SiMODiSA, in partnership with Allan & Gill Gray Philanthropy South Africa

South Africa’s startup ecosystem is gaining ground, but it continues to fall behind global and regional peers on regulatory efficiency, capital formation and access to international markets.

This is according to a new research report released by SiMODiSA, in partnership with Allan & Gill Gray Philanthropy South Africa, which assesses South Africa’s ability to create a conducive environment for entrepreneurs, attract global capital and help startups reach international markets in the context of the proposed SA Startup Act.

While South Africa’s startup ecosystem is maturing, structural barriers continue to limit the growth of a scalable, globally competitive pipeline of high-growth ventures. Existing startups continue to show strong activity and resilience, but persistent gaps remain in areas such as access to finance, support systems and entrepreneurial participation.

The research forms part of the ongoing work of the SA Startup Act Movement, led by SiMODiSA, which is advocating for a policy and regulatory environment better suited to high-growth, innovation-driven startups. The movement is calling for reforms that reduce friction for founders, improve access to early-stage and international capital, and help South African startups compete beyond the domestic market.

South Africa sits in a mid-tier of global startup ecosystems. Although it remains a leader in some respects, supported by strong private-sector activity and startup hubs such as Cape Town and Johannesburg, it risks being outpaced by more agile emerging ecosystems. The report notes that South Africa’s ecosystem growth, at 19.5%, is already trailing regional peers such as Egypt (22%) and Kenya (33.5%), signalling that faster-moving emerging markets are beginning to close the gap. In this context, South Africa’s challenge is not a lack of potential, but the pace and effectiveness of policy execution needed to convert that potential into global competitiveness.

Startup finance also remains too limited for the level of demand in the market. The report estimates fresh early-stage venture capital at R3.3 billion in 2024, while noting that most startups remain self-funded or informally capitalised. This points to a core challenge: venture capital is important, but it reaches only a small minority of firms. Broader blended-finance mechanisms are needed to support founders at different stages of growth.

“South Africa does not lack entrepreneurial ambition. What we lack is a robust policy environment that consistently enables that ambition to scale,” says Shelley Lotz, Policy Lead at SiMODiSA. “The research makes it clear that incremental support is no longer enough. If we want startups to succeed, create jobs, attract investment and compete internationally, policy reform must become a national economic priority.”

Among the barriers identified in the report are regulatory complexity, administrative delays, compliance costs, limited access to early-stage finance, constraints on international capital flows, talent challenges and fragmented support mechanisms. It also notes that South Africa lags significantly behind leading ecosystems in capital mobility, founder visas and targeted startup incentives.

The findings emphasise the need to move beyond supporting existing startups toward expanding South Africa’s entrepreneurial network, while strengthening the broader operating environment in which startups can do well. This includes improving enabling infrastructure, reducing fragmentation across support systems, and ensuring that policy interventions are aligned to support scalable, high-growth businesses.

In response to these findings, the SA Startup Act Movement is pushing for bold, coordinated reforms rather than small fixes. These include simplifying market access, advancing regulatory and exchange control reforms, improving co-investment and fund-of-funds mechanisms, strengthening private-sector-led venture capital mobilisation, and ensuring policy support is better aligned to the needs of scalable, high-growth businesses.

A clear distinction is required between support for high-growth startups and broader entrepreneurship activation. While both matter, scalable, tech- and innovation-enabled startups need strong policy support if they are to access global capital, enter international markets and contribute meaningfully to innovation, job creation and tax revenue.

Allan & Gill Gray Philanthropy South Africa’s continued support has been central to enabling the SA Startup Act Movement to sustain this evidence-led advocacy and keep policy reform on the national agenda.

“At Allan & Gill Gray Philanthropy South Africa, we believe that South Africa’s entrepreneurial potential is one of the country’s most important development assets. However, ambition alone is not enough because entrepreneurs need an environment that reduces friction, enables access to capital and markets, and gives innovation-driven businesses a fair chance to grow. Our partnership with SiMODiSA and the SA Startup Act Movement reflects our commitment to evidence-led advocacy that helps build a more enabling, inclusive and globally competitive ecosystem,” says Lufefe Boss, Lead: Advocacy & Policy at Allan & Gill Gray Philanthropy South Africa.

For the SA Startup Act Movement, the message is clear: South Africa has the foundations to build a resilient, inclusive and globally competitive startup economy, but this will require coordinated action across government, the private sector and ecosystem partners.

As Lotz concludes, “Strengthening South Africa’s startup ecosystem is not only about empowering existing startups – it’s expanding the entrepreneurial pipeline, reducing structural barriers and enabling founders to build global businesses from South Africa.”

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