Registered users can save articles to their personal articles list. Login here or sign up here

Building an ‘entrepreneurial state’

Politicians are clutching at straws thinking they can replicate Silicon Valley in SA.

One of the reasons the Silicon Valley model is difficult or even impossible to reproduce is because it has a built-in culture where the failure of a start-up is not seen as a negative outcome but more of a learning process.

It is irrefutably the entrepreneurial Shangri-La of our time. Failure and risk-taking are encouraged as the best minds push the boundaries of conventional ways of conceptualising, creating, developing, learning and producing new technology.

Quite often, economic advisors, politicians and policymakers from all over the world see it as the answer to many of their country’s challenges, especially on innovation, technology or as a long-term approach to government policy. Trying to reproduce Silicon Valley’s success has never been achieved. We know this because one of the world’s leading universities – Harvard – has countless articles to this effect by leading scholars in its Harvard Business Review magazine.

Much like the major tech companies based there, Silicon Valley has proved to be a unicorn. It begs the question, at least to me, why after years of others trying and failing to replicate it, would any government attempt to do so?

We have known for some time now that in South Africa the Fourth Industrial Revolution (4IR) has replaced Radical Economic Transformation (RET) as the political rhetoric of the moment.

Revolutionary talk

On July 5, President Cyril Ramaphosa addressed the first South African Digital Economy Summit, saying how “the digital revolution calls on the state itself to be a risk-taker; to be entrepreneurial.

“The digital revolution is an opportunity to build an entrepreneurial state, where government’s own appetite for risk and innovation inspires large-scale entrepreneurship and unlocks economic potential.”

Did you also rub your eyes in disbelief after reading that quote? Doesn’t it read like government is now saying it is following the Silicon Valley route? It does!

It should concern us when government appears to be all over the place – is economic growth not a priority? Is it not practical and urgent to focus on priorities that clear the path for investment to flow into the country? Then strengthen it with policies that are going to enable growth that is complemented by job creation – including modifying those policies that could hinder the process (see my column Labour market change is necessary, and it needn’t hurt).

Government’s ‘appetite for risk’

The president didn’t stop after declaring government’s appetite for risk and innovation in the hope that it will inspire and unlock economic potential: “Therefore, an entrepreneurial state should not only provide funding but should also have capacity to determine the strategic direction of entrepreneurship. An entrepreneurial state should have strong venture capital as one of its elements.”

Such aspirations, to me, infer a state that sees itself as an investor in high-risk entrepreneurial projects.

It is useful that Google was mentioned in that speech; the odds of discovering something similar locally are miniscule. Most of all, venture investors are aware of the risks and more so the unlikelihood of getting some of their capital back, if any at all.

I for one am curious to know if the state will drive this? It is known that there are three significant stages in venture capital. The seed stage – where the investor’s capital is used to get the business started, much like planting a seed and caring for it until it germinates, then ensuring that it survives past the seedling stage.

However, it doesn’t end there. Now comes the early stage of increasing the capital invested in the start-ups that survived the seed stage. Again, an investor’s work will not be done because simply putting in more money won’t do. This stage is about ensuring that the start-up stays on the path and keeps growing.

Finally, the growth stage: this means the start-up has become a successful company generating millions in income over a sustained period. This is when the venture investor uses their capital to take the company to a higher level.

In all of this, the time, skill and expertise required varies and so does the amount of invested capital.

This means an entrepreneurial state with strong venture capital elements is a high-risk state.

Some would even say an all-in kind of risk – unless this was one of those occasions where politicians say one thing and then continue to avoid turning their words into actual deeds.

If not, this mimicry of Silicon Valley and treading into venture capital waters seems to be a leap from the hot coals of black economic empowerment into the inferno of high-risk, big-capital ventures with uncertain outcomes. This is the riskiest type of enterprise to embark on.

Surely it cannot be the case. Can the state’s purse, its backlogs and the country’s economic reality afford to attempt to become such an entrepreneurial state?

There is, however, a possible light in all of this. That sort of undertaking might work if it is sponsored by that R1.3 trillion cash reserve that has been accumulated by the South African private sector.

Wouldn’t that be finding the light in pursuit of common vision and goals? I think it is.

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

AUTHOR PROFILE

COMMENTS   14

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

“Such aspirations, to me, infer a state that sees itself as an investor in high-risk entrepreneurial projects.” The state has been doing this for years, see Ayo, Eskom, SAA, etc. One of these days they might get lucky but I bet on that day freezing weather will be reported in hell.

Which sane overseas investor is going to hand over his money, knowing he will have to give away part of his business to passengers who do not add any value, and that he will be forced to use parasitic middelmen in his supply chain? BEE is killing the economy.

Ummm. SOE’s are zero risk to the government as it doesn’t have to pay for anything.
On the other hand, tax payers have indeed been speculating with the few % of their tax bill which doesn’t go to salaries, hand outs, political campaigns….

The part they don’t speculate with, well that’s just stubborn patriotism fees.

Like Zimbabwe 2019, soon the only entrepreneurial venture that will pay off, will be how to take leveraged bets against your currency going into death spiral.

Great article. Lots of the right sentiment but unfortunately in South Africa digital entrepreneurs are caught between a rock and a hard place. In order to build a silicon valley which is not impossible their has to be some fundamental mind-set shifts with a commitment to action and not rhetoric. The change both in Government and Corporate South Africa that is needed from the “leadership-Ha Ha” is they should be held accountable not for why they have done things but rather why they constantly say no no no because of perceived risks. In order to build a silicon valley you first have to fail, fail fail fail trying before you succeed. Planning does not happen in a boardroom it happens by doing doing doing until you succeed.
The greatest single entrepreneurial opportunity in the world is the advent of digital technology and the power it has to disrupt and change every single business. The innovation train has left the station. Corporate South Africa with the exception of a handful of companies and the South African Government have been left at the station believing that another train is close by to pick them up.
Dream on

Our man is not a businessman but a professional beneficiary that uses other peoples money to benefit himself.

He is good at giving free stuff away. Like taxpayers money.

Another Lala Land dream.

At last a voice of reason.

With a track record of abject failure in everything they undertake, the appropriate strategy for the ANC is to withdraw from as much as possible and to stop telling others how to do it – bee and charters, etc.

But humility and introspection is not the strong suit of liberation movements, and it’s even worse when it comes to the EFF.

With most learners unable to read for meaning by the end of matric, South Africa has to be the last nation on earth poised to lead the 4th industrial revolution.

When our leaders spew this nonsense (like Zuma and his nuclear) it just reinforces the notion that we are led by people who have become unhinged from reality and who are prepared to blow taxpayer money clutching at straws.

But isn’t this a fair description of the mining charter, the multiple SAA turnarounds, our defunct world cup stadiums, our visa requirements, Zuma’s favourite oceans economy, the construction of our power stations…the list is pretty endless?

So please, spare us from your dreams and roll back your job killing policies instead.

Lol. let’s see ,1. give away 51% to a BE
numbskull 2 if you make money CancER will up yr tax rate 3 directors will probably have
“julius “ photocopy degrees
there is good reason why Musk made his money in US and Shuttleworth has taken most of his cash offshore.
Africa is good for a holiday not for investing
longterm

It is quite easy and straightforward for the ANC to create entrepreneurs. A simple wave of the legislative wand and lo and behold, an entrepreneur appears! This is how our president was turned into a BEE entrepreneur overnight. In other countries, they will call him a highwayman, an extortionist, a looter or a communist, but we call him an entrepreneur. Look, children…if the president can do it, you can also do it!

What the Ramadreamers do not get is that Silicon Valley is like the Fortune 500 or Dow Jones: as one company fails, another takes its place — none of the twelve companies on the 1896 original DJ remain on it. There are no guarantees that one is backing an Apple or Microsoft and not a Netscape or ANN7

Besides, until the ANC demonstrates that it can run a relatively simple 2IR SOE like Eskom and provide 1IR education at state schools, it has no business trying to second-guess the best of the “4IR”

Culture is a big reason why America has a lot of success. The culture of the computer and DOS (teenagers around America playing around with DOS and eventually ending up coding with mad skills). There’s the cultures of XGames (monetising BMX riding because there are a lot of people doing it), dorm room culture, garage band, garage start-up (these two leading to great bands and awesome tech companies). Again, as a culture, many people do it and eventually skills develop. Surfing (Beach Boys music), tree hugging (Birkenstock sandals become popular), and the latest being eSports. Culture drives a lot of America’s success. Not the American government but youth, ambitious adults learned in ‘Manifest Destiny’. This is missing in South Africa. It is missing so much that when 1 black person opens a new car dealership or studies medicine at Oxford, it is celebrated as a feat when it should be normal (see Capitec). And yes, there is no failure in all these cultural undertakings, only growth. Culture is the key. But how can SA inculcate this idea of culture leads to success?

Ah, our clever revolutionary masters are at it again. You can’t make this stuff up guys. It appears they don’t understand many things, one of them being the term “mutually exclusive”.

From a strategic / scenario planning viewpoint (taking into account history of the continent & the rise and fall of nations; plus taking into consideration various global rankings the past decades), it’s simple to grasp:

Findings:
SA is in a long-term structural decline, following the colonial period and after the peak of gold exploration / the US doing away with the global “gold standard”.

The decline doesn’t always manifest itself as a negative econ growth rate…even at sub-1%….it’s merely a function where the rest of globe (Asia in particular) develops faster towards building up modern economies.

(SA is beyond it’s peak development. Africa will catch up with SA as critical skills continue to leave, along with investments). Econ climate boils down to what leadership style Govt has (and its supporters).

Agree. Until we have “normal business in an abnormal self enriching BEE society “ we are dead in the water.
Young people are leaving the sinking ship. I have seen 4 young families in a medium size coastal town emigrating in the past 6 months. All our children have left and they have made the correct decision after 17 and 14 yrs away.
Proudly brought to you by the people who always plead complete ignorance of their path of destruction. Freedom before education = empty stomach every night with no hope

Load All 14 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

SHOP NEWSLETTERS TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company:
server: 172.17.0.2