How the State of the Nation Address can revolutionise innovation and growth in South Africa

In his essay Early. Not Broken, Ido Sum offers an intuitive but often overlooked insight into Africa’s innovation economy: capital does not flow to potential alone. It flows to places where there is a reasonable expectation of return. That expectation is shaped as much by trust as by opportunity, and trust, in turn, is built through ecosystem maturity, institutional reliability and credible risk mitigation.

This matters profoundly for South Africa as the President prepares to deliver the State of the Nation Address (SONA). If growth and employment are to be more than aspirational themes, entrepreneurship and innovation must be understood and addressed as systems, not slogans.

Innovation ecosystems are, by definition, multiplayer games. In every successful example globally, the state plays a dual role: acting as a force multiplier while simultaneously serving as a kind of “magic shield”, reducing early-stage risk and uncertainty.

The evidence is remarkably consistent. In Israel, the United States, the European Union and India, intentional, patient and long-term government partnership catalysed innovation, translating intellectual capital into firms, industries and jobs over decades.

As Sum correctly observes, Africa today looks far more like:

• the United States in the 1970s and 1980s
• Israel in the 1980s and 1990s
• Europe in the late 1990s and early 2000s
• India in the early 2000s

Not resembling anything like “US venture capital in 2025”.

These regions did not achieve today’s multi-trillion-dollar technology sectors overnight. What we often label as “overnight success” is the outcome of 30- to 50-year journeys marked by consistent sequencing of innovators gaining access to capital, then markets, followed by sustained growth. The government has played a role at every stage of that evolution in these countries’ success.

South Africa’s timing is unusually opportune for a renewed and serious focus on innovation, productivity and Fourth Industrial Revolution–centred growth. Recent improvements in electricity supply, ports and rail have begun to rebuild trust with citizens and investors alike. The South African Reserve Bank’s disciplined stance on inflation, which should ultimately lower the cost of capital, combined with shifting global power dynamics, has expanded South Africa’s “luck surface area”. As the saying goes, one should never waste a good crisis.

Yet if SONA is to speak meaningfully to growth and employment, entrepreneurship cannot be framed as a collection of disconnected programmes. South Africa has invested heavily in policy intent, institutional architecture and funding vehicles. Outcomes remain uneven not because of a lack of effort, but because the interfaces between these elements are weak, undermined by inadequate human capital, misaligned incentives and, at times, narrow or uninformed self-interest.

Entrepreneurs experience this friction daily. Whether operating formally or informally, they face fragmented support, slow approvals, delayed payments, frictional demands for additional “fees”, and difficulty accessing growth capital precisely when momentum begins to build.

Informal innovation, such as spaza shops, township manufacturers, service entrepreneurs, traders and micro-producers, is not peripheral to the economy. It is the front edge of economic participation, often more adaptive than its formal counterpart, yet largely excluded from structured demand, finance and scaling pathways. The absence of bankability, insurability and the capacity to scale traps many in perpetual cycles of poverty.

The first priority must therefore be demand-side activation. Government and state-owned entities can act as credible catalytic first customers for both formal and informal enterprises but only if procurement processes are predictable and payment timelines reliable. For SMMEs, late payment is not an inconvenience; it is an existential threat. Treating fast payment, simplified onboarding and reduced red tape as economic levers would unlock immediate capacity for hiring, investment and delivery. Existing red-tape reduction initiatives must be backed by stringent, persistent and publicly transparent KPIs.

Second, SONA should explicitly recognise the importance of the “scaling middle”. Much of South Africa’s employment potential lies with firms and informal enterprises transitioning into formality, that are already operating but constrained by working capital, management capability and access to markets. A coordinated national scaling pipeline that integrates blended finance, technical assistance and procurement access would generate more jobs than a continued fixation on early-stage startups alone. The objective should be clear graduation: enterprises moving from survival to sustainability, and from sustainability to scale.

Third, government must manage South Africa’s geopolitical stance so as to increase our capacity transact at an order of magnitude more than we currently are. Our agricultural industry, as per the very knowledgeable Wandile Sihlobo of Agribiz, is likely to have generated about $14 billion in exports in 2025. He goes to great lengths to explain that this feat has been achieved through intentional collaboration between key stakeholders, the farmers, capital owners and government. The cocktail off access to land, capital goods, finance and export avenues has seen the sector grow to such an extent that South Africa is food secure and has excess export capacity. For innovation to scale, we require the same support and interventions from government.

Fourth, innovation policy must shift decisively toward commercialisation. South Africa produces high-quality research but struggles to translate it into globally competitive companies. Streamlined intellectual property arrangements, clearer incentives for university–industry collaboration (modelled on tax incentive programmes like S12J in VC and S12B in Renewable energy) , and patient seed capital that crowds in private investment are essential. Equally important is regulatory certainty in emerging sectors. Predictability reduces risk, attracts capital and accelerates adoption across both formal and informal markets.

Venture capitalists invest in innovation with the promise that the successful venture is going to find fertile ground for scale (Total Addressable Market) and turn their R1 of investment to R5 or more of return. Our technology transfer office, Innovus and its execution arm, the Launchlab, churn out amazing innovations yearly. To date multiple innovations have been commercialised – with Innovus holding close to 40 of these spinouts, which are estimated to be worth over R1.5 billion, generate close to R1 billion in revenue and employ a multitude of our citizens. NAVU, an innovation company and SU spinout founded by a very bright and bubbly Amohetsoe Shale, promises to provide affordable, resilient prosthetics that can support a growing market of amputees (1.5m amputations per annum globally). Her success depends on raising capital, manufacturing capacity and accessing the large markets. The latter depends of geopolitics as well as our stance as a country, in global trade. 

The central risk is that SONA reiterates commitments without addressing execution. The opportunity is to define entrepreneurship, both formal and informal, as a core productivity strategy, supported by a small number of transparent metrics reported consistently over time. Growth will follow clarity, co-ordination and disciplined implementation.

* Khulekani Dlamini is an Honorary Professor at Stellenbosch Business School and a Managing Partner of Lwembu Ecosystem Ventures (Pty) Ltd.