In an exclusive interview with HumanIPO Tim Harris MP, the Democratic Alliance’s shadow finance minister and government liaison member of the Silicon Cape committee, discusses what obstacles need to be removed for startups and entrepreneurs.
HumanIPO: What is your role at Silicon Cape and why did you want to get involved?
Tim Harris: I was at the launch four years ago now and there was a lot of buzz. The best thing it had going for it was that it was private sector driven. It wasn’t government saying ‘we want to develop this sector’. It was people from the sector sitting down and saying there is a lot potential for Cape Town to become a hub for technology.
My sense of it now is although the best thing about it was that it came from the private sector, not having anyone connected to the government was one of its major constraints.
I was asked by the previous executive chairman to come to the board and speak to them and talk about what government could do. Perhaps more what government can do to get out of the way rather than assist.
I see my role at Silicon Cape as kind of being the adviser of what government is doing in the space that is going to potentially support or get out of the way to allow the tech sector to expand.
When you are trying to do something at a local level, you have three spheres of government. You have the municipality which has not insignificant resources to support business development, then you have provincial government which has some resources and then national government which holds almost all of the budget.
Is your role with Silicon Cape apolitical and how do you manage that?
Clearly the fact in Cape Town we sit with a DA provincial government and an ANC national government, it makes it more complex and I make sure I acknowledge that.
I try to remove the politics from it. It is about making sure the government is getting out of the way when required and that is not a political thing.
It is at national level you will see most of the constraints. Tax control and exchange restraints. I am prepared to work with the finance minister in relaxing these constraints in a totally non political way. I want to see this work and I am not interested in point scoring.
What needs to addressed to attract more investment into the South African tech scene?
There are three main areas. The first thing is exchange controls. I have spoken to venture capital guys from abroad. They found it hard to believe we still have exchange controls on the financial side.
But also the definition of capital includes intellectual property. This is the real bread and butter of the venture capitalist. You are moving financial resources to try and support IP. When you do that in South Africa you are constrained. We have a huge generalised constraint on VCs, which I have argued is the main constraint holding back Silicon Cape and the tech sector in South Africa more broadly.
The second one is the issue of business regulations, which hits the tech sector as hard as any other sector. I’ve heard investors speak favourably of the regulation in the Kenya system. That is outrageous that we compare so unfavourably to other countries in Africa. In most international rankings, it is clear South Africa has a business regulation problem.
The tax system could work better to support startups. I am actually busy consulting the startups in Cape Town to see how we can alter the tax code.
I am hearing more and more venture capitalists and entrepreneurs saying they think the system could be designed to assist them better. Most of the constraints towards the tech sector do emanate from national policy.
One of the things I am working on is how we can provide resources and support from between the province and the city. We will be having a meeting of the Economic Development Partnership (EDP) and the Silicon Cape because sometimes the government bodies don’t necessarily know the best way to develop a tech sector. We need to make sure the Silicon Cape is in step with the EDP.
If removing the constraints and assessing the support structures are the first two, the third objective is open data. I am trying to work with the city and the province to open up the data that they generate to the tech space, especially in mobile innovation.
I am not the first to do this. The province has worked on this already.
If we could open up a significant chunk of data that will be quite a victory. It will be data around property, businesses in the city and traffic volumes – any data that the city or the province is prepared to share.
It might well be very useful for an entrepreneur who can deliver some kind of product which could benefit the citizens because services could be delivered better.
What do you make of Jess Green’s vision to bring the Start Up Chile model to Cape Town?
I think it is a very interesting idea and I think it is one we could emulate. If we [the DA] were in control at national level we would be looking to experiment with ideas like that.
The direct funding of startups by the state is something Chile has shown can work, but it is not a perfect policy. The trick with industrial policy is knowing when you need to provide that support and when you need to withdraw that support.
We simply don’t have the budget within the province or city to do it locally. We don’t have the resources. I have spoken to Jesse about it and it is a great idea.
What are your thoughts concerning the state funding of fibre-optic network rollout, for example the City of Cape Town’s high speed network launched this year?
I think what smarter governments are coming round to is connectivity and broadband is a public good. The state has responsibility to ensure public goods are provided.
Too often the national government has not involved the private sector enough and what they have tended to do is end up with state monopolies like Telkom.
The initiative to introduce competition to Telkom was 15 years too late and I think mobile was an example of how you can have a proper competition within a space. There are now four players which compete and consumers are the big winners.
Compare that to the fixed line space, it is just behind. The cost of ADSL is the side effect of what happens when you get the policy wrong.
Governments are realising providing broadband is a public good. In terms of delivering it we need to get the private sector involved with rolling it out. It needs to be regulated because you can’t have five different companies digging up the pavement.