Grow Your Business in Cape Town: How SMEs can thrive in Africa's New Silicon Valley

What springs to mind when you think of Cape Town? Stunning beaches perhaps? The iconic Table Mountain? Wine farms by the barrel? Unparalleled sunsets?

What many don’t instantly associate Cape Town with, is that it is one of the fastest-growing start-up ecosystems in the world.

Already home to an impressive array of tech heavyweights such as Takealot, GetSmarter, SEON, Yoco, Sweep South and Naspers, Cape Town is only just getting started with an unrivalled ambition to become the ‘Silicon Valley’ of Africa.

The Mother City is now counted as one of the fastest-growing regions for foreign direct investment, according to a report from fDi intelligence. The exceptional growth and vast opportunities are clear to see:

• Cape Town’s start-up scene is worth an estimated $2.8 billion (to add some perspective, Johannesburg is estimated to be just $962 million)
• According to PWC, over 60% of South Africa’s tech start-ups are located here; and
• 58% of South Africa’s venture capital firms are headquartered in Cape Town
• Over 450 tech firms are employing more than 40,000 people (making the ecosystem bigger than Nairobi and Lagos combined!)
• Cape Town topped the leader board in the African Tech Ecosystems of the future 2021/22 report by fDi Intelligence

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But what makes it such an ideal place to grow your business?

With four world-class universities, two globally recognised business schools, research councils and private and public coding schools in and around Cape Town, talent acquisition is readily available. The location and time zone also allows for effective pan-African and European collaborations.

Impressive connectivity is a huge draw factor for start-ups and Cape Town has one of the largest open-access fibre networks in Africa. Then there are the numerous government initiatives and projects set up, providing significant support for entrepreneurs. Added to this, the abundance of co-working spaces, the work-life balance, the relatively low cost of living, and the appeal for entrepreneurs and larger companies alike are compelling.

Cape Town’s Funding Gap

Despite the above, there are numerous challenges to overcome in the quest to become a global leader within this space, namely the lack of follow-on funding.

Early-stage ventures, including SMEs, face a huge funding gap. According to World Bank, this is estimated to be as high as USD330 million across sub-Saharan Africa.

Many SMEs are now forced to pursue ‘bootstrapping’ to grow their business. Unfortunately, most SMEs buckle, finding it unsustainable to rely on a combination of personal finances and operating revenues alone.

Or worse yet, SMEs are often forced to sell equity too early on in their cycle giving away larger stakes in their company than they would like to. Sometimes, debt is the better option for SME expansion, especially if the company has an incredible growth trajectory; selling equity should always be the last resort.

This is where Geddes Capital is ready to assist. We are passionate about stepping in to assist SMEs which have overcome the initial start-up phase but find themselves cash strapped whilst navigating through their growth phase. We offer multiple creative and flexible funding solutions for SMEs to free up valuable cash flow and focus on expansion.

There is still much work to be done and improving access to funding for these SMEs is crucial to ensure Cape Town continues to thrive, one day obtaining the accolade of being the ‘Silicon Valley’ of Africa.