The SA SME Fund, created in 2016 by big business to support entrepreneurs and help established small firms expand, is planning to set up a R150-million university technology fund to support the commercialisation of intellectual property developed at South Africa’s tertiary institutions.
The R1.4-billion fund has already made firm commitments valued at R725-million, with about half of that amount committed to tech-heavy venture-capital prospects and the balance in support of the expansion of small enterprises in traditional business sectors.
As a fund of funds, the SA SME Fund does not invest directly, instead channelling resources to established investment companies specialising in venture capital, growth or impact investing.
Fifty of South Africa’s largest companies have injected R900-million into the fund, while the Public Investment Corporation has contributed R500-million, which it manages on behalf of the Unemployment Insurance Fund.
CEO Ketso Gordhan tells Engineering News Online that the fund is deliberately focusing a good deal of its attention and resources on venture capital, owing to the underdeveloped nature of the sector in South Africa.
In the process, it has become aware of several other market gaps, including specific funding to support the commercialisation of technologies emerging at South African universities, as well as for the high-potential biotechnology sector.
Gordhan reports that the SA SME Fund aims to launch, by August, South Africa’s first dedicated financing scheme for university technologies, as well as a new biotechnology fund.
He is particularly excited by the prospect of partnering with South African universities to commercialise technologies and business ideas arising across South African campuses.
Two universities, Stellenbosch and the University of Cape Town, may considering co-investing in the fund, together with the Industrial Development Corporation.
Of the initial R150-million being set aside for the university technology fund, R25-million will be earmarked as “seed capital” to help the inventors improve the commercial viability of their product or concept.
Again, a fund-of-funds model will be used and Gordhan says the selected fund manager will consider prospects in engineering, information and communication technology, biotechnology, medical devices and even space technology.
The full R1.4-billion should be committed by year-end. Thereafter, the SA SME Fund will seek to raise a second fund from a new pool of investors.
The target set for the first fund is to support 200 small businesses and nurture the development of 20 world-class companies.
Gordhan says the environment for entrepreneurs in South Africa remains difficult and reveals that he has been somewhat disappointed by the lack of support for entrepreneurs, as well as by the low levels of entrepreneurial activity.
Nevertheless, there are still pockets of excellence, which the SA SME Fund will seek to leverage in the interest of growth and job creation.