Digitech and Electronics
digitech electronics hero
Western Cape is the digitech hub of Africa and a leading location for technology start-ups and venture capital deals.
Between 2008 and 2017, a total of 54 FDI projects were recorded into the Western Cape’s software and IT services sector, representing a total capital investment of ZAR5.24bn (FDI Intelligence, 2018).
The 2017 Ventureburn Survey found that 47% of start-ups are based in the Western Cape. Also according to the South African Venture Capital and Private Equity Association (2018), the Western Cape hosted 56% of Venture Capital deals in 2016.
The ongoing advancement of Information Technology infrastructure and innovative software developments, has allowed the e-commerce industry to grow at a rapid pace within the city.
In an industry that is strongly reliant on supply side factors like the availability of ICT skills, and the prevalence of entrepreneurship, the Western Cape has been able to carve out a competitive niche despite having physical access to a much smaller market than in Gauteng. So successful has the Western Cape been in carving out this niche, that it is now widely considered to be a tech and e-commerce hub within Africa.
Competitive advantages of the Western Cape as an IT location
The Western Cape represents a number of opportunities and advantages to IT businesses locating in it, including:
- The industry is largely supply driven and the availability of ICT skills and, the prevalence of an entrepreneurial culture, are key aspects in this regard.
- There is better availability of venture capital in the Western Cape (SAVCA, 2018).
- There are benefits of agglomeration. Western Cape has established itself as a key technology hub in South Africa with a number of major companies launching their head offices in the province. This is, in turn, attracting other tech companies.
- In a highly mobile sector, the Western Cape’s natural beauty which allows for a better working environment and lifestyle, is a strong pull factor to skilled employees.
- The diverse eco-system of companies across the value chain and, a strong presence of supporting institutions, provide for ease of business operations.
- The perception that software developers are more progressive attracts other business operations as it provides the impression of there being greater opportunities to innovate.
The Western Cape’s strong skills base enables it to be flexible, responsive and innovative in response to ever-shifting technology possibility frontiers.
The electronics sector, although relatively small, is an important contributor to foreign exchange earnings through both exports and FDI. Between 2007 and 2017, the Western Cape’s electronics components sector attracted ZAR1.2 billion in FDI, while the consumer electronics sector attracted ZAR1.5 billion.
Western Cape has a strong company representation across the following clusters: satellite technology, circuit board and contract manufacturing, audio-visual product manufacturing, including televisions, telecommunications and medical technology.
Competitive advantages of the Electronics industry in the Western Cape
- There is a prevalence of innovative design thinking and strong systems integration.
- There is good access to skilled engineers required within the sector.
- There are established African export markets for electronic products and good infrastructural connectivity to these markets.
- It is relatively easy to export products from the Western Cape.
- Cape Town is considered a comparatively low cost destination for consumer electronic manufacturing.
- In a 2014 study by FDI Benchmarking, Cape Town ranked 11th in terms of quality but first in terms of cost, meaning it was the cheapest of the benchmarked countries to set up a consumer electronics manufacturing plant.
- The business environment is perceived to be safer, based on a perception of lower crime levels in the Western Cape.