Key Challenges South African Startups Face in Going Global

South African startups are securing increasing interest from venture capitalists (VCs), angel investors, government-backed initiatives and private equity. While many of these ventures are gaining traction in the local and continental markets, expanding into global territories remains a significant hurdle - especially when it comes to securing investment and navigating regulatory complexities. 

In this article, we unpack the core challenges facing South African startups as they scale beyond local borders — and explore how founders and investors can address them.

What is Global Expansion for Local Startups?

Global expansion refers to a startup extending its operations, products, or services into international markets. The strategy is often pursued to increase revenue, mitigate local market risks and access new talent pools and customer bases.

While global scale can be lucrative, local startups must be prepared for a series of practical and strategic challenges - from accessing international capital to complying with cross-border regulations. 

Limited Access to Global Funding 

One of the most pressing challenges facing South African startups looking to scale globally is limited access to international funding. Several factors contribute to this issue:

Local Venture Capital Constraints 

Although VC interest in South Africa is growing, investors often remain cautious due to the country’s economic volatility. Significant limitations include:

• Regulatory uncertainty
• Lack of infrastructure development 
• The conclusion of the Section 12J tax incentive scheme 
• Limited early-stage funding options
• Exchange control policies

The conclusion of the Section 12J initiative in 2021 removed a key incentive for high-net-worth individuals to support early-stage businesses through tax-deductible investments. While the government is working to reframe startup support through new policies, concrete changes are yet to materialise.

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Barriers to International Investment 

International investors often prefer backing ventures in their home currency. As Hlengiwe Makhathini of MIC highlighted at the SME SA Funding Summit, currency fluctuations present a real risk: 

“As currency and interest rates change, the money you need to pay back the investor may change as well. If the Rand is not doing great against the Euro or Dollar, you might find yourself in a position where you can’t fulfil your end of the deal,”

Moreover, international investors tend to favour ecosystems with strong policy support. While South Africa is a relatively mature economy in Africa, it lags behind markets like Egypt, which has implemented a dedicated Startup Act. Local initiatives, such as the SA Startup Act Movement, are pushing for policy change, but progress is slow. 

Regulatory and Compliance Barriers

South African startups face a patchwork of regulatory challenges that can make cross-border growth complex and costly. 

B-BBEE Compliance

The Broad-Based Black Economic Empowerment (B-BBEE) policy initiative aims to redress the economic exclusion and inequality brought on by apartheid. However, for international investors, ownership-related requirements — especially in sectors like telecoms and mining — can be restrictive. While B-BBEE compliance can be achieved through other means such as supplier development, job creation, and skills investment, these routes require strategic planning.

Visa and Immigration Rules 

Unlike other African countries, South Africa has a cumbersome visa application process. This deters foreign investors who wish to bring in specialised international talent — a critical component for scaling global tech operations.

Exchange Control Restrictions 

Exchange control regulations, administered by the South African Reserve Bank (SARB) govern capital inflows and outflows. These controls are often seen as overly stringent by international investors, further limiting interest in local startups. 

Data Protection and POPIA Compliance

The Protection of Personal Information Act (POPIA) imposes restrictions on how personal data can be collected, stored and transferred. For startups operating in finance, telecoms or any other data-heavy sector, POPIA compliance can become a barrier -  particularly when international data transfer is involved. 

Operational Insufficiencies

Despite being one of the most industrialised economies in Africa, South Africa continues to grapple with operational issues that directly impact business growth:

• Loadshedding disrupts productivity and increases operational costs. 
• Crime and security risks pose a challenge to both physical assets and digital infrastructure. 
• Underdeveloped logistics and transport networks can complicate international fulfilment and distribution. 

These systemic issues may negatively affect investor confidence and the viability of large-scale expansion plans.

Talent Acquisition and Retention 

A growing concern for investors is the shortage of tech and specialised talent in South Africa. Key sectors affected include: 

• Information and Communications Technology (ICT)
• Engineering 
• Education 
• Healthcare
• Retail

Ironically, these sectors also attract quite a lot of startup investment (yes, Fintech is still number one). The local talent gap means startups may need to source expertise internationally -  adding further strain to budgets and compliance efforts. 

On the upside, some investors see South Africa’s young, skilled population as an untapped advantage. However, they must be prepared to navigate local labour regulations, manage payroll across jurisdictions, and respect cultural dynamics.

The Path Forward: Turning Obstacles Into Opportunities

Despite these challenges, South African startups have much to offer global markets — from high-impact innovation in fintech and edtech, to emerging leadership in agritech and green solutions.

To unlock global opportunities, startups must:

• Engage with policymakers to influence favourable startup legislation
• Build investor-ready models that factor in currency risk and compliance
• Strengthen operational resilience, especially in energy and logistics
• Tap into global mentorship and accelerator programmes for strategic guidance
• Attract and retain global-standard talent, locally or remotely

The global stage is within reach — but navigating it requires foresight, structure, and a solid network of both local and international partners. 

Global expansion is not a linear path, and for South African startups, the stakes are high — but so are the potential rewards. With clearer policy direction, a renewed focus on infrastructure, and smarter funding mechanisms, local ventures can become continental leaders and global contenders.