ANALYSIS: Western Cape attracts the most venture funding in SA

The Western Cape continues to attract the most start-up funding, findings by the Southern African Venture Capital and Private Equity Association (Savca) show. 

Savca recently released a report showing that capital flow to SA start-ups in 2023 reached R3.28bn, driven by investment into local technology businesses. 

The report, which covers the state of the 2023 venture capital ecosystem in SA, says it was the highest total capital flow to start-ups since the launch of the survey 14 years ago.

SA’s venture capital asset class, which excludes small business support by government, development finance and a number of corporate investment programmes, had R10.73bn invested across 1,106 active deals.

Active portfolios containing Western Cape-based companies dropped marginally from 53.7% in 2022 to 49% in 2023, by value. By deal volume, things remained steady at 55.6%.

As such, “this province thus continues to account for more than half of the overall VC [venture capital] activity in SA, with Gauteng making up one in three VC deals,” Savca says. 

Gauteng, dominated by Johannesburg, was second at 30.4%, comprising 32.6% of all deals by number.

Cape Town has gained the reputation of being SA’s Silicon Valley, with some referring to it as the “Silicon Cape”.

Factors driving tech development in the city are the availability of globally competitive talent and funders based in the province. 

Some of the country’s biggest start-ups to emerge from the region in recent years include payment businesses Yoco and Ozow, agriculture player Aerobotics, developer marketplace OfferZen, and gaming company Carry1st. 

Biotech start-up

Additionally, it helps that there are learning institutions that support and grow start-ups. 

In June, Immobazyme, a Stellenbosch-based biotech start-up, secured R24.5m in venture funding to expand its enzyme immobilisation and precision fermentation platform. The funding round was led by the University Technology Fund — a private sector initiative set up by the SA SME Fund, and University of Stellenbosch Enterprises.

Immobazyme aims to double its facility size and “dramatically scale its high-value proteins and enzyme production capabilities”.

Earlier this year, CubeSpace, a satellite component manufacturer started at Stellenbosch University, received R47m through a funding round led by the University Technology Fund and co-investor Savant Venture Fund, based in Cape Town, to expand its operations beyond SA. 

Last week, the manufacturing company said it had secured R47m in venture capital funding.

Access to funding does not guarantee success for a venture. 

In late 2023, mobility start-up WhereIsMyTransport closed down having failed to secure additional funding to keep operating.

Founded in Cape Town, WhereIsMyTransport specialised in mobility technology, mapping formal and informal public transport networks. The company is said to have raised a total of $27m from backers, including Naspers. 

Steady decline

Savca CEO Tshepiso Kobile noted that while the value of deals and investment had risen, the number of deals had not, because a third were earmarked for additional investment. These companies have thus received multiple rounds of funding.

New deals amounted to 64.6% of all active deals to date by deal number, reflecting a steady decline from 70.5% in 2022 and 73.1% in 2021, and a “clear demonstration of an increase in follow-on funding into own portfolios in 2023”, Kobile said. 

While venture funding grows in SA, the country has continued to trail behind Kenya and Nigeria in attracting capital, despite having the continent’s most developed economy and industrial ecosystem. 

Data from The African Private Capital Association (Avca) shows that in 2023 West Africa attracted the largest proportion of venture capital deal volume in Africa, at 26%, driven by Nigeria, which was the most active country by volume, at 19%. 

With the inclusion of venture debt, venture inflows to Africa last year clocked in at $4.5bn across 603 deals — $2bn less than the previous year, Avca said. 

The total for Africa is a paltry amount compared with the $144.3bn worth of venture capital that flowed through the US. 

The bright spot for SA is that while overall venture funding shrunk on the continent, flows to the local start-up ecosystem grew during the period. 

gavazam@businesslive.co.za