In a world driven by technological advancements, investors are eyeing technology-enabled businesses in South Africa as promising opportunities for growth and innovation. According to Nchaupe Khaole, chief investment officer of the Mineworkers Investment Company (MIC), these ventures are creating exciting prospects for investors and have the potential to revolutionise entire industries.
“In South Africa, technology companies and start-ups alone raised $168.6 million in funding in 2021,” stated Khaole, highlighting the significant funding that has already been flowing into the tech sector.
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“While last year was more difficult for local companies… it was a big year for start-ups across the continent, with more than 600 African start-ups raising a combined $3.3 billion throughout 2022, a year-on-year jump of 55.1%,” Khaole explained, pointing out the remarkable surge in funding experienced by African start-ups.
Khaole attributed the attractiveness of these businesses to their use of innovative technologies such as “artificial intelligence, blockchain, and the Internet of Things” to create ground-breaking products and services.
“In South Africa, many of these companies have the added advantage of addressing the socio-economic challenges faced by many,” Khaole emphasised. “Investing in them not only provides potentially lucrative opportunities but also supports the advancement of technology and the broader economy.”
Regarding education technology, Khaole noted, “Access to affordable and technology-driven education is growing exponentially in South Africa and across the continent… [with] personalised learning, gamification, continued growth of online learning, and augmented and virtual reality… already driving growth and evolution.”
“With more people working and learning from home, there is a growing demand for online education and training platforms,” stated Khaole, underscoring the increasing need for innovative online learning solutions.
Khaole highlighted the growth of cybersecurity, saying, “There is an increasing need for cybersecurity solutions such as cloud-based security platforms or AI-powered threat detection systems and the companies that provide them.”
“In healthtech,” Khaole predicted, “telemedicine will grow exponentially, and the increased use of out-of-facility devices and wearables will allow for increased remote monitoring, supported by AI in areas such as diagnostics and remote health management.”
Similarly, fintech continues to be a key investment driver, according to Khaole, due to “the still substantial constraints around access to affordable banking across the continent.” He mentioned that trends like “digital payments, AI, and machine learning, blockchain, and DLT solutions” are accelerating in the fintech sector.
“With growing concerns about climate change and environmental sustainability,” Khaole pointed out, “there is an increasing demand for technologies that can reduce greenhouse gas emissions, promote renewable energy, and improve resource efficiency.”
Elaborating on South Africa’s energy crisis, Khaole stated, “South Africa’s current energy crisis necessitates the leveraging of solutions which not only offer short-term relief to the disruptions brought on by load shedding… but long-term interventions which make the economy less susceptible to man-made disruptions… and leverage technological advancements aimed at creating sustainable national power grids.”
“When considering investing in technology-enabled businesses,” Khaole advised, “investors should look for certain crucial features including a market for the product or solution, scalability, and either a new, innovative approach to solving a real problem or replication of an existing solution that has not yet been tried in a local market.”
Reflecting on the risks involved, Khaole cautioned, “Many start-ups fail to make it past the initial stages of development, and even those that do succeed often face intense competition and rapidly changing market conditions.
“From a global point of view, funding for start-ups has dried up significantly due to the end of the high liquidity period and inflationary pressures globally which existed pre-2022… Unrealistic growth projections from the founders… are also risks to consider.”
However, despite the risks, Khaole remained optimistic, stating, “Emerging markets offer potential for traction… Investors can position themselves to capitalise on this trend and potentially earn significant returns in the years to come.”
Embracing technology start-ups
Embracing the potential of technology-enabled businesses, the Mineworkers Investment Company actively seeks partnerships with start-ups that leverage technology for positive change. Khaole highlighted some of their investments, including “Limulab, an online platform that facilitates the learning of indigenous languages for children” and “Kelo, Africa’s first all-in-one interactive digital library and bookstore.”
“In the healthtech sector,” Khaole continued, “we have backed Quro Medical, which provides a digitally driven Hospital at Home solution, allowing medical professionals to treat patients remotely, and our fintech investee Livestock Wealth enables crowd funding for farming assets such as cows and macadamia nut trees, a service they call Crowdfarming.”
“While two of our technology-based investments, Rentoza, a subscription-based platform for consumer goods, and TooMuchWifi, an ISP focused on connecting previously disadvantaged communities, do not necessarily address socio-economic challenges, they function as a bridge to access the digital economy for those members of the population who haven’t been absorbed into it,” Khaole pointed out.
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