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I recently sat down with Conrad Steyn, CTO for Cisco Sub-Saharan Africa, to chat about the state of startups and SMMEs in South Africa and across the continent.
Brendon Petersen (BP): Conrad, thanks for joining me. I wanted to chat with you about the startup landscape in South Africa. Last year Cisco opened an EDGE Centre in Century City in Cape Town to provide startups access to the latest technology to help them grow their businesses.
What was the thinking behind establishing these centres?
SMEs account for the majority of businesses worldwide and are important contributors to job creation and global economic development.
Conrad Steyn (CS): We focus all around South Africa and if you look at it from all of the areas and angles that we look at it, startups and small & medium enterprises (SMMEs) are really the heart of the South African economy. For us as Cisco, we wanted to positively contribute to South Africa.
We’ve been in South Africa for more than 20 years, and understanding as a key contributor to the ICT landscape in South Africa, we really looked at what is key and what is going to help startups and drive innovation as well as this digital transformation within South Africa.
The key things we saw in the current economic landscape in South Africa for startups and SMMEs was a lack of access to technology and skills development as well as a lack of incubation programs and facilities. There’s also the issue around finance and obtaining credit in the South African market and access to experts and new markets and how they develop relationships with customers.
We also saw a lack of recognition from large companies and government.
From Cisco, programmability is key for us and everything that we do and it’s really the glue that brings all of our technologies together and ties it into the customer and business requirements and really creates that value add.
The whole concept around the EDGE centre was around how we create this technology experience and attract new talent into this environment? How do we get startups and SMMEs to design all of these vertical solutions while at the same time developing the required Cisco skills through Cisco specialisation. And then help them to drive that go-to-market into the South African economy through becoming a Cisco channel partner and ultimately earning potential revenue from here and what that normally leads in terms of job creation and employment in terms of the company growing and having to employ more people.
So that was really the train of thought and as the program evolved, we started looking at what we do with these centres and what’s actually required from startups, etc. We found that facilities were the key thing here. So we created an innovations/incubation space where startups could come in and leverage the space free of charge and pretty much use it as a daily office, but then have exposure to all of those Cisco experts and also be able to showcase the technology to their customers. That was really the big aim around it.
BP: Are there any plans to expand further and create more EDGE centres or maybe take some of the concepts and technologies and make it even more accessible?
CS: Yes, definitely. At the moment we have six centres in Africa, four in South Africa in all of the major hubs: the Innovation Hub in Tshwane, the Dube TradePort in KZN, the one in Century City in Cape Town and we’re about to launch one at the East London Development Zone. We also have one in Lagos, Nigeria and we have one at Nairobi University in Kenya. During this COVID and pandemic time, we’re looking at how we turn this into a virtual environment to extend the footprint. But I think for us as well, working with other government entities like SEDA and the Department of Small Business Development to see how we create external partnerships in places like Limpopo and other areas to expand the footprint, the program, content and capabilities as well. We’re also working with our two distributors in South Africa to drive that onboarding where they have a presence.
BP: From your perspective, why do you think that other companies and big enterprises are not making similar moves in terms of making programs and spaces like these accessible to people?
CS: Other entities have similar programs from an OEM point of view, etc. I think a lot of it has been virtual, however. What we found is that the virtual environment addresses the skills, development, etc. But you know it doesn’t really bring everybody together to foster innovation and incubation. What we found was with spaces where we pulled the customer, the SMME, the startup, where we pulled everybody in, it creates a community of interest.
Interestingly enough we had a lot of discussions about putting twenty SMMEs in the same space and how they’d deal with things like intellectual property rights and conflict of customer base etc, but we found that SMMEs started banding together to fulfill market requirements and develop solutions where they would leverage one another’s strengths in particular areas and come up with joint solutions that they would then take to market. I think just by keeping the virtual separation we would not have achieved that. From a prototyping point of view it’s quite important to have a physical space where you can come in, sit down, do your prototype analysis, 3D printing, etc. That’s really a differentiator for us. The other key differentiator here is that we did it in partnership. We would create these EDGE centres in partnership with government where they would provide us with the space and we would build up the program, the content and the technology.
BP: For years government has spoken about the importance of entrepreneurial skills and startups and what they’re doing to empower and enable a startup and entrepreneurial environment but we haven’t really seen that sort of come to fruition. What do you think are some of the challenges that they’ve faced trying to make this a reality? Is it a lack of partnership with companies and key stakeholders like Cisco?
CS: Previously there were a whole myriad of challenges that impacted things. I think if we start looking at what’s been happening in the last quarter with all of the new funds that’s been launched, etc. I think there’s a lot of potential, and there’s a lot of areas that’ve been addressed that were lacking before, and I think during the pandemic time a big impact was felt and I think funds got redirected to do the SMME support programs, etc. Now that you have the SMME toolkits available from government to really lead startups and SMMEs around what is required to get the business registered and from a financial support point of view there’s a lot of progress being made on that side. Previously, challenges were that government tried to do all of the policy making and everything on their own.
When we look at the 4th Industrial Revolution Council was created under the Presidency and you look at all of the major OEMs that formed part of it and key industry players, now that we can participate in the policy making process driving the country digitisation strategy, people working together is driving the result. There’s also a lot of new investment coming into it right now.
BP: I find it very interesting that all of a sudden we’ve got this massive influx of people turning their eyes to Africa, saying “we need to invest”. What do you think is driving that?
CS: It’s a combination of things.
When you start looking at South Africa, we look at Kenya and Nigeria as the key touch points from a start up point of view. There was a big area of unemployed youth and then also the challenges in entering the market from a job opportunity point of view. A lot of focus has been driven into programmability skills and when you look at the talent that we’ve created through all of these incubation programs in starting from early, from an application development, and we start looking at other areas like fintech and agriculture, I think IoT is still key for us in Africa because we haven’t really looked at AI machine learning and how we bring IoT together to touch on all of these different areas. I think we have the skill and suddenly during the pandemic we saw quite innovative ideas coming up. But I think it’s just exponentially risen tenfold from a skills and capability point of view. If we look at it historically we’ve always had these skills and they’ve always been absorbed into the US and into Europe. I think what’s happened in the pandemic is a lot of these skills have chosen to remain in Africa and to address the gap in technology versus business requirements and business gaps. And that’s now where we’ve seen this boom around application development startups and all of the new innovative ideas coming out.
I think the second part of it is that Africa is sitting with a huge talent pool. We have a lot of undeveloped countries and environments where we see all of these everyday challenges and that’s really sparked the innovation drive.
From a labour market point of view, we have the ability to work remotely for any organisation in the world because of our time zone and location which is really contributing to those global impacts around innovation that we want.
BP: Where do you see some of the biggest shifts happening with SMMEs and startups?
CS: We see a lot of focus at the moment in fintech, education, retail and healthcare. Agritech at the moment is really coming to the fore right now across Africa. If you look at our food situation across Africa right now, there’s a big big investment around agritech but predominantly the four key focus areas are still fintech, edtech, retail and healthcare.
BP: What are some of the biggest challenges you’re seeing that SMMEs and startups are facing?
CS: The biggest challenge is access to funding. Where this starts having a big impact is when prototyping has been completed and you’re ready to take it into the mass market.
I think from a startup funding point of view there’s a very big gap. Also, from a venture capitalist point of view access to funds is very, very limited. We’re seeing a number of partnerships coming to South Africa or actually to Africa at the moment when we start looking at companies like Plug and Play, but that only addresses a small percentage of the startup market.
I think that the perception from a startup is that they have to go international before they can make it big. Focus local and grow exponentially is also something to focus on, but those are the key challenges I think.
BP: As much as government has done to improve access to resources for startups and SMMEs, what are some of the things that still need to change and improve?
CS: From a Cisco standpoint it would be just a stronger alignment with government. Focusing on and identifying top verticals that we need to focus upon. I think we also try tighter partnerships with other OEMs so we can look at startup funding etc. And I think a big invitation to other venture capitalists out there to come and invest in South Africa. There is a very big untapped market here and I think some venture capitalists are starting to venture into Africa but there’s a lot more opportunity than what they think.
Ultimately there are a lot of OEMs and major tech companies still coming together looking at a cohesive alignment and driving a single strategy into Africa around skills development startups and also allowing for all the required preferential procurement.
(Interview edited for clarity)