High growth entrepreneurs are powerful job creators, with 30 companies creating 1 350 new jobs in the first six months of 2022 alone. This number is forecast to double to 2 700 by year end, an increase of 36% compared to 2021, with a total employment expected at 16 010 by the year end.
In addition, 80% of the new jobs created by Endeavor’s cohort of high-growth entrepreneurs will be occupied by local youth defined as younger than 35 years and greater than 75% by black South Africans.
Endeavor South Africa opened its offices in 2004 and led high-growth entrepreneurs to success by catalysing long-term economic growth through selecting, mentoring and accelerating the best high-impact entrepreneurs the country has to offer and who are emerging leaders in their sector and specialise in enterprise software and services, as well as companies in the fintech, smart city, edtech, agtech and healthtech space.
So far the group of entrepreneurs is on track to post an impressive R3 billion annual increase in revenue for the 2021-2022 period and forecast to reach R10.3 billion by the end of 2022, growing 56% compared to the year before.
The private capital these entrepreneurs attract is another indication of their strong growth, productivity and the over-indexed contribution to the economy. The forecast for 2022 is running at R5.3 billion compared to the R5.2 billion of 2021 (up 200% on 2020) and matches Africa’s positive Venture Capital (VC) trend and bucking the global VC trend.
Alison Collier, MD of Endeavor South Africa, says the results are very impressive compared to the current backdrop of South Africa’s GDP and job growth, as well as the lacklustre global capital markets.
“The results highlight how South Africa’s high-growth tech entrepreneurs are powerful growth engines, not only attracting private capital but also driving revenue growth and most importantly local job creation,” she says.
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Real solutions for Africa’s mass market
According to Collier a number of these high-growth entrepreneurs created digital solutions aimed at Africa’s mass market, with success depending on how they improve the lives of Africans, such as the recent partnership between two of the companies, Hello Paisa and AURA, to advance the SME ecosystems in South African townships.
Hello Pay, part of the Hello Paisa group, offers accessible card payment solutions to spazas on their mobiles. Hello Pay partnered with AURA, a start-up combatting security threats through their on-demand private security service platform, to offer AURA’s private security as an added service to the spazas that are Hello Pay’s merchants.
Hello Paisa and AURA operate in a number of markets in Africa, with AURA expanding to Kenya in 2021 and Hello Paisa operating in Zimbabwe and Mozambique. Mobile payment solutions, such as Hello Paisa’s, opened financial services to the African mass market, with another Endeavor company, MFS Africa, bridging multiple payment schemes across 36 African markets (and counting) with its single digital payment hub.
Collier says she believes these innovative fintechs, marketplaces and other tech solutions are solving real local problems for Africa’s mass market, which in turn leads to financial improvement and wealth creation for these consumers, kick-starting upliftment and positive economic growth.
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Africa’s digital economy at in an important stage
Africa’s fast population growth, coupled with accelerating digital penetration with smartphone use forecast to double by 2025, as well as the lack of legacy systems, means that Africa and South Africa’s digital economy is at an important stage.
Collier says it is a once in a lifetime opportunity and one we cannot afford to waste. “With Africa firmly entering its demographic bonus, it is crucial that South African policies are competitive for the tech and start-up sectors.”
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SA needs to do more to attract entrepreneurs and capital
While Endeavor SA’s group of companies have been very successful in attracting international investment, Collier believes South Africa, given its onerous policy environment, has become less attractive for high-growth start-ups compared to other African markets, such as Nigeria and Kenya that both recently established Start-Up Acts to support the tech sector’s growth.
“We know where the local policy challenges are for start-ups. The main issues are centred around attracting foreign capital while established in SA. Our government needs to facilitate by addressing a handful of key policy challenges to remove the regulatory burden our entrepreneurs face today and ensure they are attracted and attractive.
She says the key challenges are:
- Current IP legislation imposes costly restrictions that requires prior approval rather than reporting to authorised dealers on transferring IP internationally, a core requirement for start-ups to raise capital from international VCs.
- Cumbersome and costly exchange control restrictions when establishing an international HQ that requires prior approval, rather than reporting to authorised dealers, to raise offshore capital.
- Capital Gains Tax is triggered on establishing an international HQ which is too early and is well before the start-up’s future liquidity event, making it more costly for SA start-ups compared to other nations.
Despite these challenges, Collier is positive about the growth trajectory of the Endeavor entrepreneurs. “It is encouraging to see the growth of these businesses, both locally and globally, off the back of growing investment from international venture capital funds.”
She says these companies are expanding and creating jobs for black youth in South Africa by leveraging private international capital, both of which are beneficial to an economy with an historical twin deficit.
“We hope our government notices all these positive benefits and takes action to incentivise high-growth entrepreneurship, especially now, given the inflection point in the market is clear.”
The current cohort of 30 Endeavor entrepreneurs include businesses with an annual turnover of R50 million to R1.5 billion. These are Aerobotics, ArcAqua, CallForce, Clevva, Clickatell, DataEQ, Entersekt, Flexclub, Go1, Guidepost, GreatSoft, HelloPaisa, Identifii, Innovent, InQuba, Isometrix, Masana, Merchant Capital, MFS Africa, Ozow, Pargo, Retail Engage, Saryx, Sendmarc, SPARK schools, SweepSouth, TTRO, Tymebank and Wyzetalk.