Tech intellectual property exodus?

Why the seeming exodus to overseas markets by these South African companies?

Information technology (IT) analyst Irnest Kaplan of Kaplan Equity Analysts says that besides names like fleet management company DigiCore, Spescom (which has proprietary voice recording and data management solutions) and UCS (which specialises in IT solutions for retailers like Clicks and Pick ‘n Pay), there are not many of these companies on the JSE.

“In the main, most of our IT companies in South Africa are selling software or products that come from overseas. We don’t generally have many companies with their own tangible intellectual property. And the ones we do have are few and far between,” he explains.

Kaplan says the move to the US has to do with the efficient allocation of capital to good intellectual innovations: “If an idea is good, the capital will stay with that idea and it will run with it. If it isn’t, the company will fold and the capital will go elsewhere, looking for other ideas. If you look at markets like the US, that whole sort of system is so efficient and so well developed that it’s actually amazing. You go there, and if you’ve got a good idea, capital will basically hunt you down, whereas in South Africa you may find the odd investor that might be interested.”

The size of the American market is another attraction: “You need a huge market as well. So if you’ve really got a good idea that’s your own, you want to leverage it in as many markets as possible. Trying to do that from South Africa is not that easy, as most of our companies have found out,” says Kaplan.