The JSE, in collaboration with the Technology Innovation Agency (TIA), has launched a four-month pilot program aimed at preparing ten small and medium-sized technology enterprises to attract capital, without providing grants to participants. This was announced at the JSE in Sandown on Wednesday.
Patrick Crappie, TIA's Executive Director for Innovation Support, told TechCentral that participating SMEs in this pilot do not receive direct funding in the form of grants. He emphasized that the value of the program lies not only in providing funds but also in assisting SMEs in improving their readiness to attract investment, enter markets, and build sustainable, scalable businesses.
The technology development program is implemented under the auspices of JSE SME Rise and will cover companies from the healthcare, agriculture, and financial technology sectors over 16 weeks. Crappie characterized it as a program primarily focused on business development, investment readiness, and market access. Participants will receive support in areas such as business diagnostics, growth planning, presentation development, and technology commercialization, as well as assistance in creating a document package ready for fundraising.
Through the JSE, participants will also gain access to sector-specific events and a market access day, allowing them to network and explore opportunities for capital attraction and market entry. Crappie added that, provided they meet the relevant requirements, participants may be considered for private placement on the JSE or screening on AltX. JSE Private Placements, launched in December 2021, is the exchange's digital platform for attracting debt and equity capital for unlisted and listed companies, while AltX, established in 2003, is its parallel market for high-growth small and medium enterprises.
Composition of the cohort of 10 companies
Crappie noted that the selection process was designed to be 'competitive and evidence-based.' TIA provided a database containing 43 SMEs, all of whom were invited to apply. Sixteen companies applied, and 14 passed a structured 30-minute interview. They were assessed based on criteria such as innovation, market potential, business readiness, leadership, identified risks, and alignment with program goals. After moderation, the JSE recommended a cohort of 10 companies, along with reserve and non-recommended candidates, which was confirmed by TIA.
The selection was made based on 'proven service offerings, operational maturity, and commercial potential.' The companies were not named, but they have already attended an orientation session. The partnership arose from a 'shared recognition' that one of the problems in the South African innovation ecosystem is the 'gap between developing a promising technology and successfully bringing it to market.' Crappie explained that SMEs may possess strong products or technologies but still face challenges related to business readiness, market access, investment readiness, and necessary networks for scaling.
Crappie specified that TIA has expertise in technology development and commercialization, while the JSE contributes expertise in capital markets and corporate governance, and provides access to investors and its networks. Creating a pipeline of promising small companies makes sense for the exchange, which has significantly shrunk over three decades. In a TechCentral column in May, Duarte da Silva indicated that the number of companies listed on the JSE is around 280, compared to more than 800 in the 1990s.
Despite TIA being better funded than usual, the pilot program does not include grants. In February, the agency received a settlement of US$72.9 million (approximately R1.2 billion) from the sale of a 49% stake in the biotechnology startup Kapa Biosystems in 2015 for $4.9 million, eight months before Kapa shareholders sold the company to Roche for $445 million. This amount includes an arbitration-awarded penalty of $39.5 million plus interest, and the arbitration appellate tribunal also awarded TIA additional legal costs.
In June, TIA announced how these funds would be spent. CEO Titus Mathe stated that R137.3 million would go towards supporting TIA's seed fund and commercialization hubs, and R300 million towards a fund-of-funds approach to unlock private capital. He noted at the time that the funds were fully reserved for a range of interventions but had not yet been disbursed. Crappie, who has held the position of TIA Executive Director for over four years since June 2020, also described this pilot as a test of the TIA-JSE partnership. He concluded: 'It is also an opportunity for us to test a structured support model that can foster a stronger path from innovation to commercialization.'