Magda Wierzycka on reimagining SA venture capital

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JIMMY MOYAHA: South African pension funds should invest at least 0.5% of their monies into venture capital initiatives. That is the view of the CEO of Sygnia Asset Management, Magda Wierzycka.

For those who don’t know Sygnia Asset Management at this point, they are one of the largest asset managers in South Africa who currently are the custodians of north of R400 billion in South African assets. We’re going to take a look at this in a bit more detail with the company’s CEO and see if we can make sense of it.

I’m joined on the line now by Magda to take a look at these developments and see what we make of them … lovely having you on the show, as always. Thanks so much for taking the time.

This is certainly one way to get venture capital investment increased in South Africa. What sparked this view?

MAGDA WIERZYCKA: Well, I have spent the last seven years with one foot in South Africa, one foot in the UK – and the business I set up in the UK was and is a venture capital business.

So I’ve been quite involved in this field of seeding and providing capital to founders of businesses, to entrepreneurs, new entrepreneurs.

What you see in that kind of tier is that if you deploy enough capital into building up businesses, those businesses – the successful ones – become the job creators, become the disruptors, become the innovators and provide this foundation to the growth of an economy.

This is, of course, what we are sadly lacking in South Africa. It is sad to say that we have virtually no venture capital market in South Africa – that is, no support and no capital support for founders of businesses.

I can speak from experience because 20 years ago I was one of those founders with no capital behind me and I know how difficult it was to build up a business. So my view is we should be making it simpler.

Where is the largest pool of capital that we could access? Clearly it’s South African pension funds. Everyone talks about ESG [environmental, social and governance] investing. Well, how about investing back into South Africa?

I’m not talking about some huge significant percentage of assets – just 0.5%. It really is insignificant but could make an enormous difference to the economy. To me it’s a very simple equation and I can even tell you how to achieve it.

JIMMY MOYAHA: [Magda], this is a conversation you and I have definitely had in our private conversations around the state of venture capital in the South African landscape, and what needs to be done to spur that on.

You touched on the fact that this could potentially be a good catalyst for job creation, for economic growth. Can we take a look at how the introduction of new ventures and new businesses then starts to reshape how we see investable assets in South Africa?

MAGDA WIERZYCKA: 100%. Let’s look at – and this is where I start – let’s look at two things.

Let’s look at our young demographics. Yes, there are lots of unemployed people, but we have very young demographics.

Entrepreneurs of businesses and innovators are usually young people, not people in their 60s. So we’ve got this huge layer of young, innovative, ambitious people.

Despite everything, we’ve got some of the leading universities in the world. We don’t need to be number one and compete with Harvard or Oxford. We have very, very good universities in the country – Pretoria, Stellenbosch, UCT, Wits. And within those universities you have IP [intellectual property] being developed which can then be commercialised by virtue of being taken out of universities, and companies being built around that IP.

We have things going for us – ambition, innovation, education, young demographics. So why not?

Given the situation that Africa is seeing with, as we know, a lack of job creation, a lack of economic growth, we need to look at innovative solutions for building that economic foundation. And I can’t think of anything simpler than supporting those innovative businesses going forward with some capital.

Again, I’m not talking about a lot that pension funds would have to allocate.

JIMMY MOYAHA: Now, [Magda], you mentioned that you have a practical way to get this done and to get this off the ground. What would that entail and how would we go about doing that if we are to start this conversation?

MAGDA WIERZYCKA: It comes from two sides. Obviously, you have to have experienced people running venture capital funds – and you don’t need a lot of venture capital funds. That’s one thing. And they do not have to be big teams of people and highly costly structures.

But more importantly, how do you get capital into those funds? Very simply. Retirement funds in South Africa are already governed by Regulation 28, which basically means you have restrictions on how much assets you can invest in equity, 75%, and offshore 45%. That regulation is kind of imposed on retirement funds by National Treasury and the Financial Sector Conduct Authority, the FSCA.

That regulation talks to limits, maximum limits, and what you can’t do rather than what you should do. So how simple would it be? I hate to use the word ‘prescription’ so I’m going to use another word now. How difficult would it be for National Treasury and the FSCA to amend Regulation 28 to ‘compel’ – again, I’m going to amend that word – to compel retirement funds in South Africa to invest 0.5% in venture?

But let me change that word from ‘prescription’ because everyone immediately sits up and says ‘prescription?’ In the UK, because I’ve had a lot of experience in venture [capital] in the UK:

What the government did is they called in the largest pension funds in the UK and got them to sign a commitment agreement where they committed to deploying 5% of their assets into UK innovation by 2030.

So it is a compact, rather than a prescription. Imagine the largest pension funds in South Africa doing exactly the same. Incidentally, those pension funds are all pension funds associated with state-owned enterprises – SOEs – such as Eskom and Transnet. How difficult would it be for National Treasury and the FSCA to call the boards of trustees of those funds and say, guys, sign this pledge which commits you to investing.

Let’s forget five years. It’s too long. I hate five years. I’ll be 61, about that, by that stage.

Let’s commit to deploy that capital in the next two to three years into credible venture capital funds which can support credible innovation in South Africa.

It takes a meeting and two weeks to change some paperwork and another month to call all the boards of trustees together. We could be done by Q1 2026; we could be there.

JIMMY MOYAHA: From someone who has walked this journey and built a business over the last 20 years and done it practically in South Africa, this is a strong message on how collaboration and just rethinking how we approach things could solve a lot of our problems.

I think this is the perfect note to leave the conversation on. Thank you so much, [Magda], for those insights and for the time. Magda Wierzycka, the founder and CEO of Senior Asset Management joined us to take a look at how we could transform asset management and venture capital in South Africa.