South Africa is preparing to strengthen its startup ecosystem through plans to raise up to R10 billion ($609 million) in venture capital, a move expected to help high-growth businesses expand, create jobs and attract more investment into the country’s technology sector.
The South Africa SME Fund plans to secure an initial R2 billion in 2027 before using that capital to attract additional funding from institutional investors, with the goal of reaching R10 billion. The initiative comes as South Africa’s venture capital market continues to mature, giving startups greater access to the funding needed to scale their businesses.
According to South Africa SME Fund Chief Executive Officer Ketso Gordhan, the planned fundraising builds on the foundation created by the fund’s first capital raise nearly a decade ago.
“The planned raise follows an initial R1.7 billion that the fund raised about a decade ago and was backed by the likes of the Public Investment Corp, Naspers, Vodacom Group,” Gordhan said, adding that “there are talks to also reinvest the proceeds made from those investments.”
Established by the CEO Initiative, a group made up of leaders from South Africa’s largest listed companies, the SME Fund was created to address barriers that prevent small businesses from growing while building a stronger entrepreneurial ecosystem.
A Growing Venture Capital Market
The latest plans come as South Africa’s venture capital industry shows clear signs of growth and increasing maturity.
A study by the SME Fund, Endeavor South Africa and the Southern Africa Venture Capital and Private Equity Association found that more than R16 billion has been invested in 1,142 companies over the past decade. During the same period, investors realised close to R5 billion through approximately 226 exits, demonstrating that successful startups are increasingly delivering returns for investors.
Endeavor South Africa Managing Director Alison Collier said the country’s venture capital industry has made significant progress over the last five years.
“South Africa has managed to double the size of its venture-capital market over the past five years,” she said, adding that the planned expansion of the local funding pool could “most likely see the space double again in the next three to five years.”
For many startups, venture capital has become an important source of funding, particularly for businesses that struggle to secure financing from traditional banks. The additional investment is expected to support innovation, help companies grow faster and contribute to the development of new industries.
With South Africa continuing to face slow economic growth and high unemployment, many investors believe that supporting successful startups can play an important role in creating jobs and driving long-term economic development.
More Exit Opportunities Strengthen Investor Confidence
While raising investment remains important, creating successful exit opportunities has become another key measure of a healthy venture capital market.
Collier noted that South Africa has made progress in this area, supported by increased merger and acquisition activity from both local and international companies. She also pointed to the development of a secondary market that is attracting startup listings, particularly in the financial technology sector.
“The market has developed multiple pathways to exits,” she said. “That’s a critical sign of a healthy venture-capital ecosystem as investors need confidence that successful companies can ultimately generate liquidity.”
Several major transactions have also demonstrated the scale that South African startups can achieve. Fintech company Optasia reached a valuation of $1.4 billion following its Johannesburg listing last year, while Endeavor-backed Tyme Bank is now valued at more than $1.5 billion.
Source: Bloomberg
