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Go to any startup event in South Africa and you’ll likely hear at least one conversation about everything that’s wrong with the local ecosystem. Some of those complaints are valid, but there’s plenty to celebrate too.
The latest reminder of that fact comes courtesy of Seedstars Index (SSI) of Global Emerging Markets Ecosystems, which ranks South Africa as the second best ecosystem of its kind around the globe and the best in Africa.
When you consider that South African startup Giraffe took top honours at this year’s Seedstars World Global Summit, that’s perhaps not overly surprising.
According to Seedstars regional manager for Africa Marcello Schermer Cape Town is still stealing most of the attention when it comes to startups in South Africa “as it has an incredibly vibrant ecosystem and support infrastructure from investors, government and private institutions”.
“However, he says, “Johannesburg is the promising new kid on the block which is churning out solid, ambitious and sophisticated businesses while most people are still focused on Cape Town”.
South Africa sits ahead of Kenya and Rwanda on the SeedStars Index, with Nigeria sitting in a surprising fourth place on the continent.
The scale is a bid by the entrepreneurial organisation to measure the quality, maturity and future potential of the 54 ecosystems SeedStars interacted with in 2015 . The SSI consists of three pillars:
- Culture: How prevalent is the entrepreneurial mindset in the country? How much is entrepreneurship and risk taking celebrated and promoted?
- Environment: How conducive is the legal, political and financial environment to build and grow companies in that country?
- Opportunity: How big is the opportunity to grow and scale within and outside of the home market?
According to Schermer:
These three pillars determine the success of the ecosystem, which then in turn reinforces each of these pillars and makes them stronger and more capable of replicating successes.
These three pillars have been measured across over 15 underlying factors, hundreds of on-the ground interviews as well as the qualitative research and quantitative resaerch that our teams conducted while visiting every country. After studying each country, a score is calculated on a scale of 0–100 (0 worst, 100 best) with Silicon Valley representing the benchmark of 100 points.
This means that the closer a country comes to 100 points, the stronger their entrepreneurship ecosystem is. Lastly, the index score is correlated with the GDP per capita of the country, to indicate how much the entrepreneurship ecosystem is over-or underperforming compared to the general economy.
Schermer also notes that Sub-Saharan Africa as a whole still has some way to go when it comes to building sustainable startup ecosystems:
“Sub-Saharan Africa,” he says, “is still behind other regions in terms of entrepreneurship development and support systems, averaging 52.4 points on the SSI while Latin America, the front runner in our study, reached an average of 63.8 points”.
“There is also a large disparity between the top and worst performing ecosystems in Africa, with South Africa, the best ranked African country in our study (and second best globally), performing nearly twice as well as Angola, the country ranked last in Africa (and second to last globally)”.