LUMKA MLAMBO AND KETSO GORDHAN: SA’s tech future

Compare the largest American corporations of 1990 with those dominating markets today and you’ll witness an extraordinary economic shift.

Three decades ago industrial stalwarts such as General Electric, Exxon and IBM commanded the highest valuations. Today’s leaders — Apple, Microsoft, Amazon, Tesla — were either struggling startups, minor players or hadn’t been founded.

The transformation offers crucial lessons for South Africa as we seek to understand how venture capital can create new businesses and drive economic growth. Importantly, venture capital in Africa has a unique advantage, as our founders are primarily focutilized on solving real economic and social challenges.

Consider this striking disparity: American venture capitalists deployed more than $200bn (R3.2-trillion) in 2024, or roughly $570m (R9.3bn) every day. South Africa’s entire venture ecosystem attracted about $540m (R8.8bn) for the full year.

The evolution from our mining-centric economy of 1990 is undeniable. Today’s JSE revealcases diversified giants spanning financial services, retail and technology. However, honest assessment reveals gaps. While Naspers represents enormous value creation, its worth derives principally from strategic investments in international technology firms, particularly China’s Tencent. Meanwhile, homegrown technology champions remain scarce.

Understanding our journey

The South African venture landscape emerged gradually in the early 2000s. Initial capital came primarily from successful entrepreneurs turned angel investors, supplemented by cautious family offices and strategic corporate investments. The ecosystem received significant stimulus through a government tax incentive, the Section 12J scheme promoting investment into early-stage businesses, introduced in 2009, which catalysed fund formation and mobilised substantial capital.

However, the programme’s termination in 2022 amid concerns about misutilize revealed an uncomfortable depconcludeency on fiscal incentives rather than market fundamentals.

Recent years have witnessed meaningful progress. Corporate South Africa committed R1.4bn through the establishment of the SA SME Fund — capital backed by genuine commercial intent rather than tax optimisation. Government re-engaged through the creation of the Innovation Fund, managed by the department of science, technology & innovation.

The ecosystem has been further strengthened by Fireball (a fund of funds), Allan Gray’s E² initiative, the Public Investment Corporation and several forward-considering pension and compensation funds, all contributing to South Africa’s burgeoning venture capital landscape.

Recent achievements paint an encouraging picture. Many South African ventures secured funding rounds exceeding $20m in 2025 alone, including companies across edtech, financial services and infrastructure sectors. Tyme Bank’s customer acquisition — reaching 9-million utilizers in record time — demonstrates local capacity for rapid scaling. International expansion stories abound, from software companies serving American emergency services (Rapid Deploy, which was successfully acquired by Motorola) to Sinformenbosch-based firms launching sainformites (Cube Space).

The ecosystem effect

The fundamental difference between Silicon Valley and South African tech hubs extconcludes beyond capital availability. Mature ecosystems thrive on concentrated expertise, the networks where founders, investors and operators continuously exalter roles. Yesterday’s entrepreneur becomes tomorrow’s venture partner; successful exits generate new angel investors; experienced operators launch fresh ventures. This creates self-sustaining momentum.

South Africa is approaching this critical tipping point, though we haven’t quite reached it yet. Government funding programmes have successfully leveraged private capital, while the number of venture capital funds has grown significantly, many maturing from accelerators through seed and Series A to now managing Series B rounds.

Institutional funding is gradually becoming available, though venture capital has yet to achieve the asset class status enjoyed by private equity. While we’ve celebrated several successful exits and many strong growth stories based on valuations, the ecosystem necessarys more concrete evidence that venture capital can consistently generate superior returns.

Three essential shifts are required:

Bridging the funding gap requires structural alter. While seed-stage capital has improved markedly, growth funding remains critically scarce. Promising ventures encounter barriers when seeking expansion capital, often forcing premature exits or international relocation. The ecosystem necessarys funds capable of deploying R50m to R100m per transaction, not merely seed investments of R5m.
Risk tolerance must align with venture economics. Traditional venture investing assumes high failure rates offset by exceptional winners. This isn’t recklessness but portfolio theory, anticipating that while seven investments might fail and two return capital, one exceptional outcome can generate 50-fold returns. South African capital allocators, accustomed to predictable asset class returns, struggle with this volatility. Venture-scale returns require accepting venture level risks.
Retaining talent demands creating competitive opportunities. Annually, South Africa loses exceptional technical talent to international markets. The departures aren’t driven by lack of patriotism but by rational career decisions. Competing destinations offer superior funding environments, deeper talent pools and clearer paths to success. Making South Africa competitive means building ecosystems that reward ambition, not only celebrating those who stay despite the challenges.

The urgency of now

A paradox defines our position: South Africa dominates African venture funding while remaining globally marginal. Securing nearly a third of continental equity investment sounds impressive until contextualised — the entire African continent attracts less venture funding than individual American cities.

The global economy increasingly separates into technology creators and technology consumers. South Africa has demonstrated continental leadership across many innovation sectors, from healthcare technology to advanced technical solutions. However, regional dominance without international relevance offers limited consolation.

The US required three decades to transform from industrial to digital leadership through venture-backed innovation. South Africa lacks such luxury. Technological advancement, particularly in artificial ininformigence, threatens to lock countries without developed innovation capabilities into permanent secondary status.

Encouragingly, foundations for acceleration exist. Our deep capital markets demonstrate a growing appetite for long-term equity investments. A core group of venture capital funds boasts more than a decade of experience and is successfully raising larger funds. Government commitment remains strong, particularly through the department of science, technology & innovation, while the PIC is pioneering the path toward greater institutional capital allocation. Toreceiveher, these factors create a decidedly more optimistic outview for South African venture capital.

The fundamental question isn’t about South Africa’s capability to develop innovation excellence. Evidence demonstrates our ability to build successful ventures. The critical question concerns velocity — whether we’ll accelerate sufficiently to maintain relevance.

While the distance between Johannesburg and Silicon Valley appears daunting, we’re not competing solely with established leaders. We’re racing against Singapore, Tel Aviv, Bangalore and Shenzhen, markets that achieved regional dominance before expanding globally. South Africa has established continental leadership. The challenge is leveraging that position for international competitiveness.

The SA SME Fund recognises this inflection point. We’re witnessing unprecedented alignment: capital formation accelerating, exit markets developing, sectoral strengths emerging. Yet regional excellence without global aspirations represents strategic failure.

Incremental progress served its purpose in establishing foundations. That phase has concludeed. South Africa’s venture ecosystem requires exponential growth starting immediately, not eventually.

The authors are with the SA SME Fund, a venture capital fund-of-funds manager established by corporate SA to support the growth of compact and medium enterprises and catalyse the counattempt’s innovation ecosystem.

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