What’s the future for South African tech startups?

admin | Monday, October 24th, 2011

Image Credit: The Next Silicon Valley

In the previous post, we gave some background on how Cape Town became the tech hub of South Africa. Now we will take a closer look at what’s going on in the region today.

A company worth mentioning is Twangoo, the Groupon clone founded by Daniel Guasco and Wayne Gosling in 2010. The founders started “inspired by the success of Groupon” and managed to get acquired for an undisclosed amount by the group buying giant in January this year. Check out an interesting interview about the deal here.

Another inspiring web start-up story comes from Adriaan “Adii” Pienaar, co- founder and CEO of Woothemes, a company making premium WordPress themes. Adii has seen his business grow exponentially in 14 months of existence, and they currently have 200,000 users, and a yearly revenue of 2 million USD, bootstrapped and profitable from day one.

When mapping out the South African software startup space you cannot omit Mxit. Mxit is a phenomenon, a South African made social network that has exploded due to its mobile features. Founded in 2003 by Namibian-born software developer Herman Heunis, and was launched as a mobile messaging platform. The platform is now a full blown social network where its more than 30 million users can communicate, shop, play music and games and much more. Recently, a campaign was launched to vote to select Table Mountain as one of the New Seven Wonders of Nature and thanks to thousands of South Africans’ votes for Table Mountain online via Mxit or via SMS, the Cape Town landmark has made it into the final round of the competition!

South Africa is the country in Sub Saharan Africa where you find most successful web startups. We touched upon the cultural and historical aspect in the previous post, but infrastructure and access to international markets also play a huge role. Bandwidth is better and the business networks are stronger due to a history of South Africans travelling and working overseas.

In the mobile space things are slightly different however. Despite the success of Mxit and a few other mobile tech companies, the mobile service industry in South Africa so far isn’t booming as much as in other parts of the continent. One reason could be that South African telecom giants like MTN and Vodacom are historically not competitive companies but more of monopolies, conglomerates of state supported companies protected from outside competition. Some say South Africa would have been light-years ahead of the rest of Africa in the mobile startup space if this hadn’t been the case. Instead, innovation is pushed to other parts of Africa, something we will explore in future posts. Another contributing factor is a business landscape that is prohibitive for foreign players, partially due to the legal environment that makes repatriation of funds out of South Africa difficult for investors.

A recent initiative that is attempting to trigger mobile innovation and helping to establish Western Cape as a center of the South African IT industry, is Google’s recently launched six month incubation program for South African startups, called Umbono (the Zulu word for “vision” or “idea.”). The program is offering seed capital ($25,000-50,000 for 10% equity), office space and a mentor program with access to other successful entrepreneurs, VCs and angel investors. Umbono will most likely be a fantastic opportunity for future South African web and mobile entrepreneurs and we look forward to news coming out of the program.

Finally, African entrepreneurs need more role models and inspiring stories. Please help by commenting and sharing tips on more exciting products and companies coming out of South Africa!

  • Atengble Kirchuffs

    This post is really inspiring and informative of developments in the IT industry of SA. Initiatives to help identify entrepreneurs on the continent are very much welcomed, as google is doing there and Meltwater is doing in Ghana.

    With many of such information on economic, legal and technological environments in other parts of Africa (and other parts of the world), Ghanaian Software Developers can have some leverage over competition, and introduce some of their products to those markets, or at least serve as a catalyst to request for further information on those markets.

    The value of such information can not be underestimated. Thank you Ylva.

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  • South Africa just launched Virtusa – a digg-like web startup primarily aimed at the South African market. Users can share and discover NOT only the latest news by category, but just about anything of interest ! Making Virtusa a leader in SA is the fact that this is the only social community startup that works on a revenue sharing model for SA based Adsense publishers. Now users and SA webmasters can increase their own traffic, be more social, increase their search engine rankings, and make money at the same time – by simply submitting quality links and news ! Check it out : http://www.virtusa.co.za (One of the greatest South African web startups i have come across)

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