Venture capital opportunity to ‘push the boundaries’ when investing in township economy

16th July 2021

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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It is up to venture capital (VC) fund managers to “push the boundaries” with funders to bring across examples of businesses that are outside-the-norm and to challenge funders to consider investing in these, enterprise and supplier development company Edge Growth Ventures investment principal Vuyiswa Nzimande said this week.

Investment managers and funders often shy away from these businesses, such as those found in townships and rural areas, because it is often treated as a separate form of investment, she said during a South African Venture Capital Association- (Savca-) hosted webinar on July 15.

“This shouldn’t be the case, given that this is where most of our population lives – rural and township, mostly,” she stated.

She pointed to the importance of providing funding in these areas, more than in commercial city centres, Nzimande noted, as both are “equally important”.

Start-up collaboration company Simodisa vice chairperson Matsi Modise agreed with Nzimande that “the township economy is the South African economy”, adding that it also brings into focus how infrastructure will be provided to these areas to “nurture and enable township entrepreneurs to organically grow businesses”.

“The reality is that Sandton doesn’t need any more working spaces and technology hubs. But every time you hear that there is a new office space that’s being built or that’s coming up, it’s not in a township environment,” she stated.

This brings into sharp focus the lack of investment attention given to township and rural areas, Modise stated. She questioned how entrepreneurs in rural and township areas are “supposed to know what the value of technology is and how they can participate within that value chain” otherwise.

Modise, therefore, emphasised the importance of creating infrastructures that enable high-impact technology to come to rural and township areas, as this would create an environment for “everything else” to organically happen.

She used universities as an example and said these were hubs where technology transfer often exists.

Modise proposed using university environments as an example to bring the same skill and technology transfer environment to the rural and township areas in the form of innovation hubs, especially considering that persons within these areas are often required to take more than one taxi, as an example, to get to an opportunity.

“There’s an additional layer that makes it harder for township entrepreneurs to be able to access the opportunities that exist, and [Simodisa] understands what value they can create, and we contribute towards that,” Modise said.

Standalone investment vehicle South African Small- and Medium-Enterprise Fund CEO Ketso Gordhan, meanwhile, pointed out that the lack of investment into rural and township-based entrepreneurs could be attributed to government’s failure to provide adequate service delivery.

However, finding new ways that are going to be more effective to deliver things that are already being delivered, is going to be challenging, he said.

Another reason is that VC, in general, is being driven by large companies that want to be innovative but are “constrained by their own large and bureaucratic structures” and so investments often take place via intermediaries, which often see investments being made into a company’s own particular needs, or a variety of deals.

VC is, however, gaining traction as more people begin to understand the positive side to the sector that’s emerged in South Africa over the last few years.

“It creates a huge excitement and a better understanding of the possibilities for VC,” Gordhan said.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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