New research has identified the initial cost associated with starting up a tech business in South Africa.
According to early stage tech seed fund and accelerator, Savannah Fund, it costs in excess of $70,000 (R750,000) to launch a start-up in SA – the most expensive out of six African countries assessed.
Additional countries covered in the research included Uganda, Tanzania, Kenya, Ghana, and Nigeria.
“As a venture capital firm, Savannah Fund is interested in the differing variables that can affect entrepreneurs in the countries of start-ups we have or will invest in. One of the key metrics we want to understand more about is first year start-up costs,” Savannah Fund said.
The company noted that its sample size was relatively small, asking hubs and approximately three start-ups per country.
The costs covered included: web hosting, internet, entry level engineer, engineer with 3-5 years of experience, shared apartment (for 3 people), workspace desk rental, legal costs, business permits, accounting, travel, and admin/sales.
Savannah Fund found Ghana to be the second most costly country to launch a start-up, at just below $60,000 (R647,00), followed by Tanzania ($50,000), and Nigeria.
Savannah said it was interested in seeing the differences between start-up costs with a sample from its investments or potential investments.
It specializes in US$25,000-US$500,000 investments in early-stage high-growth
technology start-ups in sub-Saharan Africa, having most recently invested SA based start-ups BabyGroup, and Wyzetalk.
Savannah Fund noted that the cost of securing an engineer with between 3-5 years experience accounted for as much as $46,000 for the year in South Africa – well above that of someone with the same experience in Tanzania ($34,000), Ghana ($33,000), and Kenya ($20,000).
The seed investor also pointed to infrastructure costs, where again, South Africa, followed by West African countries are most expensive.
Savannah Fund said there are a number of variables that could change these numbers, such as industry of start-up, personal preferences of start-ups (which could affect size of home and willingness to spend on personal costs), etc.