Here’s what you need to know about SA’s new R1.5bn startup fund

This week, some of South Africa’s biggest corporates announced a new R1.5-billion fund aimed at boosting entrepreneurship in the country. The fund, set up following extensive consultation between the private sector and government, has the potential to be a game-changer in a country where the official unemployment rate currently sits at around 27%.

Here’s what you need to know about the fund:

It’s a collaborative effort

While the fund’s current pool of reserves comes almost entirely from the South African corporate sector, the business leaders behind it came together at the behest of government. In February, South African president Jacob Zuma instructed finance minister Pravin Gordhan to engage with the private sector and see how it could help in turning around the country’s economy and growing unemployment problem.

“I mandated the minister of finance to lead a process of engaging with the private sector in particular to map out a strategy to the goal of growing the economy,” Zuma said at the launch of the fund. “Leaders from labour and business joined the minister of finance on a roadshow abroad early this year to promote the country and prevent a possible credit ratings downgrade. The hard work is paying off, and we saw the evidence this weekend with the announcement by Moody’s.”

It’s (mostly) about job creation

While the fund is ostensibly about encouraging entrepreneurship, it’s unlikely to pump money into the kind of disruptive tech businesses that result in net job-losses. Instead, the fund managers will be looking for scalable job creating enterprises.

It’s being done properly

This isn’t just a case of powerful people throwing a load of money at a problem and hoping that it goes away. Ventureburn understands that the fund has been set up with the right structures in place and extensive industry engagement.

It could get (much) bigger

During the announcement of the fund, Discovery CEO Adrian Gore said that the hope was to double the amount in the fund’s reserves, especially with input from government.

“The fund is a private sector initiative but we are hoping that government contributes,” he said. “we are focusing on what business can provide. We have injected R1.5-billion into the fund but ultimately we are hoping to raise R3-billion”.

But if government has its way, it could get even bigger than that. Deputy president Cyril Ramaphosa expressed the hope that fund could eventually be worth R10-billion.

“We want to see it going to R10bn so that it can support entrepreneurs who are the great job creators in the economy,” he said.

It’s not just about money

This relates to point two above. Increasing the amount of funding available in the country doesn’t really help if entrepreneurs aren’t given guidance on how to use their investment for real, scalable growth. The hope is also that the fund will help grow the number of investors out there, with structures put in place to provide business support via mentors and technical assistance.