Take a look at South Africa’s leading businesses over the last couple of decades and you’ll see that industries such as mining, finance and media have long been national powerhouses. However, as we all know, the world around us is changing and tech is now a dominant force around the world. Unsurprisingly, South Africa hasn’t closed its doors to tech. In fact, it’s positively welcoming tech companies and that could pay dividends in the coming years.
As it stands, the South Africa 40 is still dominated by mining and banking companies. As you track the value of the 40 richest companies in the country using IG’s South Africa 40 index, it’s easy to see why this is the case. According to the statistics, mining now accounts for just 7.3% of South Africa’s GDP compared to the 20% levels seen in 1980. This drop-off in revenue for South Africa 40 companies such as Gold Fields has clearly had an effect.
Mining Down but It’s Certainly Not Out
Of course, it’s not all doom and gloom. Some commentators are pointing to the growth of economies across Africa as a potential source of salvation for the mining industry. As Richard Baker has noted, South Africa is a “lynchpin in the region” and the mining companies making up the South Africa 40 have a chance to capitalise on the continent’s growth. As countries such as the Ivory Coast continue to enjoy economic upswings, South African mining companies such as Gold Fields will have a whole new market to supply.
Unfortunately, this might not be enough to save the economy and that’s why tech is quickly becoming the go-to industry for investors. In between tech companies such as redPanda and Wantitall that started in the mid-noughties, recent upstarts like GetSmarter have been making waves on the SA tech scene. Thanks to rapid growth in 2016, GetSmarter’s platform for offering online university course for professionals was purchased by US Nasdaq listed company 2U.
SA the Silicon Valley of Africa
Beyond the international investment in one of South Africa’s brightest startups, invest firm Silvertree Capital has pledged to up its investment in across the country. Following 330% growth for Silvertree Internet Holdings (Silvertree Capital’s parent company), the company poured $10 million into Africa, including South Africa, during 2016. As tantalising this figure sounds, it’s just a fifth of the $54.6 million South African tech companies gleaned from investors in 2015.
Although South Africa might not be a rival to Silicon Valley, it is on its way to becoming the Silicon Valley of Africa and that’s a good thing. This can only be good news for an economy that’s been struggling to deal with a downturn in mining revenues over the last few decades. Of course, the prominence of mining companies on the South Africa 40 isn’t likely to fade completely, but don’t be surprised if we start to see tech companies breaking into the most valuable businesses in the coming years.