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Africa Map growth startups entrepreneur

Want to start a business cheaply? Think twice about South Africa

New research from Venture Capital firm, Savannah Fund, shows that South Africa is the most expensive country to start a tech company in. The data, which was published late last week highlights six of Africa’s fastest growing tech ecosystems: Kenya, Nigeria, Tanzania, Uganda, Ghana and South Africa.

According to the Kenyan-based firm, it is interested in the “differing variables that can affect entrepreneurs” in the countries it may choose to invest in. The point of the study, it seems, is to better understand the costs that startups may incur in their first year of business in these countries.

“In this research study, we asked hubs and about three startups per country for their first-year startup costs,” says the fund.

Costs ranged from: web hosting, internet, entry level engineer, engineer with 3-5 years of experience, shared apartment (for three people), workspace desk rental, legal costs, business permits, accounting, travel, and admin/sales.

1styearstartupcosts

Apparently South Africa ranks number one when it comes to first year costs for a startup with Ghana coming in a close second. The country with the lowest first year costs to a startup is Uganda, followed by Kenya. Interestingly, all the polled startups seem to spend the bulk of their money on engineers and living costs.

costs graph

Africa startups seem to spend a lot on admin, which is quite even across the board but Kenya and South Africa are lowest.

“Entry level Engineers out of college [are] lowest in East Africa. South Africa and Ghana next,” says the fund. Though it does pose a rather interesting question as to whether this is due to better education systems in those regions. South African Engineers command the highest salary for experienced Engineers (3+ years).

The company notes that the sample is relatively small, however it qualifies this by saying that its interests lie more “in seeing the differences between startup costs with a sample from our investments or potential investments”.

“There are a number of variables that could change these numbers, such as industry of startup, personal preferences of startups (which could affect size of home and willingness to spend on personal costs),” the fund added.

It does concede that these numbers vary from startup-to-startup in different countries.

Author Bio

Mich Atagana
Mich started out life wanting to be a theoretical physicist but soon realized that mathematics was required. So, she promptly let go of that dream. She then decided that law might be the best place for her talents, but with too many litigation classes missed in favour of feminist... More