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South Africa’s startups silver lining in struggling economy

South Africa’s startups silver lining in struggling economy

In recent weeks South Africa’s economy has faced one trial after another leaving investors worried about the state of the government and its leadership. But in the midst of all the economic dreariness and bad news the local startup scenes of Johannesburg and Cape Town in particular have kept ticking along and might even play a role in reinvigorating investor confidence in Africa’s most advanced economy.

A case in point is Silvertree Capital, one the country’s leading consumer internet backers, which said earlier this month it plans to invest $10m into African economies, targeting South Africa as its main priority, as well as Nigeria and Kenya. The South African business incubator’s significant investment comes after its parent company Silvertree Internet Holdings announced a 330% per annum growth for 2015, bringing in $10m in revenue.

Manual Koserm, founder of Silvertree Internet Holdings, says they’re making this commitment even though it’s a tough environment currently, with strong macro-economic headwinds in South Africa and Nigeria.

“We see the opportunity outweighing the risks by quite a significant margin,” says Kosem. His team is making a classic ‘Africa rising’ bet and investing for the long-term in the expectation that the continent’s growing middle class becomes a strong consumer market. “We’re fully aware of the opportunities that the African consumer market is presenting us so we position ourselves accordingly.”

It seems an overly optimistic position to take in present economic circumstances. Business confidence in South Africa is at a five-year low says Rand Merchant Bank’s Bureau for Economic Research. This means the private sector is less likely to invest in the economy and this has stifled job creation. South Africa’s ailing economy—with expected growth of about 0.7%—for 2016 is naturally unappetizing for investors at first glance.

Yet, South African startups could very well inject some life back into the economy.

The startup sector in South Africa tends to be overlooked internationally in favor of exciting new tech hubs in Nairobi and Lagos. However, the country has produced some real global competitors like WhereIsMyTransport, who’ve expanded into London; VIGO, a website-building platform that has entered the Asian market; and things are looking positive for SweepSouth, the first South African startup to have recently caught the attention of 500 Startups in Silicon Valley.

In fact, last year South African startups raised some $54.6m, the highest on the continent according to data collected by Disrupt Africa.

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