Government wants to create a fund for South African startups

Minister of Communications and Digital Technologies Stella Ndabeni-Abrahams has outlined a plan for the government to help fund the development of digital skills in South Africa.

The minister recently gazetted a National Digital and Future Skills Strategy whitepaper, which includes a number of planned interventions across the business, education, and society sectors to improve the digital literacy and skills of the populace.

Among these proposals is the creation of a seed fund for startups, which the government envisions will be done in partnership with the private sector.

“A gap exists in respect of bridging finance for tech start-ups to support the transition from early-stage innovation to commercialisation to scaling up,” the paper states.

“Funding support of this nature, however, lies outside the scope of the funds examined in this section.”

“It is, therefore, important to partner with the private sector to encourage funding arrangements that will support and encourage the transition of tech hub innovations into commercial production where they will attract independent investment,” it states.

Put simply, the government want to partner with private companies to invest in local startups and subsequently attract international investment to the country.

“A public-private partnership, to establish seed funding for digital tech start-ups located at tech hubs and digital incubators, will be investigated and created, within the broader national system of innovation.”

Funding digital skills development

The whitepaper focuses on enabling the development of digital skills in South Africa via a number of funding sources, including the National Skills Fund, the Labour Activation Programme, and a new Digital Development Fund, which will be created by dissolving the Universal Service and Access Fund (USAF).

“The Universal Service and Access Fund (USAF) is currently funded via a levy on turnover imposed on electronic communications licensees, with the funds collected by ICASA, passed over to Treasury, which then allocates funds to the USAF, which is administered by the Universal Service and Access Agency of South Africa (USAASA),” the department said.

“In recent years the Fund has received substantial allocations towards digital terrestrial television set-top boxes, some of which should be available to fund digital skills development.”

“The DCDT is preparing draft legislation to dissolve the Universal Access and Service Fund and replace this with a Digital Development Fund (DDF), with broader scope and access to a greater pool of funding,” it said.

It said that the DDF will be created for the broad purpose of funding digital development, including but not limited to skills development projects.

“Digital literacy and digital skills development are to be an explicit focus of the DDF,” the department said.

“Subject to Ministerial regulation, monies from the USAF could be used for digital skills development projects under the overall universal access and service ambit, until such time as the DDF has been established and is operational.”

The full National Digital and Future Skills Strategy whitepaper is below.

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Government wants to create a fund for South African startups