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Q3 2023 - (released November 2023)

SA's quarterly Private Equity & Venture Capital magazine

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VC survey shows startups have Boks’ resilience

by Michael Avery

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In a region grappling with low growth, soaring unemployment, and the persistent challenge of energy scarcity, Southern African startups have emulated the region’s rugby pride, the Springboks, standing firm in the face of adversity and weathering the storm of economic adversity over the past year.

The latest insights from the 2023 Venture Capital (VC) Industry Survey, published by The Southern African Venture Capital and Private Equity Association (SAVCA), shed light on the intricate dynamics shaping the local venture capital landscape.


Tshepiso Kobile, CEO of SAVCA, unveiled the survey's findings at its annual launch, underscoring the formidable hurdles faced by the sector. Yet, Kobile remained resolute in her conviction that the business case for venture capital in Southern Africa is not only robust, but also serves as a potent tool to tackle the region's deepening socio-economic challenges.

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A standout revelation from the survey was the 14.5% contraction in the value of VC deals for the 2022 period, compared to the previous year. Nevertheless, the industry marked its fifth consec-utive year of attracting over R1bn in early-stage investments. The information and communication technology (ICT) sector, a driving force behind South Africa's digital transformation, retained its allure for investors, accounting for a staggering 48.1% of deals in 2022.


The resilience of the local ICT sector was further under-scored by its domi-nance in active portfolios, compri-sing 40.6% of all deals by number. Within this sector, FinTech, Software, Telecoms, AgriTech, and Electronics emerged as the leading sub-sectors, illuminating the diverse spectrum of opportunities within ICT-related investments.

A comprehensive breakdown of capital allocation across primary economic sectors unveiled the ascendancy of ICT, constituting 37.7% of deals by value and 40.6% by volume. Consumer Products and Services and Business Products and Services followed suit, highlighting a strategic diversification of investment interests.


The emergence of education technologies (ICT EdTech) as a prominent player in the 2022 investment landscape signalled a noteworthy shift, although it accounts for a relatively small portion of the overall portfolio allocation, reflective of its recent introduction as an investment sub-sector.


Kobile aptly encapsulated the innovative spirit permeating Southern Africa's entrepreneurial ecosystem, emphasising the ascendancy of FinTech over traditional domains like Food and Beverage. She underscored the sector's capacity to harness technology, addressing mass-market needs and streamlining service delivery.


The dual role of the ICT sector as an engine for both commercial viability and social development was underscored by Kobile, who highlighted its pivotal role in facilitating access to information and e-learning resources, particularly in the realm of education. As South African startups spearhead technological solutions in healthcare, governance, and various industries, the sector's potential to elevate the nation's global standing is unmistakable, attracting investments and fostering international collaborations.


At a panel discussion during the SAVCA VC Industry Survey launch, Kabelo Themane, Senior Investment Associate at Edge Growth, echoed Kobile's sentiments, emphasising the imperative of striking a balance between return-on-investment and societal impact. Themane underscored that "impact" should transcend conventional ESG considerations, extending its reach to grassroots issues such as unemployment, sustainable development goals, financial inclusion, and the advancement of education.


Fuelled by the survey's encouraging findings on funds under management, investment activity, and exits, Kobile expressed optimism for early-stage investments in the coming year. The lion's share of available funding was directed towards new deals, a trend attributed to the increased support for existing portfolios during the 2022 investment year.


As the 2023 SAVCA VC Conference unfolded in Stellenbosch, Kobile urged industry stakeholders to sustain the vital discourse on the future of the VC sector in Southern Africa. The conference brought together local and international luminaries, uniting investors, fund managers, entrepreneurs, advisors and policy-makers in a collective pursuit of a vibrant, sustainable venture capital landscape. 

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