CC image coutersy of Marcin Wichary
Research from the United States suggests government policy to promote tech startups could stimulate employment and GDP, but the model may be not be so clear when applied to African economies.
HumanIPO reported last week on the results of a survey by research and policy foundation Engine, in partnership with the Ewing Marion Kauffman Foundation, which said young technology-based companies were alone in creating on-average positive job growth.
The report said while young companies in general had a negative impact on the economy due to high failure rates, the tech companies which lasted tended to grow big enough to more than make up for the negative impact of failures elsewhere in the sector.
Dane Stangler, director of research and policy at the Kauffman Foundation, said: “The report confirms the dynamism of the technology sector and its disproportionate contributions to the US economy. It also underscores the need for policies that enable and support that dynamism.”
HumanIPO spoke to members of South Africa’s tech startup community to gauge opinions on whether these results should be applied to the country’s economy and the government’s relationship with the tech industry.
Jess Green, entrepreneur and e-commerce consultant, said: “Government should definitely get more involved. I think they are really making big strides in the right direction, but if they took a concerted approach to improving the tech industry they’d reach their goals of GDP and employment far quicker.”
Andrew Lynch, founder of Cape Town-based startup Weaver, disagreed: “I don’t think that applies in terms of South Africa, we don’t have a highly skilled workforce who could take advantage of government support for tech startups.”
Both agree there are currently no significant government initiatives to support tech entrepreneurship, though the value of such legislation has been a subject of debate in the past.
Speaking to HumanIPO earlier this year, Permjot Valia, chief executive officer (CEO) of Mentorcamp, said: “It is 100 per cent private sector led, which I have never come across.
“Here you have got no government involvement… It could be better, but sometimes government messes things up. Government per se is neither good nor bad, it depends, it’s always down to the quality of the people.”
Green suggests there is room for the government to be more hospitable to the tech startup community in South Africa without drastic change or heavy involvement.
“I would say it’s about oiling the wheel of entrepreneurship,” he said. “They need to focus on making it far more efficient, making it quicker to get up and running, making it easier to formalise business practices.”
According to Green, bureaucratic barriers are tied with a generally poor relationship between government and the tech industry.
“There’s not enough focus on what tech companies can do for the country… instead of engaging with us they just go in and make rules,” Green added.
Opinions are mixed on how far the results of this US-based survey can be applied to South Africa.
Ian Hathaway, author of the report, said: “By comparing the high-tech sector with other firms across the economy, we see the job-creating power that growth-oriented technology startups harness, compared with other young businesses. Observing these trends, it is clear that encouraging the creation of new tech businesses can boost our economy.”
It remains to be seen whether IT literacy among South Africa’s workforce is high enough for stimulation in the tech industry to have a major impact on job creation and GDP.
What members of the country’s tech community appear to agree upon though is that the startup industry itself could benefit from an alteration in the government’s approach to entrepreneurship, and only then will the benefits of tech innovation on the economy be fully felt.