South Africa's Innovation Fund pilot phase shows promise amid challenges
Image: AI Ron
THE Department of Science, Technology and Innovation (DSTI) recently briefed Parliament on the results of its five-year Innovation Fund pilot phase, revealing that 96 startups had been supported since 2020 — but with glaring disparities in provincial representation and private-sector hesitancy threatening its scalability.
Acting director-general Gugulethu Zwane, leading the DSTI delegation, framed the Innovation Fund as a response to the White Paper on Science, Technology, and Innovation, implemented through the Decadal Plan.
Mlungisi Cele, the newly appointed director-general and former chief executive of the National Advisory Council on Innovation (Naci), emphasised the Fund's role in commercialising innovation. 'The Fund includes interventions aligned with the Decadal Plan's objectives, with measurable indicators to track progress,' he said.
Konanani Rashamuse, DSTI chief technocrat, detailed the 'Fund on Funds' (FOFs) model, where government seed capital attracts private investment. To date, R265 million in public funds has leveraged R1.3 billion — a fivefold multiplier effect.
Three FOFs have been established, including the High Impact Seed Fund and the Public Investment Corporation Technology Development Fund.
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However, Cele admitted that South Africa lagged behind Nigeria, Kenya, and Rwanda in venture capital activity. 'One of our goals is to scale up and position South Africa as a leader,' he said.
MPs grilled the DSTI on stark inequities. Gauteng and the Western Cape account for 80% of funded startups, leaving other provinces underserved. The MK Party's Thembinkosi Mjadu demanded action: 'What measures will ensure equal geographic distribution?' Rashamuse pointed to the DSTI/EPF Tech Fund Venture Building Programme, targeting underrepresented regions, but conceded more work was needed.
Gender transformation remains another hurdle. 'The venture capital industry lacks enough first-time female innovators,' Rashamuse acknowledged. Cele highlighted the Women in Technology and Innovation Programme, launched in March 2025, as a step forward.
Rashamuse admitted high failure rates are inherent in venture capital but argued even a 10% success rate could yield a significant impact. 'We need a large enough pipeline to sustain failures while ensuring the successes create social impact,' he said.
A major concern is private-sector engagement. Cele cited 'risk aversion' and 'lack of policy certainty' as barriers. Rashamuse added that stronger data transparency could rebuild trust. 'We must position the Fund as an attractive investment for the private sector,' he said.
Meanwhile, budget constraints loom. Cele revealed Minister Blade Nzimande is lobbying Treasury for increased funding, noting South Africa's innovation budget pales in comparison to global peers.
Despite challenges, Rashamuse showcased standout startups: Stone Three: AI-driven mining tech operated from Cape Town but deployed globally.
AI-driven mining tech operated from Cape Town but deployed globally. Artisan Biomed: Precision medicine using DNA-based diagnostics for African patients.
Precision medicine using DNA-based diagnostics for African patients. LignOrganic: Waste-reducing biomass solutions from macadamia nut shells.
Looking ahead, DSTI plans to: Scale the Fund and assess the pilot phase independently.
Boost youth and female participation through targeted programmes.
Develop a digital dashboard for monitoring.
Host the SA Tech Challenge 2025 in Cape Town to spur innovation.
Chairperson Tsakani Shiviti from the ANC stressed the need for a 'coherent system' bridging grassroots entrepreneurship to commercial markets. 'We must close the gap between development and local product accessibility,' she said.
The ANC's Vusumuzi Nkosi pushed for metrics tracking long-term social impact, while the DA's Natasha Mazzone called for expert-backed responses in future briefings.
As the meeting adjourned, the message was clear: The Innovation Fund has potential, but without equitable distribution, private-sector buy-in, and sustainable funding, its promise may remain unfulfilled.
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