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Tech investors scared away by strict regulatory policy
11 May 2016
Overly strict regulatory policy can inhibit investment in internet companies, with governments in emerging markets needing to ensure policy does not put off tech investors.
©Ion Chiosea via 123RF
This is according to the The Impact of Internet Regulation on Investment report released by incubator Fifth Era and commissioned, which surveyed 475 investors in 15 countries, including Nigeria and South Africa.
“Investors are chilled by regulatory ambiguity and would reduce their capital investment if countries introduce internet regulations that reduce their investment viability or return,” the report said.
According to Fifth Era researcher Matthew Le Merle, the digital economy will be the most significant driver of growth of GDP and jobs over the next five years, something which most governments understand. Yet he said regulations often had the effect of making it difficult for entrepreneurs to do business, and thus scaring off investors.
“The notion of an innovation-based strategy always collapses down to the fact that we need entrepreneurs and venture capital and both are scarce,” he said.
For example, in South Africa, all of the 31 investors assessed said the current policy environment in the online sector had a negative impact on their investment activities, with 74% saying they were not comfortable investing in business models where the regulatory framework was ambiguous.
The risk of secondary liability and exposure to large damages was of concern to 84% respondents, while 81% said they would be uncomfortable investing in internet companies if tax rules were applied making those companies liable for double taxation.
Meanwhile, 87% of investors said they would not be comfortable investing in internet businesses if intermediaries could be held liable for third party content or actions, while 58% of investors said they would avoid internet or mobile businesses if regulators were to apply traditional telecom regulations and tariffs to mobile messenger and free online content services such as WhatsApp or Viber.
On the other hand, 77% would consider increasing their investments in internet businesses if regulation was reduced in the mobile app space.
Source: Disrupt Africa
Disrupt Africa is a one-stop-shop for all news, information and commentary pertaining to the continent’s tech startup – and investment – ecosystem. With journalists roaming the continent to find, meet, and interview the most innovative and disruptive tech startups, Disrupt Africa is a true showcase of Africa’s most promising businesses and business ideas.
Our readers can keep up-to-date with the quirky world of tech hubs and accelerator programmes; and our reporters provide live coverage of the all-important tech and entrepreneurship events across Africa.
For our startup, entrepreneur, and investor friends alike, our mission is to provide practical information and advice from across Africa’s varied vibrant markets, and to promote engaged and thought-provoking discussion about the exciting ecosystem we belong to.
Go to: http://disrupt-africa.com/
About Tom Jackson
Co-founder @DisruptAfrica. Tech and business journalist in Africa. Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.
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