Is Cape Town becoming South Africa’s IT entrepreneurship capital?

Is Cape Town becoming South Africa’s IT entrepreneurship capital?

Forget the business energy of Johannesburg, the city of gold. Brush aside Pretoria, the ‘sluggish’ capital city of South Africa, with its phlegmatic businesses and government buildings looking like monasteries. Here comes Cape Town, South Africa’s second-biggest city, which is said to be emerging slowly but surely as the continent’s Silicon Valley. In other words, the city is emulating a region in California which is home to some of the world’s largest technology companies, as well as many entrepreneurial ventures.

This was contextualised by Stuart Forrest, owner of Triggerfish Animation and 2012 winner of the Sanlam/ Business Partners Entrepreneur of the Year.
Forrest said: “The consistent growth of small tech-focused businesses in Cape Town and the accessibility of educational institutions continue to create fertile ground for entrepreneurial activity within the region.”

It is believed that the Western Cape provincial government and the City of Cape Town have invested over R150m in the city’s broadband infrastructure project. Another R500 million (about 5 million USD) is due to be pumped in mid-2013 to take the technology sector to greater heights.

Forrest believes that initiatives such as these will generate seeds for a successful entrepreneurial ecosystem in Cape Town, and positively contribute towards economic growth and development within South Africa. But does this really make the ‘Mother City’ the capital of entrepreneurship of South Africa?

Forrest said growth companies in the IT and telecoms industries have proven to generate significant positive cash flow and profitable reinvestment opportunities for its retained earnings. “High growth companies are also responsible for innovation, which is necessary for the development of any country, but in order for the industry to truly be successful we require investment,” the award-winning entrepreneur said.

The rise of Cape Town’s IT sector is said to have generated the influx of many entrepreneurs – young and old, upcoming and well-established – to the city, each looking a grab a piece of the business pie the city has to offer. Kobus Engelbrecht, spokesperson and co-sponsor of the Sanlam/Business Partners Entrepreneur of the Year competition, agreed: “Due to the city’s entrepreneurial culture, Cape Town has seen an influx of IT and tech startups. By attracting the best entrepreneurs, technical brains and foreign direct investment, Cape Town is quickly becoming a local ‘Silicon Valley’.”

Engelbrecht said other influential players such as Vinny Lingham and Justin Stanford – both local tech entrepreneurs – have recognised the Cape’s great potential for fostering entrepreneurship in the IT and technology space. Lingham and Stanford launched Silicon Cape in 2009, a local high-tech innovation hub based on the international concept of Silicon Valley in 2009.

The aim, they said, was to attract top technical talent and entrepreneurs to the Western Cape, ultimately creating an environment for local IT and tech companies to compete with similar hubs around the world.

However, the only obstacle hampering the province’s IT entrepreneurship from reaching the top of its landmark mountain is the lack of risk capital. “Investors in South Africa are very risk averse. To date, we have been a resource driven country with a history of investing in fixed assets and manufacturing businesses,” Forrest said.

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