A coalition of South African entrepreneurs, under the banner of the Startup Act movement, yesterday escalated their advocacy efforts by presenting their concerns to the Portfolio Committee on Trade, Industry, and Competition in Parliament. Their primary demand is the removal of restrictive exchange controls that are perceived as impediments to startup growth. This movement aligns with the objectives outlined in the African Union’s Startup Model Law framework, which was also discussed during the committee’s briefing.
The Startup Act Movement’s concerns are highlighted by a troubling trend in the World Bank’s “Ease of Doing Business” rankings, which have shown a notable decline for South Africa. Currently, the country ranks 84th among 190 economies, a drop from 82nd in 2018. This decline raises alarms for local entrepreneurs and potential investors alike, who contend that the existing regulatory environment stifles innovation and deters investment in the startup sector. The movement argues that relaxing exchange controls would significantly improve the business landscape, facilitating greater capital mobility and enhancing funding opportunities.
“In South Africa, obtaining loans for consumption is far easier than securing financing for productive ventures,” Committee Chairperson Mzwandile Masina said, agreeing with the movement.
In support, new consultations are now underway with legal experts on the feasibility of introducing new legislation or revising existing laws to better support startups, the committee disclosed.
South Africa’s Startup Act Movement has garnered international attention and support, recently receiving a third round of undisclosed funding from the British High Commission’s UK-SA Tech Hub. This funding aims to propel policy reform at the local government level, focusing on high-growth startups that have the potential to drive economic development. To date, the UK-SA Tech Hub has invested R2 million ($116,482) in South Africa’s tech startup landscape, aiming to create a supportive ecosystem for entrepreneurs.
Milisa Mabinza, director of the UK-SA Tech Hub, expressed optimism about the potential for meaningful change. “We believe the Government of National Unity (GNU) can effect policy changes more efficiently at the provincial level, and we are pleased to support such important legislative initiatives,” she stated.
Launched in 2014, the Startup Act Movement, operating under the SiMODiSA secretariat, has been instrumental in identifying and addressing legislative hurdles that impede the growth of small and medium enterprises (SMEs). Advocating for visa reforms, the movement argues that attracting skilled entrepreneurs from around the world is vital for South Africa’s economic future. The introduction of the digital nomad visa earlier this year has been heralded as a significant step in this direction, allowing global tech talent to contribute to the local workforce.
The movement is now calling for the establishment of a dedicated South African Startup Act, which would provide clear guidelines for supporting startups in the country. This proposed legislation aims to address critical issues, including legal protections for intellectual property, improved access to funding, and streamlined bureaucratic processes.