When it comes to scaling into Africa, South African startups are increasingly looking beyond borders for growth and scaling into the broader African continent. Scaling past local borders has become both a strategic imperative and a complex challenge. Venture Capitalists (VCs) and investors eyeing pan-African expansion want more than just a compelling pitch, they want to see evidence of market validation, a scalable model suited to diverse local contexts, and strong compliance frameworks built through trusted partnerships.
This long-form guide explores what investors expect from South African startups looking to scale into Africa. Drawing on real-world case studies, emerging trends, and region-specific insights, we break down the strategic factors that influence successful cross-border expansion.
South Africa’s Startup Ecosystem: Key Growth Drivers
In the last decade, South Africa has seen a surge in startup activity, especially in urban hubs such as Cape Town,Johannesburg and Durban.
The growth of startups can be contributed tovarious factors such as:
Increased Digital Adoption
With some of the highest mobile penetration rates in Africa, South Africa’s digital infrastructure has enabled startups to scale efficiently. Internet access and widespread smartphone usage have paved the way for digital-first ventures across sectors such as fintech, healthtech, and e-commerce.
Public and Private Sector Support
South Africa benefits from a growing network of public-sector initiatives aimed at fostering entrepreneurship. Agencies like the Small Enterprise Development Agency (SEDA) and the Small Enterprise Finance Agency (SEFA) provide critical funding and development support. On the private side, accelerators, incubators, and corporate-backed venture programmes continue to nurture high-potential startups with mentorship and early-stage capital.
Healthy Investment Landscape
Both local and international VC firms are increasingly drawn to South Africa as a regional innovation hub. In particular, the fintech sector has emerged as a magnet for capital, thanks to the country's established financial services infrastructure and regulatory maturity.
Skilled Talent Pool
South Africa has strong educational institutions, with a focus on Science, Technology, Engineering, and Mathematics (STEM), producing a workforce ready to engage with high-growth startups. This technical depth provides a solid foundation for ventures with pan-African ambitions.
While many South African startups are achieving traction locally, the next stage which is scaling across Africa, requires a more tailored and nuanced approach.
How to Validate African Markets Before Scaling
Investors prioritise startups that understand the nuances of market validation across African regions. In Africa, a successful market entry requires a combination oflocalisation, strategic partnerships, and adaptability to meet each region’s unique economic, cultural, and regulatory environments.
To succeed, startups must develop comprehensive market entry strategies that account for:
Localisation of offerings
Regulatory alignment
Cultural sensitivity
Strategic partnerships
Understanding African Consumer Behaviour by Region
Consumer behaviour varies significantly across African countries, influenced by a wide range of cultural, social, and economic factors. For example, a digital lending solution that resonates with young professionals in Lagos may not appeal to informal traders in Lusaka or farmers in Eldoret.
Startups must invest in deep market research like surveys, focus groups, and ethnographic studies, to understand consumer needs in each market. For instance:
Urban youth may prioritise convenience, speed, and mobile integration.
Rural consumers often seek affordability, accessibility, and offline functionality.
Effective localisation requires more than translating content; it demands a rethinking of product features, pricing, and distribution strategies to suit regional preferences.
Case Studies: How Startups Succeeded in African Market Entry
For startups looking for practical examples of businesses, real-world success stories offer valuable lessons for startups looking to expand beyond South Africa. Here are three examples of companies that have made their mark across the continent:
Example 1:Jumia's Across Borders
Founded in Nigeria, Jumia built a pan-African e-commerce platform by leveraging the continent’s growing mobile penetration. Its operations span Kenya, Egypt, Morocco, Ghana, Senegal, Côte d’Ivoire, and Uganda. Notably, Jumia exited both South Africa and Tunisia, highlighting that not all markets offer the same opportunity or alignment.
Example 2: Luno’s Cryptocurrency at Scale
South African-founded Luno successfully expanded its cryptocurrency platform across multiple continents. With a presence in Kenya, Nigeria, Australia, Indonesia, Malaysia, Singapore, and the UK, the platform demonstrates how regulatory understanding and user education can drive adoption of emerging technologies beyond the home market.
Example 3: Peach Payments Payment Takeover
South African-foundedPeach Payments is an African payment gateway that has expanded its footprint into Kenya and Mauritius. Its acquisition of PayDunya has extended its presence into West Africa, including countries such as Senegal, Côte d’Ivoire, Benin, Burkina Faso, Togo, and Mali. The company’s growth underscores the importance of M&A strategies and strategic local partnerships in navigating new markets.
A business model that works in South Africa may not automatically succeed elsewhere. Investors are looking for scalable models that reflect the unique opportunities and constraints of different African markets.
Mobile is not optional, it’s foundational. Services like M-Pesa (Kenya) have revolutionised financial inclusion in East Africa by allowing unbanked populations to access digital services. South African startups expanding northward must consider mobile-first (and often mobile-only) strategies that reduce friction and increase reach.
E-Commerce and Platform Economies
E-commerce is another area with high development potential in Africa, especially where digital infrastructure is improving. Platforms like Konga in Nigeria have shown that consumers are willing to transact online when payment, delivery, and customer service are reliable. Marketplaces, SaaS platforms, and aggregator models have strong potential across Africa, if adapted to the context.
Practical Strategies for Scaling into Africa
To succeed across African markets, startups must approach expansion systematically. VCs expect to see evidence of the following:
1. Building Strong Local Networks
Trusted local partners are critical for navigating market complexities. These partners provide:
Local knowledge
Access to networks
Insights into regulations and compliance
Credibility with customers and stakeholders
Whether through joint ventures, distribution agreements or local hires, partnerships must be strategic and not opportunistic.
2.Community Engagement and Localisation
Engaging with local communities helps build trust and social licence to operate. Startups that embed local voices into product development and marketing strategy often enjoy faster adoption and stronger brand loyalty.
Community engagement also helps businesses better understand informal economic dynamics that are often overlooked in top-down strategies.
3.Financial Sustainability and Revenue Planning
Investors want to see robust financial planning that goes beyond the pitch. Key considerations include:
Clear customer acquisition costs
Defined revenue models
Forecasts tailored to different markets
Sustainable gross margins
A startup’s ability to generate revenue and reinvest into growth is a more attractive signal than aggressive but unfocused scaling.
What VCs Expect: Local Partnerships, Leadership and Compliance
VC firms backing African expansion can be highly selective. They look beyond traction to assess operational discipline, regulatory alignment, and long-term sustainability.
Local Partnerships Must Be Strategic
Investors assess the depth and quality of local partnerships. Surface-level relationships are insufficient. VCs want evidence of:
Legal and regulatory compliance (e.g. B-BBEE in South Africa)
Knowledge transfer between teams
Local leadership embedded within the business
Governance structures that support operational accountability
How VCs Assess Regulatory Risk in African Scale-Ups
VCs typically perform robust due diligence before committing capital. This includes:
Reviewing the startup’s legal structure and corporate governance
Verifying ownership stakes and cap table alignment
Assessing labour practices and employment contracts
Evaluating IP ownership and licensing frameworks
Analysing customer and vendor contracts for risk
They also examine the company’s industry-specific compliance whether that’s in financial services, data privacy, or healthtech, and assess how regulatory trends might affect future operations.
Investors are especially wary of hidden legal risks, such as unresolved lawsuits, IP disputes, or non-compliance with local laws. Proactive startups will pre-empt these concerns by having clean documentation and a dedicated legal strategy for each market.
The Bottom Line: What Makes African Expansion Investable?
From an investor’s perspective, the startups most likely to succeed in Africa are those that:
Prove market demand with real customer engagement
Build adaptable, regionally attuned business models
Establish meaningful local partnerships
Demonstrate compliance with all relevant regulations
Have a clear financial roadmap to profitability
Scaling into Africa is not a leap of faith, it's a measured, strategic process. Startups that invest time in localisation, regulation, and relationship-building are far more likely to unlock the continent’s vast potential. For South African founders, the opportunity is significant, but only if approached with the same rigour and ambition that built their local success.
Lungile is the Digital Editor for Startup.Africa, with a knack for storytelling, technology and innovative ideas. Working with Startup.Africa, she takes simple ideas and turns them into amazing stories.
Lungile Msomi
