business in South Africa, Cape Town ranked the top metropolitan municipality in the country when it comes to the ease of doing business.