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As one of Africa’s “big four” start-up ecosystems, South Africa is an undisputed tech innovation leader. Paula Mokwena, chief executive of local venture capital firm Fireball Capital, discusses how creating a sustainable impact in communities begins with investment in innovation.
South Africa is home to innovative technology companies that have developed solutions that are solving real global challenges. The country is well-established as one of the continent’s “big four” start-up ecosystems, and leads the way for exits, with more than one-third of the acquisitions that have taken place across the African tech space since 2015.
The tech sector is actively addressing a myriad of challenges, ranging from unemployment, all the way to education, health, and financial inclusion.
South Africa has one of the most unequal school systems in the world, with 85% of students attending poorly funded, and dysfunctional schools. This was further exacerbated by the Covid-19 pandemic, which saw schools adopting online learning systems. A lesson that South Africa and many other countries took from the pandemic is the role technology plays in co-creating a digital learning environment.
This also led to the proliferation of edtech solutions provided by companies such as Syafunda, a South African eLearning start-up which provides an online platform for creating a digital portfolio for students, and uLesson, a Nigerian start-up that provides pre-recorded lessons for students that lack access to technology and data.
Healthcare accessibility remains poor in rural areas and there are challenges in retaining physicians in the public system. The highly unequal two-tier healthcare system leaves approximately 75%5 of the population, who can’t afford the exorbitant cost of private healthcare, in the hands of underfunded healthcare facilities.
While these challenges pose a threat to the country’s socio-economic development, they also create the perfect environment for innovative tech solutions, such as the use of drones to deliver health supplies to remote areas that lack infrastructure.
HearX Group is another prime example of a start-up that has developed innovative healthtech solutions including a suite of clinical hearing health solutions consisting of eight products, some of which are designed to allow someone without a medical background to conduct an ear test remotely and then send the results to a medical professional for diagnosis.
These innovative companies also contribute to the development and growth of the real economy, leading to improvements in measurable macroeconomic metrics such job creation, economic growth and the rate of innovation.
In addition to this, there is anecdotal evidence that suggests that a vibrant venture capital ecosystem promotes a culture of entrepreneurship, and facilitates knowledge and skills transfer as companies expand into other markets and gain access to global talent, partners and investors. For consumers, intuitive, easy-to-use tech solutions is not only fixing their pain points but also democratizing access to information, products and services.
Injecting smart capital into innovation
As impactful as these tech solutions are to real challenges, very little investment support is directed at them. Fireball Capital seeks to support the South African venture capital ecosystem and inject smart capital into innovative, high-growth companies that have developed solutions that are helping to solve the world’s biggest problems.
When venture capital is not just directed towards investments that yield a commercial return, but also takes into consideration the environmental, social and corporate governance (ESG) aspects, it has a much greater impact on the country’s communities.
Fireball Capital has embedded ESG considerations into its investment framework because when investors successfully manage ESG issues, they can reduce investment risk, improve long-term return on investments and set companies up for sustainable growth in the long term. ESG-underpinned tech solutions drive a lasting positive impact on society.
For example, Ozow, has increased the rate of financial inclusion for people who have been previously underbanked and underserved by traditional payment rails.
The private sector cannot be excluded from this ecosystem, as it provides access to markets for small businesses, in addition to critical funding. A model example of a corporate that is providing market access is Tiger Brands, which has committed R100 million to its own corporate venture fund to invest in entrepreneurs with businesses that align to consumer-relevant growth platforms such as health and nutrition.
Therefore, the recipe for creating a sustainable positive impact on local communities begins with supporting local entrepreneurs that have created globally relevant and scalable technology-based solutions that solve real-world challenges and adopting an ESG lens to venture capital investing. By investing in innovative tech-enabled companies, not only do we empower entrepreneurs, who in turn create sustainable jobs, but we also contribute towards economic growth and help to solve society’s biggest challenges.
- Paula Mokwena is chief executive and head of direct investments at Fireball Capital in South Africa.