Western Cape - Tech Hub of South Africa drawing massive investments

Western Cape consolidates status as tech hub in South Africa

The Western Cape region of South Africa received billions in foreign investment between 2011 and 2021, according to the opposition Democratic Alliance (DA) party.

Most recently, the region received ZAR 103 billion in foreign direct investment (FDI) in the technology sector. This consolidated the region's place as the "technology hub" of South Africa.

The Western Cape Province has sought these funds through campaigns conducted and monitored by the Department of Economic Development and Tourism (DEDAT) and Wesgro, the province's official tourism, trade and investment promotion agency. According to DEDAT, total FDI was distributed across the following sectors:

• Communications - R55 billion, representing one of the largest contributors to the Western Cape;
• Renewable energy - R18 billion, about 13.36% of total FDI, encouraging news considering the country's energy crisis;
• Business services - R16 billion, and;
• Software and Information & Communications Technology (ICT) services - R13 billion, channelled into 61 projects across the province.

According to a 2021 report by fDi Intelligence, a data division of the Financial Times Group, Cape Town is ranked as one of the fastest growing regions in the world for foreign direct investment.

The Western Cape - Start-up hub of South Africa

In addition to investment, the province has become a breeding ground for start-ups. According to Wesgro, there are 450 tech companies in the Cape Town - Stellenbosch corridor, employing more than 40 000 people. This makes the tech ecosystem in the region bigger than that of Nairobi and Lagos combined, Wesgro says.

On 10 August, Cape Town-based artificial intelligence (AI) start-up DataProphet closed its ZAR 166 million Series A round to accelerate its global growth. DataProphet was founded in 2014 by two friends from the University of Cape Town, Frans Cronje and Daniel Schwartzkopff, who decided to combine their AI knowledge and start their own company. The company's systems aim to optimise factory floors and manufacturing processes through AI.

In addition to local start-ups, heavyweights such as Amazon have also set up shop in Cape Town. The multinational online retailer is in the process of developing its new R4.6 billion Africa headquarters in the city before launching its e-commerce platform in South Africa next year to challenge Takealot.

Development and retention of Skills

It has become the Western Cape’s mission to make it more attractive for foreign investment.

The focus in the Cape region is also shifting more towards fostering the skills needed for further development. One of the province's initiatives to upskill graduates to adapt to a more digital work environment is EdTech Hubs. Cape Town has 73 edtech start-ups offering online learning opportunities for engineering, business services and data science, amongst others.

On 18 July, the City of Cape Town-funded CapaCiTi technology programme trained 198 graduates in in-demand technology skills. The new graduates are said to have some of the most in-demand skills in the country, in one of the world's fastest growing regions for foreign direct investment, with the IT sector being one of the biggest draws for foreign investors.

The students were further trained in various aspects of digital literacy, such as systems and software development. The hope is that given the many opportunities in Cape Town, including 600 technology companies, the students would choose to apply their skills locally.

This development is due to the fact that global companies are increasingly outsourcing their skills and looking for qualified workers in developing countries. The skills of South African developers are in high demand and local companies are exposed to the risk that highly qualified workers can be poached by European companies without the workers having to leave South Africa. The aforementioned projects are designed to prevent this poaching of skilled workers by global companies.

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