ICT sector defies odds, tops VC investments

The Southern African Venture Capital and Private Equity Association (SAVCA) released its annual Venture Capital Industry Survey, revealing significant trends in the region’s investment landscape. Despite a sluggish economy, high unemployment rates, and persistent energy crises, Southern Africa’s Information and Communication Technology (ICT) sector has emerged as a beacon of hope, continuing to attract investor interest and confidence.

The 2023 survey, presented by SAVCA CEO Tshepiso Kobile, highlighted the challenges faced by the region’s start-ups but emphasised the robust business case supporting the ICT sector. The report indicated a 14.5% decrease in the value of venture capital deals in 2022.

However, it marked the fifth consecutive year the industry attracted over R1 billion in early-stage investments. Notably, South Africa’s ICT sector represented the largest combined sector by the number of deals, comprising 48.1% of the investments in 2022.

Within the ICT sector, specific sub-sectors captured investors’ attention. Fintech led the way with 12.3%, followed by software (8.9%), telecoms (4.0%), agritech (3.9%), and electronics (2.3%). The survey also showcased the sector’s potential for social impact, especially in education, where technology is bridging gaps in access to information and e-learning resources.

Kobile emphasised the importance of finding a balance between commercial viability and social impact. She stated, “The ICT sector holds promise as a bedrock for social development, evidenced in areas such as education, by providing much-needed access to information and e-learning resources.”

Kabelo Themane, senior investment associate at Edge Growth, echoed Kobile’s sentiments, emphasising the need for investments to go beyond financial gains. According to Themane, investing in homegrown businesses should involve mentorship, ongoing support, and training to foster growth and address societal challenges like unemployment and financial inclusion.

The report revealed that most funding was allocated to new deals, indicating increased follow-on funding into existing portfolios in 2022. This trend suggests a growing confidence in Southern Africa’s entrepreneurial ecosystem. Reflecting on the survey’s findings, Kobile expressed optimism about early-stage investments in the coming year.

The SAVCA VC Conference, held in Stellenbosch, served as a platform for industry stakeholders to discuss the future prospects of the VC sector in Southern Africa. The event brought together local and international institutional investors, fund managers, entrepreneurs, advisors, and policymakers to share insights and ideas.

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