Accelerate Cape Town: Open for Growth, Open for Innovation

Interview with Ryan Ravens, CEO of Accelerate Cape Town

The obvious advantages of Cape Town are the excellent infrastructure and the sound governance here. Can you start by telling us exactly what you think makes Cape Town’s economy distinctive?

We have three ports, so from a connectedness perspective we’ve got the two sea ports which run with fairly high levels of operational efficiency, as well as the airport. So in terms of physical connectedness to sub-Saharan Africa and the broader continent, we’re quite unique. As you’ve mentioned, the government is accessible and very open to engaging with the private sector, very sympathetic to the needs of the private sector and the investment environment. It’s unusual within the South African context to have a level of both provincial and city government that’s so conducive to working with the private sector. Within the Cape region we have seen a massive upswing in ICT start-ups, the creative sector, and software development as well as related industries; that sector’s grown exponentially and almost without support. It’s evolved organically, we don’t have an ICT special economic zone or anything to that effect, but there’s certainly a very encouraging creative and intellectual undercurrent within the Cape region.

We also have four very good universities, which is rather unique for an African city and as Accelerate we work quite closely with them, so the emphasis on and the attention given to innovation within those universities, and the innovation value chain and the linkages within the triple helix model of government, business and universities is fairly strong and well understood. And I think all of these things are really shaping the Western Cape economy to a large extent. Particularly with regard to economic growth and the areas and sectors that we think should be prioritised.

Accelerate Cape Town’s vision is to continuously grow Cape Town as a global African city of inspiration and innovation. Tell us initially a little about how you will actually achieve that?

A big part of the reason why we are seen as a hotbed for innovation has been the success of start-up incubators.

Let me pick up on the innovation discussion again. As you’ve already mentioned, we do have fairly significant infrastructure capability in relation to the rest of Africa. We see innovation as key to unlocking a lot of the broader social challenges, specifically the relationship between universities and business. So, triple helix aside, Accelerate is very cautious not to try and be everything to everyone. We understand the triple helix model, we have good relationships with the government, but our focus as Accelerate has largely been to connect universities with the corporate sector. And specifically the technology transfer offices at universities. We help to unpack the innovation value chain along with our members and identify the optimal opportunities and ideal points where the corporate sector should get involved in the innovation value chain, understanding what that means for intellectual property, and so on and so forth.

How exactly do you go about understanding your members’ priorities and beyond this really addressing business issues which are impacted by regional and national strategy?

Because we maintain a fairly small number of members we are able to engage with them quite intimately at a face-to-face level. So I work very closely with the executive management in each of these corporates, really unpacking what the key pressure points are, understanding their major requirements and strategic direction and areas in which they’d like to grow. And then serving as the conduit between the corporates and what the government plans to do. We look at the macro context and government’s large initiatives, overlay corporate individual strategies and objectives on top of that and then figure out optimal areas for collaboration. As all the big players gain a better understanding of the big picture and what everyone else is doing, your opportunities for efficiency and collaboration around common objectives are massively improved.

Can you elaborate for us a little on how being globally oriented and connected is essential to your regional and Cape Town’s success?

Obviously, you cannot grow a regional economy in isolation. With technology pushing us closer and closer to homogeneity almost and making the world a lot smaller, and flatter, it’s essential to make sure that those opportunities for small start-ups within this region and the good work being done by them is visible on a global scale. Obviously, the attraction of investment inwardly is key for many of these initiatives. And of course the fact that the rand has taken quite a beating in recent years makes procurement from South Africa quite attractive. And procurement not only of commodities, which is what we traditionally do, but of services, indeed services in some of the key sectors that have been identified within the Western Cape, such as ICT, business process outsourcing, financial services and the like suddenly become quite attractive, because these are services which can be delivered across the globe at marginal cost and effectively.

From your perspective, what are the most strategically important African and global destinations that Cape Town would seek to grow as potential markets? What are your highest priorities?

Certainly the discovery of gas in Mozambique is fairly significant for sub-Saharan Africa, particularly in light of the fact that Cape Town has been earmarked as an oil and gas servicing destination. Servicing of rigs and various infrastructure and support vessels and so on is quite key. Also within the Western Cape we are looking at gas power as a potential short-term solution to our energy crisis, so retrofitting our power stations to be gas powered and gas fired is something which we certainly will be pursuing. Obviously that speaks for a strong relationship with Mozambique. Angola has also recently emerged as a key destination. Interestingly enough, Angola had a vibrant agricultural sector not so long ago and five fairly successful agricultural cooperatives, but all of that kind of fell by the wayside when oil was discovered and everyone threw their chips into the oil basket, as it were. But with the oil price bottoming out and seemingly not recovering any time soon, Angola has looked back to its agricultural sector and a firm desire to reinvigorate it. And they’ve obviously then looked towards South Africa for assistance in that regard. So from an agricultural development and agro-processing perspective, Angola suddenly becomes quite a key destination for us as well.

Sustainability is absolutely key and one of our key focus areas, specifically with regard to food and water security as well as energy security.

Cape Town actually has an enviable status as Africa’s most innovative city. Tell us how you foster an environment for innovation here and provide market access opportunities to new markets both locally and across Africa?

A big part of the reason why we are seen as a hotbed for innovation has been the success of start-up incubators. Start-up incubators are quite well supported in this region. Obviously, from Accelerate’s perspective we work very closely with the universities. As mentioned we’ve got four fairly strong universities all with a very significant research orientation. We’ve worked quite extensively to build the bridge between corporates and universities, where universities effectively serve as incubators for innovation, specifically within the tech transfer offices. Unpacking of the value chain and the initial research and development of innovation towards commercialisation is a process which is very well supported in this region, something which we are working to emphasise. Typically, once companies leave those incubators and survive that initial two year struggle to find their feet, they then reach a point at which they represent opportunity for rapid growth. They go from a five-man start-up that survived incubation to growing and scaling to 100-150 plus employees. This is a space that we are quite keen on supporting and looking into, and it’s this space that the corporates really need to get stuck into, to start procuring local innovation as opposed to looking abroad for solutions to their current problems.

And you’ve had great success in helping to establish the Cape as a base for more than 47 multinational companies who operate in the green economy. How important is the issue of sustainability to accelerate Cape Town including leveraging the Cape’s natural resources and developing the local economy?

Sustainability is absolutely key and one of our key focus areas, specifically with regard to food and water security as well as energy security. We are experiencing a severe drought at the moment so water security and water supply is a pivotal issue for us, particularly given that agriculture is a major sector within our regional economy. But also energy security with regard to renewables; so there are moves afoot to have Atlantis just up the coast designated as a special economic zone for green manufacture and renewables manufacture. In the eighteen months since that discussion has been ongoing, we’ve attracted over 500 million rands worth of investment from renewables companies. And this is prior to designation as a special economic zone. The thing about Atlantis is that it’s an industrial city that was built during apartheid, so it’s effectively never realized its potential. The problem with the special economic zone program in South Africa is that typically an area would be designated where economic development is required and the Department of Trade and Industry would then put together a basket of incentives in order to attract investors and manufacturers in that particular sector. Once you’ve got the right basket of incentives and a pipeline of investors, everything ticks along quite nicely until someone has to build the bulk infrastructure in this zone. Typically it’s because these designated areas have been deprived historically of infrastructure development, and the cost is then astronomical, the water reticulation, the road works and electrification and so on. Many of the special economic zones have struggled at that point to reach fruition because there is often pushback to the private sector at that point. And the government would then say you guys want to invest here and want to locate here, perhaps you could do the bulk infrastructure, at which point it stalls. Because that’s not their business. So the nice thing about Atlantis is that the required infrastructure already exists. It’s just never been utilized properly. Since it’s in a region that is in desperate need of economic development, we’re fairly confident that this area will be designated a special economic zone. It then has massive knock-on opportunities for the broader economy. We can’t compete with China in monocrystalline manufacture, which means we can’t compete in solar panel manufacture; we can’t compete with the Dutch and the Germans, with regard to electrical componentry because we simply don’t have the electrical engineering skills in this country at the moment. But what every solar panel needs is a steel mounting structure and what every electrical component needs is a steel casing. So this points to a significant opportunity for local content with regard to steel forming and metal forming and all of the metal componentry required in renewable projects. In a typical solar IPP project as much as 25% of total cost comes from mounting structures, cabling, screws, bolts, nuts and related services. The short-term opportunity for our region is all about beneficiation of steel, and the steel sector is in massive need of stimulus at this point in time. I believe the designation of Atlantis as a special economic zone ticks a lot of boxes. The Department of Trade and Industry needs to designate by the end of this financial year, I think 3 is the target for the year and from what I have understood there have only been 2 applications so far. So we’re fairly confident by the end of March we should have that designation wrapped up. And then obviously artisanal skills to support that sector become quite key. This represents a nice opportunity to invigorate artisanal skills in South Africa again, something, which I believe, is severely lacking. At the moment we’ve got amazing tertiary educational institutions and good universities. But universities will only serve a small population of school leavers, so the question becomes more one of what an inclusive economy means from an artisanal perspective? And should we not be developing artisanal skills as well as tertiary higher-level intellectual thinking capabilities? To me, that represents a nice opportunity to really drive artisanal skills programs out in Atlantis as well.

What’s the expected employment creation of this program?

It depends on whose research you look at, so I wouldn’t be able to pull a magic number off the cuff, but it’s expected to be fairly significant. If you just consider half a billion rands of investment in eighteen months and it’s largely the kind of work that could be seen as inclusive. With a minimal educational base, people can be trained to be active in that sector. So in a fairly short space of time you could find a massive job creation opportunity in that region.

So with the Atlantis special economic zone and Saldanha designated an IDZ, these are two very significant developments, at a regional, even at a national level?

Absolutely. It’s also interesting because it says something about the difference in approach between provincial versus city. Province when you speak to minister Alan Winde will probably point to project Khulisa which has identified oil and gas, agriculture and tourism as the key sectors to drive inclusive economic growth because those are typically the sectors that have the highest job multipliers. The investments made in these sectors translate well into job opportunities as they are labour intensive. For every million rand spent in agriculture you’ll find more jobs created than in any other sector. So the multipliers are quite attractive in those sectors. The city, however, has taken a slightly different approach and looked at the sectors that are most likely to grow the economy generally, and they have identified business services, the financial sector, BPO, ICT, as sectors that have mushroomed organically already and with minimal stimulus. Although they could actually grow the broad economy quite well, the challenge here is that they are not seen as being inclusive, because they require a much higher level of education and specialised skills in order to participate. Nevertheless, we as Accelerate are supporting both approaches because we do see opportunities within the city strategy for inclusive growth as well, specifically around programming skills, Java, .NET and the kinds of skills that can be taught irrespective of educational level. And there are a few programs already operational that have had quite phenomenal success. Our goal would then be to bring the corporates to those projects and try and scale them. But obviously scaling them in a way where they don’t become belaboured by bureaucracy, but rather are almost independent pockets of development.

Finally, you’ve only been in this role since September of last year, so tell us your thoughts as to what the fundamental tenets and objectives of Vision One Cape 2040 will mean. We don’t know how long you’re expecting to be in this job, but what’s your understanding and conception here?

The initial Vision 2030 Cape Town was a massive step in the right direction to bring together a common vision for future development of the city and the development of this document was driven by Accelerate about 7 years ago. It reflected business’s contribution towards the thinking on how to create sustainable economic growth in the region. The second version, One Cape 2040 was produced to catalyse short-term action toward realising the long-term vision of the NDP. Both versions say fairly similar things and both point to exactly what I just mentioned, namely the support of organic growth in key sectors through increased skills, innovation, and collaboration.

Let’s make it a little more ad hominem – what do you hope to achieve during your tenure?

The list is endless! For me, coming back to the Cape as someone who was born here but came back as an outsider, what struck me straight off the bat was both how much has changed, in terms of development in areas like the Waterfront and the financial sector, but also how little has changed in terms of the reality of people stuck in gang and drug-fuelled violence on the Cape Flats. Cape Town is an incredibly divided city and with the political situation being what it is, those divisions are being enforced rather than addressed. So I believe part of what Accelerate needs to do is build social bridges and an inclusive economy and all that entails for this region. On the one hand you’ve got sectors that are growing exponentially and doing very well, and driving the broader regional economy. But they are growing in a way that excludes the vast majority of the population in the Western Cape. So for me a big part of what Accelerate needs to do is bridge that divide and find those opportunities for inclusion within this economic growth. I think without that the region will become increasingly volatile and unstable. Disillusionment among the youth is only going to grow and that’s something which is a significant concern for us at this stage. So I would like to walk away from Accelerate in a few years knowing that at least we’ve made some headway and that we’ve developed some new models and some innovative approaches to economic growth in this region. Because innovation needs to be about far more than widgets and gadgets, and a lot more within our context about innovative approaches to addressing social challenges and ills. And in that regard, there’s definitely some good ideas and good thinking happening.

So do you see Accelerate almost as a social laboratory in a sense?

Yes, absolutely, and a microcosm of the broader South African society. What was very encouraging for us recently was the slight shift politically within the Western Cape ruling party. Whereas before they’d always insisted that this was the best-run province because they ran it, they are now actually beginning to understand that these successes need to be shared and need to be disseminated across the entire country so it’s not so much competitive any more from a party political perspective, but collaborative from a South African perspective. Because I do believe that South Africa is at a key tipping point in its history, and we need to move away from this level of competition and political antagonism, towards a situation where successes are shared and the learnings of those successes are exported to a large extent to other provinces.

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