To Investors,
Today’s letter features a guest post from Sakhile Xulu, an entrepreneur and strategist operating at the intersection between venture capital and venture building. He is the Managing Partner at The Office Of Sakhile Xulu, where he works with South African family offices and businesses, identifying SME investment opportunities across South Africa. Following his article suggesting that evergreen funds may be a better alternative for African investors than the current venture capital model; I asked Sakhile to double-click into that idea, and to share his views on more topics such as what needs to come together to enable a livelier IPO environment in South Africa, how he’s thinking about the high-tech manufacturing sector in South Africa, which industries he thinks will have the most growth in South Africa over the next 10 years, how he would invest R50 billion in A.I. in South Africa today, and more.
Question: Macroeconomics is difficult and complicated; what forces do you think need to come together to enable a livelier IPO and general exit environment in venture capital/private equity in South Africa?
To solve this, we need more than liquidity events, we need structural integrity across the capital stack, market absorption capacity, and strategic economic protections that allow businesses to scale and stay.
1. Abundant Early-Stage Capital: With Role Discipline Across the Capital Stack
A functional exit environment begins at the bottom of the stack.
Venture capital ignites: taking high-risk, high-uncertainty bets to unlock innovation and product-market fit.
Growth equity stabilises: institutionalising the business, strengthening governance, and preparing for scale.
M&A capital scales: aggregating fragmented players, integrating operations, and creating continental champions.
Institutional capital matures: providing market confidence through pension funds, DFIs, and public market listings.
Without this sequenced continuity, businesses stall mid-journey, too big for early investors, too small for public markets.
2. Fluid Secondary Markets
The absence of a vibrant secondary market in South Africa is a structural drag on venture capital and private equity.
Secondaries provide liquidity without forcing exits, giving GPs and founders time to build instead of rushing the sale.
They allow early backers to rotate out, while long-hold capital rotates in, keeping alignment fresh.
They also signal maturity and optionality to institutional players, prerequisites for future IPOs or long-term consolidation.
3. A Competitive Market That Adopts What South Africans Build
Exits require buyers, buyers require markets.
South Africa cannot build a durable exit environment if its economy doesn’t adopt its own innovations. We must:
Encourage local procurement: by corporations, consumers, and the state.
Protect key strategic industries: through intelligent policy.
Build adoption pipelines: where infrastructure, healthcare, agriculture, and logistics [absorbs] locally built products and services. Until we scale demand, we cannot scale supply.
Question: Focusing on the funding environment, in my opinion we should be considering more SPAC listings. A SPAC listing model is beneficial for a company because (among other factors):
A younger company can get access to more sophisticated capital through institutions that are more comfortable with publicly listed equities. This deals with the risk averse nature of institutions in South Africa.
The young company can get disciplined quicker because of the transparency inherent in being a publicly listed company.
Going public earlier in a company’s lifecycle also brings positive attention to the innovation within a country — which could attract foreign investment.
What do you think?
To be honest with you, I don't know enough about SPACs to offer a strong opinion either way, and that in itself, is revealing.
There are certainly markets where SPACs have been the right tool for the right context. In those cases, they’ve helped accelerate access to capital, bring attention to innovation, and attract institutional backing. Like any structure, its success is contingent on fit, timing, and market maturity.
What I’d want to understand first is the learning curve associated with adopting SPACs at scale in South Africa.
It’s taken years, decades even, for venture capital to be understood, trusted, and integrated as an asset class here. Most South Africans still don’t fully grasp equity dilution, let alone structured debt. So, what does it look like to introduce a complex mechanism like SPACs into an ecosystem still mastering the basics?
Personally, I lean towards models that are structurally sound, simple to implement, and easy to explain to both entrepreneurs and investors. Complexity has a cost, especially in markets where financial literacy and market infrastructure are still catching up.
That said, if the business case is strong, the opportunity clear, and the governance tight, any tool can work. SPACs included. But in my view, they’re not a silver bullet, just one more tool that needs to be weighed against our context, our capital stack maturity, and our long-term goals.
Question: Double clicking into your idea of evergreen funds being a better option for startups in Africa than venture capital, I remember that Sequoia (a VC firm in the U.S.) announced an evergreen fund, but their idea ensured liquidity for investors through a fund that cycles publicly listed holdings as well. Can you explain the liquidity environment if an African firm ran an evergreen fund and how that could impact investors?
The reality is that most ventures in South Africa and across the continent, need time and patient capital. The terrain is different:
Fewer local exits.
Longer sales cycles.
Infrastructure and policy gaps.
And a slower runway to scale.
This is where evergreen fund structures offer a compelling alternative to traditional VC. They remove the pressure of a fixed exit clock and allow capital to work on Africa’s timelines, not just Wall Street’s. Evergreen doesn’t mean infinite holding, it means strategic flexibility without being boxed in by a 10-year fund life.
Instead of racing towards artificial liquidity events, evergreen funds can prioritize value-building ownership, strategic reinvestment, and long-term alignment with founders.
On Liquidity:
In our context, liquidity would come from:
Management fees and performance-based returns
Dividends from cash-generating portfolio companies
Selective exits from successful ventures when the timing and buyer make sense.
This allows liquidity to be earned rather than forced. Evergreen doesn't mean “never exit,” it means we exit when the value is real, the business is ready, and the market is rational.
In short, evergreen is not a workaround, it’s a deliberate response to market conditions that require more durability, not more velocity.
Question: To attract foreign investment, national policy needs to support growth and R&D initiatives in South Africa. Can you name one or two examples of national policy supporting growth and R&D in SA, and perhaps an example of where there could be improvement?
To be honest, I can’t point to a single flagship R&D policy with sweeping national visibility, and that’s part of the opportunity. But what I can highlight is the high-impact work being done by the Department of Science and Innovation (DSI) to systematically de-risk research and innovation.
Through its implementation arms:
NIPMO (National Intellectual Property Management Office) helps fund and commercialise R&D in the tertiary education system. Some of this IP has gone on to generate licensing revenues and even attract global acquisition interest, turning research into real, monetisable assets for institutions and the country.
TIA (Technology Innovation Agency) plays a critical role in supporting early-stage technology development, bridging the gap between research and inevitability. TIA has partnered with initiatives like the University Technology Fund, Savant, and the SA SME Fund to make innovation more fundable, essentially lowering the barrier for early-stage investors and venture capitalists.
The DSI, in many ways, is doing the foundational work to de-risk innovation, creating the conditions for early-stage R&D to survive the “valley of death” and move toward commercialisation.
What’s still missing is policy visibility and coherence at scale. We need a more integrated national innovation strategy that connects this R&D activity with procurement policy, industrial strategy, and global capital flows. We don’t just need to fund innovation; we need to scale and absorb it domestically.
In short: R&D is happening, impact is emerging, but alignment and amplification are the next frontier.
Question: Why do you like high tech manufacturing, how do you think it will impact South Africa if there was a national directive to make South Africa the largest high-tech manufacturer in the world?
I’ve always been fascinated by China’s systemic rise, lifting over 800 million people out of poverty, not through aid, but through industrial strategy. China didn’t just become the factory of the world; it moved up the value chain, from assembly to innovation, branding, and even global standard-setting. And crucially, it did so by championing local ownership and domestic capability.
That story matters because manufacturing isn’t just about making goods, it’s about building a foundation.
If we don’t get assembly right, we won’t get integration right. If we don’t build things, we won’t own value chains. Without that base, we stay dependent on imported solutions, and foreign capital.
That’s why I love high-tech manufacturing: It’s not just an industry, it’s an infrastructure for innovation, job creation, and long-term resilience.
If South Africa had a national directive to become a global hub for high-tech manufacturing, we wouldn’t just be stimulating exports. We’d be:
Creating millions of dignified jobs
Laying the groundwork for local IP ownership
Strengthening supply chain sovereignty
And redefining our position in the global economy
It’s not a silver bullet, but it’s a system lever. One that could shift us from a consumption-based economy to a production-powered nation.
Question: I’ve also never been a fan of the spray and pray strategy of some venture firms in SA because I think that lacks dedication to hard work, conviction, and lacks the ability to pinpoint the layers needed to paint the bigger picture. For example, when Don Valentine, founder of Sequoia, realized in his younger days that to sell more semiconductors there needed to be more computer manufacturers, he decided to fund those types of businesses himself, to develop the entire industry as well. What are your thoughts on whether VC in SA could be more targeted and build for Africa, not mimicking tech in the U.S.?
The one thing I wish we had copied from the U.S. venture capital ecosystem isn’t the tech, it’s the type of people running the funds.
In the U.S., many venture capitalists are former operators. They’ve built businesses, navigated scale, managed teams, and earned the right to advise founders. They’re not just capital allocators, they’re company builders.
In South Africa, we’ve largely outsourced that role to private bankers and Chartered Accountants. Then we wonder why our venture capital feels more like small-cap private equity. It's heavy on structure, light on scale. Heavy on risk management, light on growth conviction.
Fund managers must earn the right to advise founders. A CV is not a proxy for operational wisdom. If you haven’t built something yourself, your advice is theoretical at best.
As for the “spray and pray” strategy, it works in capital-rich environments like Silicon Valley, where failure is cheap and follow-on capital is abundant. You can place 30 bets and hope one returns the fund.
But South Africa is resource constrained. We can’t afford that strategy.
We can’t deploy R300 million hoping one or two companies will carry the rest, our capital has to work harder. Our bets have to be smarter; our models have to be grounded in building real businesses that create jobs, generate cashflow, and serve actual market needs.
And if, in the process, we catch a unicorn? Great. But that shouldn't be the strategy, that should be the by-product of building with purpose.
Question: In which industry do you see the most growth in South Africa over the next 10 years and why?
One of the most exciting areas of growth over the next decade, in my view, is the Internet of Things (IoT), especially as it intersects with the rise of AI and industrial digitisation.
As AI becomes more embedded in business decision-making, it will depend on real-world, real-time datasets to generate true competitive advantage, not just theoretical outputs. That’s where IoT becomes essential.
IoT devices act as sensors for the physical economy, capturing data across logistics, energy, agriculture, manufacturing, and infrastructure. Whether it’s monitoring soil health, factory energy usage, fleet efficiency, or retail consumption patterns, IoT turns analog systems into digital ones.
In a country like South Africa, where infrastructure gaps are real, operational efficiencies are critical, and local data is scarce, IoT isn’t a luxury. It’s how we bridge legacy sectors with future intelligence.
Pair IoT with AI, and you don’t just get dashboards, you get predictive, adaptive, and scalable business systems. That’s the kind of foundation you need for long-term industrial competitiveness.
Question: If you had R50 billion to invest in AI in South Africa, how would you deploy it?
If I had R50 billion to invest in AI, I wouldn’t pour it into hype cycles or speculative models, I’d build real-economy infrastructure that uses AI to solve real-world problems. Here’s how I’d allocate the capital:
IoT Infrastructure for Real-World Data Collection
AI is only as smart as the data it receives, that means we need to build the sensory layer first. I’d invest heavily in IoT deployment across key sectors: agriculture, transport, logistics, energy, mining, and manufacturing to generate localised, high-quality data that AI can use to deliver contextual insight.
Predictive Maintenance for Infrastructure & Industrial Systems
South Africa loses billions to system downtime from Eskom to water plants to mining operations. I’d back startups and platforms that use AI + IoT to predict and prevent mechanical and infrastructure failures, cutting costs, extending asset lifespans, and building resilience into national systems.
Healthcare Diagnostics & Personalised Medicine
We have a healthcare system under strain and patients who often arrive too late.
I’d fund AI tools that combine diagnostic imaging, medical records, and IoT biometrics to enable early detection, and invest in language models trained on local data to deliver personalised, culturally aware treatment regimens.
AI Talent + Data Sovereignty Layer
A portion of the capital would go toward building indigenous data infrastructure, AI research labs, and public-private partnerships to ensure South Africa isn’t just consuming AI but shaping and owning it. Think national datasets, open models, ethical governance frameworks, and inclusive skills development.
AI isn’t magic, it’s a mirror that reflects the quality and integrity of the data, systems, and values we feed into it. With R50 billion, we can build an AI economy that isn’t just smart, it’s sovereign, grounded, and built for South Africa’s realities.
Those were awesome insights from Sakhile, and I hope you enjoyed reading his response as much as I did. Sakhile is currently raising a new fund that aims to position South Africa as Africa’s premier manufacturing hub by investing within the high-tech industrialisation (manufacturing) sector. You can get in touch with Sakhile on his LinkedIn page.
What are your thoughts on the topics covered in this letter?
On my journey to becoming a master capital allocator, one lesson down, a billion more to go.
Hope you all have a great day
-Mansa
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