In South Africa’s environment of high unemployment and low economic growth, private angel investor groups already exist to fund great entrepreneurial ideas and turn them into businesses that create jobs.
Little is known about their efforts.
A new, national nonprofit network of angel investors — a first of its kind — aims to not only stimulate more investment in South African startups, but increase the data available on early stage market players there.
This week’s launch of the South African Business Angel Network (SABAN) is an effort to bridge the gap between the money donated by family and friends at the base of the funding pyramid and the post-revenue, venture-capital stage of funding, according to Ventureburn.
A professional association for the South African early stage investor community, SABAN is part of the Mauritius-based African Business Angel Network (ABAN), a pan-African nonprofit that supports startup around Africa.
The U.S. State Department helped launch ABAN — a “network of networks” — and has supported its activities through Africa, including the launch of SABAN.
Connie Tzioumis, director of global partnerships in the office of the Secretary of State at the U.S. State Department, works to bring entrepreneurs, governments and businesses together in Africa.
“We are committed to economic growth as a path towards prosperity and peace, and successful entrepreneurship is one key aspect of ensuring this,” Tzioumis said, according to Ventureburn. “If there is one thing that the U.S. knows about, it’s how to create partnerships and policies that support entrepreneurship and we want to share that and support growth in Africa.”
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Entrepreneurship can solve big problems, and the U.S. government isn’t supporting it enough in its foreign policy, said Steven R. Koltai, author of “Peace through Entrepreneurship: Investing in a Startup Culture for Security and Development” (Brookings Press, 2016).
Entrepreneurship reliably generates jobs. Joblessness — especially among youth or in failing states – is probably one of the most significant root causes of extremism threatening American security today, Koltai said in a guest column in Harvard Business Review.
Firms less than 5 years old have for decades accounted for nearly all net job creation in the U.S., said economists at the Ewing Marion Kauffman Foundation, a leading U.S. entrepreneurship think tank. In 2007, young enterprises created almost two thirds of the U.S.’s 12 million new jobs.
It is company age, not size, that matters for job creation, and economists at the OECD affirm this across the rich world. Job creation “is driven to a large extent by the entry of new startups as well as higher growth rates of young firms that survive,” Harvard Business Review reported.
In less mature economies and fragile regions of the world, entrepreneurs are just as critical, if not more so, to livelihoods and development, Koltai said.
“Our government has not adequately leveraged this American-as-apple-pie tool in its foreign policy,” he said.
Private angel groups and small syndicates do exist in South Africa, but SABAN is the first national nonprofit angel network, according to Venture Capital for Africa (VC4A), a Netherlands-based community of business professionals in 159 countries dedicated to building companies in Africa.
There is little data regarding business angel activity in South Africa, VC4A reported. There’s an estimated 20 to 50 publicly known business angels. SABAN plans to work closely with them and their related investing groups to increase data available on early stage market players in South Africa.
VC4A has identified individuals and organizations supporting the creation of the South African Business Angel Network. These include: Audrey Mothupi (NFBAN Board Member), Craig Mullet, Anthony Farr, Vuyisa Qabaka, Alexandra Fraser, Dean Cannell, David van Dijk, Ben White, Tomi Davies, Llew Claasen, Matsi Modise, Elizabeth Gould, Garreth Bloor, Anthony Record, Christophe Viarnaud, Rebecca Enonchong, Abu Cassim, Candace Johnson and Baybars Altuntas.
Among those supporting SABAN so far are the Johannesburg Stock Exchange, Newtown Partners, Allan Gray Orbis Foundation, Entrepreneur Traction, GBAN, Silicon Cape, SiMODiSA, VC4Africa, Clifftop Colony, Knife Capital, SA Enterprise Development, DEMO Africa, Venture Networks, French Tech Hub, Methys and Jozi Angels. The South African Department of Trade and Industry also showed support.
SABAN’s goals include raising awareness of angel investing; training; networking; research; accreditation; seeding angel groups; lobbying for regulatory improvements; and recognizing angel investors.
South Africa-based entrepreneur Chris Campbell was on the front line of SABAN’s creation. Through his experience pitching and going through funding rounds, he saw the need to make it easier to connect South African entrepreneurs and business angels, according to a report by EBAN, the European trade association for business angels.
Campbell was inspired to get involved personally after attending the EBAN Winter University 2014 in Helsinki, Finland, where he saw what was being done in other countries and that it could help South Africa.
The Finnish Business Angels Network and Lagos Angel Network both provided examples to follow in creating South Africa’s business angel network. At the Global Entrepreneurship Congress 2016 in Medellin, Colombia, several South African stakeholders including Campbell acknowledged that the angel investment ecosystem in their country would be difficult to grow organically unless a catalyst such as a national network was introduced, according to EBAN.
The Legatum Institute, when aggregating data from the World Bank, the U.N. and elsewhere to formulate its Prosperity Index, found that of its many indicators, entrepreneurship and opportunity correlate most strongly with a country’s overall prosperity. According to Harvard Business Review:
All this demands consideration as policymakers grope for solutions to the terrifying threats troubling the world today. The cradle of ISIS, al-Qaeda, and extremist ideology – the Middle East & North Africa (MENA) region – suffers from the world’s highest youth unemployment rates, rates exceeding 40 percent. It’s such dark economic circumstances that prompt Peruvian economist Hernando de Soto to plead, “The West must learn a simple lesson: economic hope is the only way to win the battle for the constituencies on which terrorist groups feed;” and New York Times columnist Thomas Friedman to attribute “disorder” to forces of globalization, not cultural conflict; and Egyptian-American investor Ahmed El Alfi to urge, “We have to give people something to live for, instead of the guys that pitch them something to die for.”
Tomi Davies, a seasoned angel investor, is co-founder of ABAN and the Nigerian Business Angels Network.
“Yes, we have problems,” Davies said in Ventureburn, “especially in the space of education, power and security. But we have something else — a growing middle class with cars and university degrees and a youthful population with energy and drive. The rest of the world is excited about what we can achieve and ready to support us. But first we must support ourselves.”