BDO LLP | INTERNATIONAL TECH HUBS SECOND EDITION
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25 INTERNATIONAL TECH HUBS SECOND EDITION | BDO LLP
SOUTH AFRICA
THE TECH BUSINESS ECOSYSTEM Though South Africa is a large nation, tech is concentrated on two main hubs: Johannesburg and Cape Town. The latter has more of an international reputation for tourism, but in recent years, business is also moving towards this coastal area. Cape Town has been ranked as the best city in the world to live by The Telegraph newspaper for seven years running now, making its quality of life desirable for tech employees. The city has also dedicated significant effort into developing a tech hub, which is referred to as “Silicon Cape”. This area is focused on generating a network of small tech start-ups, rivalling the larger start-ups and scale ups seen in Johannesburg which dominates in the financial services sector. Renowned tech firms have all invested in South Africa, seeing its appeal from an international perspective. For example, Microsoft has launched two enterprise-grade data centres to service Microsoft Azure Office 365 in Johannesburg and Cape Town, while Amazon is currently expanding its workforce by another 3,000 employees Google, Facebook, and Huawei – some of the largest tech firms in the world – have established either a base or subsidiaries in South Africa. Just over 30% of Tencent, the world’s largest video game company, one of the world’s most financially valuable companies, and one of the world’s largest social media companies is owned by South African tech giant, Naspers. Insurance company Discovery has recently moved into the fintech space, syndicating their own bank and competing with the likes of Tymebank, also a new entrant to the market. A more recent exploration is into the gaming and eSports side of tech. Though new in South Africa, international gaming companies are taking an interest in South African markets, particularly as the number of internet users continues to swell rapidly.
THE TECH LANDSCAPE South Africa’s European-friendly time zone and English-speaking populace make it an appealing area for technology business and investors alike. Based on Forbes’ assessment, South Africa places midway in the Best Countries for Business list, with its excellent rates of education, high quality of life and accessibility appealing to international parties. With a large but under-serviced population close by in the neighbouring Sub-Saharan and other African areas, international tech businesses are moving in to provide much- needed services and solutions. A low cost of doing business adds to the appeal.
THE MOBILE PAYMENTS SERVICES INDUSTRY IS ALSO THRIVING IN SOUTH AFRICA, DUE TO THE LARGE UNBANKED POPULATION BOTH LOCALLY AND MORE WIDELY IN SUB-SAHARAN AFRICA.
With expert input from Carl Bosma, Director, Risk Advisory Services at BDO Cape Town and Bernard van der Walt, leader of the TMT sector for BDO South Africa. Carl has a wide range of experience with a particular focus on technology, media and telecoms. Bernard also has extensive experience in the media and technology sector, from start-ups to listed entities.
The mobile payments services industry is also thriving in South Africa, due to the large unbanked population both locally and more widely in Sub-Saharan Africa. As fund transfers need to occur without bank accounts, payment apps have become a successful solution, due to the high penetration of mobile phones in the area. The appeal is augmented by the internet infrastructure in South Africa, which includes 130 node locations and 70,000 miles of fibre optic cable, including undersea cables, which are incredibly useful for tech businesses. Microsoft, for example, is leveraging this infrastructure to access the rest of Sub-Saharan Africa and other more northern nations. THE TALENT POOL South Africa’s education system is strong, with well-known and reputable institutions such as the University of Cape Town, Stellenbosch University, Wits University and Rhodes University. These produce good quality students with a very high level of education, ripe for the tech market. There is significant competition for South African talent; some of the greatest exports from the country include Tesla’s Elon Musk and Canonical’s Mark Shuttleworth, both tech giants. Highly qualified staff are available at lower rates than other global locations, which makes them appealing for international businesses. Many graduates move overseas, meaning companies in the area need to be extra competitive in order to retain talent.
OVERVIEW: IMPRESSIVE INFRASTRUCTURE WITH INTERNATIONAL APPEAL South Africa’s technological capabilities, high levels of education and excellent quality of life are appealing to international tech companies looking for access to Sub-Saharan Africa. Though the market is still nascent, multinational tech giants and international investors have already seen the attraction.
RENOWNED TECH FIRMS HAVE ALL INVESTED IN SOUTH AFRICA , SEEING ITS APPEAL FROM AN INTERNATIONAL PERSPECTIVE.
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