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August 16, 2010

Venture Capital in South Africa

Filed under: Venture Capital News — admin @ 8:16 am

South African consortium leads a $455.5 million venture capital investment in Neotel

Big companies are targeting South Africa. Top economies of the world are turning their eyes to the region. Why? Because there are lot of investment opportunities there and a growing potential for a successful market. This makes South Africa an interesting target for venture capital firms.

New technologies and good communication are two of the strong fields where things can stir up rapidly. We can figure this out only by looking at figures. Internet penetration was only 10.8% in 2009. The costs for a 1 MB bandwidth are huge, even 100 times more than in US. Still, the demand is high and people’s need for communication is increasing every day. The proof: companies from the mobile industry are doing well and mobile Internet usage is increasing mostly in the urban areas. There is plenty of room for businesses to grow and for venture capital firms to invest.

One good example is Neotel, one of the largest network providers in South Africa who raised a $455.5 million loan from a local consortium to develop their network. Google, Microsoft or Intel who recently signed a deal with MTN Group, made their moves. As other emerging markets experiences showed, the presence of big names is building trust for other businesses to come and raise the needed money for the development of new projects.

Other industries are in demand for investments, for example: mining, constructions or even software development, all of them looking for five or ten figures funds. 10 South African startups are on the short list of Seedcamp for Seedcamp Week in London this year. Companies like 10Layer, FloCash or Obami have the chance to receive $30-50,000 as a first boost for their development. On the other end, Motjoli, a mining company is seeking for $1,5 billion to develop an Iron Ore Project close to Zwaziland.

These are just a few examples but there are many more out there. Actually, some of the local investors are really complaining that venture capital firms in South Africa are not so active as they would need and that local investors do not have always the force to support all industries and projects, even if there are positive examples like Evolution One Fund who recently announced they raised $94 million to invest in clean technology businesses.

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