Billionaire Magda Wierzycka urges bold pension fund shift to fuel SA’s next wave of entrepreneurs

South Africa's economy is at a crossroads, and one of the key factors holding it back is a lack of capital and funding for young entrepreneurs.

So says billionaire Magda Wierzycka, CEO and cofounder of Sygnia Ltd and one of the country’s most influential business figures.

"Having been in the UK, I have seen what funding can do when it is provided to young entrepreneurs who have innovative ideas, who have disruptive ideas," she explains. "And if you look at South Africa, we've got a young demographic, we have hungry, ambitious people. We have some of the best universities in the world. You know, we don't need to have habits to have amazing IP and amazing innovation."

However, despite these advantages, South Africa is struggling to capitalise on its potential. Wierzycka points out that the country is lacking in capital and funding for entrepreneurs, which is hindering economic growth. "What we are sadly lacking relative to other countries is capital and funding for entrepreneurs and young people," she says. "And you know, I can talk to experience. When I started Sygnia Investments 20 years ago, you know, there was no capital to support it, and I know how hard it is to build up a business without that capital support."

Wierzycka suggests that pension funds should be encouraged to invest a small percentage of their assets in startup ventures in South Africa. "You are finding funding businesses which are the job creators of the future," she explains. "You're also funding companies which can attract foreign investment once they are attractive enough. So, it all talks to economic growth."

She also draws inspiration from the UK's approach to pension fund investment. In the UK, the government brought together the largest pension funds and encouraged them to sign a compact to invest 5% of their assets in UK innovation by 2030. "I'm not talking about compelling anyone," she says. "I'm talking about commitment to South Africa. Because the people who administer the pension funds are very committed to South Africa, and yet they're not doing this collaborative thing."

The potential impact of such an initiative could be significant. Wierzycka estimates that a 5.5% allocation of pension funds to startup ventures in South Africa could unlock around R10 billion in investment. "And remember, supporting innovative businesses does not take a lot of money," she notes. "The initial money you put into small companies is in the order of two to three to five million, so R10 billion deployed into innovation is really insignificant, particularly if you know some of those businesses can return tenfold the capital that you have invested in them."

To learn more about Wierzycka’s insights on the importance of collaboration and the potential benefits of investing in startup ventures, click below: