Epilogue: A South African Perspective

A small venture capital industry already exists in South Africa. More than twenty domestic funds are currently listed on the Johannesburg Stock Exchange.' A number of private and government-sponsored foreign funds also operate in the region. The situation therefore, at first glance, appears positive for the development of a large and successful traditional venture capital industry in a developing country which has only recently emerged from a lengthy period of economic isolation. When account is taken of the economic strength of the Johannesburg Stock Exchange (JSE), the sophistication of the financial instruments which are traded, the level of financial, legal, and accounting expertise available, the relatively advanced banking and legal systems which are in place, and the free market economic policies of the South African Government, the outlook for the development of a large and successful traditional venture capital industry cannot appear brighter. Because many of the impediments which characteristically hinder the development of traditional venture capital industries in developing countries are absent, one might be excused for assuming that the probabilities for success in South Africa in this respect are good. But such an assumption does not take account of certain fundamental obstacles which currently prevent the development of a venture capital industry in the traditional sense. These obstacles necessitate that for the medium term South Africa's venture capital industry should not endeavor to follow a traditional venture capital model. It should instead focus its resources on the promotion of the country's small, micro and informal business sectors, which will permit the industry to achieve maximum long term success. The fundamental obstacles hindering the development of a traditional venture capital industry in South Africa can be traced to its social, political and economic policies which, until very recently, have centered around the doctrine of 'apartheid.' It is not intended that this paper will cover in any great detail