Technological entrepreneurship: financing new technology based enterprises in South Africa

Abstract

Recent studies in emerging economies have shown that the main economic drivers in those countries are start-ups and small and medium enterprises (SMEs). South Africa as an emerging economy is no exception. Pilot studies in the industrial sector in South Africa have also confirmed SMEs as an industrial segment with potential for growth. There have been concerted efforts by both the public and private sectors to promote technology-oriented start-ups and SMEs in the country. Since the democratic elections in 1994, several scientific parks and innovation hubs and incubators have been constructed in various parts of the country. In addition, renewed attention to technology innovation research and new product development activities at our local universities has spurred the growth of new start-ups. All these activities present business opportunities for technological entrepreneurship. However, technological entrepreneurship is rarely a solo endeavour. It requires strategic management of technological innovations, nurturing start-ups and new ventures financing. In spite of political will and infrastructural support, new venture financing of technology based start-ups and SMEs has been rather lukewarm and lacks targeted approach and structured co-ordination. The mainstream financial houses have been reluctant to fund start-ups and SMEs with unproven business track records. A further problem is lack of expertise in managing emerging technologies, business start-ups and a lack of knowledge of the competitive global environment. This paper investigates trends of financing start-ups and SMEs in the present South African business environment. The article also analyses the obstacles and constraints to venture financing and technological entrepreneurship activities in South Africa.