“Where you will sit when you are old shows where you stood in youth”. Incubators and Innovation in South Africa.

Africa’s youth is not standing still[1]. The continent boasts the world’s most youthful human capital pool and in 29 years’ time, half of Sub Saharan Africa’s 1 billion population will be under 25[2]. The influence of youth culture on African economies cannot be overstated and the flow of venture capital in the direction of African start-ups - reaching an unprecedented USD2.5bn this year - bears testament to that[3]. With less than a third of the continent’s population using the internet, there is massive scope for the digital gap to be narrowed and the flourishing incubator, tech hub and data centre landscape is increasingly going to be a key feature of this mission. South Africa, which has once again gone into lockdown yet whose economy is set to rebound to 3% this year, is moving apace in terms of the start-up ecosystem and from our vantage point in Mpumalanga, we take a moment to reflect on the drivers and potential impact.

Hand-holding, coaching & peer to peer mentoring: key features: The incubation programs we’re observing in SA tend to range from 3 months to 3 years and provide competition opportunities for funding for early stage businesses[4]. Incubators also serve as innovation and business hubs where their key aim is to assist small business owners scale up and boost growth through providing billable access to coworking spaces, expert coaching and peer mentoring sessions. Our research on the nexus between job creation and social entrepreneurship point to a growing trend in incubators playing a key role in supporting social enterprises to start and scale their businesses.

Progressive outlook for innovation. In the year 2019 alone, S.A received $67 million1in startup funding and since then the country has been making strides in setting up innovation hubs and small business support organizations in the form of accelerators and incubators. 

A Snapshot of Incubators in SA- Songhai Advisory

Social mission orientation at heart of start-up culture: Unemployment figures in South Africa are extremely high, particularly among 15-24 year olds: 63%[5]. By virtue of this, it is unsurprising that studies point to a primary objective of start-ups and small businesses in SA to tackle youth unemployment. In addition, young businesses in SA tend to be motivated by a desire to level the playing field by becoming part of the story of success for black-owned and women-led businesses[6].

Incubators mirror Sustainable Development Goals. While not all the incubators we are coming across have an explicit impact-oriented mission, the sectors that they tend to operate in are in alignment with the SDGs. For instance, in technology, agriculture, education, women-owned SMEs, black-owned companies and to a lesser extent, in renewable energy and healthcare[7].

Key sector to watch: digital technology. The sector which stands out in terms of incubation support is digital technology. McKinsey considers that by 2030, “South Africa has the potential to create up to 4.5 million new jobs across many sectors as a result of productivity improvements, strategic policy implementation and the evolution of technology[8]”. Visibly, incubation programs and organizations are in alignment, offering mentoring and coaching sessions as well as extensive access to coworking spaces to ensure that these organizations actually succeed.

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[1]In response to Yoruba proverb: “Where you will sit when you are old shows where you stood in youth”.

[2]https://www.worldbank.org/en/region/afr/overview

[3]https://www.weforum.org/agenda/2021/05/study-shows-virtual-capital-for-african-startups-is-steeply-increasing/

[4]https://www.entrepreneur.com/article/327566

[5]https://www.worldbank.org/en/country/southafrica/overview

[6]https://smetoolkit.businesspartners.co.za/sites/default/files/body-files/en/SMEIncubatorsSupportServicesOCTOBER2016.pdf

[7]Ibid.

[8]https://www.mckinsey.com/~/media/mckinsey/featured%20insights/middle%20east%20and%20africa/the%20future%20of%20work%20in%20south%20africa%20digitisation%20productivity%20and%20job%20creation/the-future-of-work-in-south-africa.ashx