South African founders have lived with an uncomfortable paradox for years: if you want to raise serious international capital, you often need to pack your intellectual property (IP) into a Delaware or UK entity and wave goodbye to the part of the business that actually holds value. The price of global growth has been domestic hollowing-out.

Now, that might be about to change.

At the recent Southern Africa Venture Capital and Private Equity Association (SAVCA) conference, policymakers and industry heavyweights discussed a new regulatory sandbox designed to provide startups with a legally compliant route to house IP offshore for fundraising purposes — without forcing companies to relocate operations, teams, or tax revenues out of South Africa.

Whether this becomes a turning point for the technology ecosystem or just another well-intentioned pilot that gathers dust remains to be seen. But the mood in the room was — cautiously — optimistic.

The Sandbox Pitch: Keep the Jobs, Move the Capital

Safeera Mayet, head of policy and regulatory affairs at SAVCA, described the sandbox as a way for qualifying startups to get faster, clearer and legally sound processes for offshore structuring. The goal is to replace the years of expensive, complicated bespoke approvals that currently push founders and investors to take operations out of the country altogether.

It reflects collaboration between the South African Reserve Bank, the South African Revenue Service and private sector advisors — notable because getting regulators and investors into the same room in South Africa is not always the simplest achievement.

The system is designed to tackle:

• Exchange control barriers that make cross-border capital structuring painful
• Slow approvals that leave startups waiting months while competitors in other markets close deals
• A lack of commercially flexible structures that leave founders pressed to “move everything offshore now or lose the investment”

Its supporters hail it as the most meaningful shift in VC policy since South Africa began talking about building a start-up ecosystem more than a decade ago. At least this time, something is actually happening.

Adrian Dommisse, founder of Dommisse Attorneys, says the sandbox could finally allow South African startups to remain rooted at home while fundraising and operating internationally — something most founders would’ve preferred to do all along if regulation hadn’t pushed them out the door.

A key hurdle, unsurprisingly, was convincing government that a more flexible regime wouldn’t deprive the taxman of revenue.

“It had to be shown that the fiscus would not lose out through offshore structuring,” Dommisse said. In other words, every government’s favourite pitch: we promise this makes the pie bigger, not smaller.

The Cautionary Tale: When Offshoring Goes Wrong

Earlier this year, we reported the story of South African fintech LittleFish, where co-founder Davith Kahwa sued his cofounder, the company and prominent VCs TLcom Capital and Flourish Ventures.

The short version:
 He lost — comprehensively.

The High Court ruling laid out how Kahwa signed a succession of agreements that:

• Moved the company’s IP into a Delaware entity
• Diluted his ownership from roughly 40% to 11%
• Placed the remainder of his shares on a vesting schedule controlled by the new board
• Allowed the board to define his role, assess his performance and — if unsatisfied — terminate him and repurchase his unvested shares for a nominal amount

It’s not an uncommon arrangement in VC-backed startups — especially those moving IP into a foreign holding company.

But it did give the court a clear view:

If the founder had signed documents allowing others to define his role and power over his shares, he couldn’t later claim to have been unfairly prejudiced.

Perhaps the most damaging legal point was jurisdiction. Because the IP was moved to a Delaware company, the South African court couldn’t grant a unified remedy. A founder seeking protection under South African company law found himself trying to apply it to an entity sitting outside the country.

It was a sobering example of South African startup law meeting US corporate structures — and getting trampled.

Why This Matters for the Sandbox

LittleFish illustrates the wider problem the sandbox tries to address:

• South African founders often have to adopt foreign structures to attract global investors
• Once they do, their legal rights, protections and recourse move outside the South African legal system
• Many founders do not fully understand how much power they are surrendering until a dispute arises

If the sandbox works, founders could structure globally without undermining their legal footing at home — something that would make South Africa a more credible hub for scaling rather than merely building.

The Pilot Phase — And the Real Test

SAVCA says the sandbox will be tested with a small group of qualifying startups before a broader roll-out. The outcomes could inform long-term legislative reform. That phrase — “long-term legislative reform” — is enough to make many founders groan, but at least the process has begun.

If the pilot succeeds, South Africa could:

• Keep more startup value, jobs and tax revenues onshore
• Make itself a more attractive jurisdiction for investors
• Reduce the incentive for promising companies to reincorporate at the first sign of real funding

If it doesn’t, founders will continue hopping on the first plane to Palo Alto via the Delaware Secretary of State’s filing portal.

So Can South Africa Finally Fix Its IP Problem?

Cautious optimism is warranted.

For the first time, government regulators and investors are aligned on the diagnosis: the system is pushing value offshore in ways that weaken the domestic ecosystem. The industry has asked for practical fixes — simpler documentation, faster approvals, clearer rules — rather than grand strategies.

But South Africa has been close to breakthroughs before, only for momentum to fizzle.

The difference now is urgency. Global investors don’t wait. Startups can’t either. And enough South African founders have learned — sometimes painfully — that the legal fine print matters as much as the fundraising headline.

If the sandbox proves functional, enforceable and scalable, South Africa could become one of the first African markets to build a compliance-friendly pathway to global investment without requiring founders to give up their domestic roots.

If not?

Well, Delaware or UK continues to answer emails at speed.