2020 Startup Trends in South Africa

Consumer

COVID-19 has been a catalyst for hyper-growth in some industries & created a fast decline in others. For instance, grocery delivery has rocketed while travel slowed down & prop-tech has been completely upended. With all of this happening companies are being born & opportunities arising from the changes in consumer behaviour.

Business

The uncertainty in the lockdown & the manner in which it has been handled has hurt small businesses in South Africa. This has further highlighted the importance of the small business ecosystem in the country. Therefore we are going to see a lot of ad hoc calamity in this area but also the creation of tools that will enhance the ability of a small business to succeed.

Trends
These are some of the trends I have seen over the past couple of months:

— EdTech (Education Technology)

  • Online learning
  • Content Sharing
  • Whatsapp Chatbot learning/information
  • Early-Childhood development games

One of the first things to be closed during lockdown were schools. & since then, there has been a lot of uncertainty & scrambling to continue with the curriculum. But the way the South African education system is set up is a tale of true inequality. While some schools were able to pivot to online learning due to the requirement that all students have tablet devices, on the flip side this was not the case in most government schools. Nevertheless, a lot of content & learning material was shifted to a reliable communication channel; WhatsApp. There has also been another barrier that inhibits distance learning; the high cost of data. I am not sure how sustainable the online learning trend is but it has shown the ever-present gaps in South Africa’s education system. It will be interesting to see what other products can be layered on top of WhatsApp’s business API.

— TeleMedicine

  • Primary care Booking
  • Online consultations

Primary care booking existed through Dr Connect by Discovery Health & RecoMed. Online consultations came with COVID-19 & the interesting thing here is; can computer vision progress enough for doctors to be able to examine patients through a screen.

Interesting stuff.

— SME Funding

  • Factoring
  • Merchant Cash Advance
  • Trade Finance
  • Tender-based finance
  • New underwriting models

The SME funding gap is ever-so present. In the USA FinTechs were tasked with dispersing PPP grants while in South Africa the government & banks have struggled to disperse the loan-grants. SMEs that were still able to trade needed to find alternative sources of capital & FinTechs needed alternative data to underwrite SMEs. Yes, this might not be new but there are new elements around it. For instance, KYC (Know Your Customer) documents are important at first contact but the relationship is an ongoing ordeal so isn’t it more important to know the transaction history of the business or the ability to tap into their accounting platform to underwrite their invoice history?

As long as SMEs exist they with need funders to back them.

— Solo Entrepreneur Tools (Micro Entrepreneur)

  • Budgeting Tools
  • Invoice financing
  • Payment links
  • Freelancer/business matching

About 10% of South Africa’s working population are either self-employmentThe Henley Business School estimates that about 27% of employed South Africans have a side-hustle or a side-job. That puts the total figure of solo entrepreneurs at ~6 million people. With the ever-increasing number of gig workers the micro-entrepreneurship space needs tools as well. So now we will see an increase in tools such as invoice management software, freelancer neo-banking products like invoice-financing & payment links. Marketplaces for job matching will also play a big part in the age of the gig worker.

— Payday lending

  • Cash advance on salary earned

This has been the clearest cut trend for me. No less than 6 startups in the last 18 months have been started to give employees an advance on their earned salary. I even wrote about it on my substack newsletter.

— E-commerce

  • Same-day/fast fulfilment
  • Hyper-local delivery

E-commerce is connected by the hip to payments & logistics. The more people are comfortable with purchasing things online, the more e-commerce stores are created the more important it becomes to have fast fulfilment of products, which makes the purchasing experience worthwhile.

Yes, there has been an increase in the number of e-commerce stores but the logistics have remained the same.

— Grocery Delivery

Zulzi raised closed a 30 million rand investment in April, OneCart raised an undisclosed amount from Growthpoint & Kingson Capital, BottlesApp pivoted to groceries & Shoprite-Checkers continues to invest in Sixty60.

Exciting times in this space.

— e-hailing (Micro mobility)

  • Scooters
  • E-bikes

Lime planned to launch its scooters in CapeTown last year.

Bikes are becoming a common alternative way to move around. Is there a market for such things? we will see.

— AI

  • Manufacturing Tech
  • Computer Vision as a Service
  • Data Science as a Service
  • Deep learning

Visit LaunchLab in Stellenbosch


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