beyondbrics

Groupon – the “collective buying” web company that last month turned down a takeover bid from Google worth up to $6bn – hit the headlines this week with three acquisitions of its own, in India, Israel and South Africa.

The first two countries, well known for their ICT strength, might seem like obvious targets for the hottest dotcom outfit of the moment. But the purchase of Cape Town-based Twangoo reflects the blossoming of IT talent in what is becoming known (at least to its more computer-friendly citizens) as Silicon Cape.

Wayne Gosling, co-founder of Twangoo, openly admits that the company’s business model was based on US-based Groupon’s, which was in turn inspired by the power of online social networking.

Businesses looking to promote their offerings can propose a discount offer to be advertised by Twangoo to its members, with a separate cut-price deal in each of eight South African cities (Wednesday’s Johannesburg offer promises 52% off a one-hour tarot and hand reading session). Provided a set number of people sign up, the deal is activated, with the revenues split between Twangoo and the company concerned.

“All consumers like a good deal, and vendors appreciate the model,” says Gosling, on a high after selling a business just seven months old for a sum “comfortably” into the millions of dollars. Started during last year’s World Cup with start-up capital of just R200,000, Twangoo’s turnover grew from R20,000 in its first month to about R1m last December.

Gosling and his partner, Daniel Guasco, met in 2008 on an MBA course at the University of Cape Town – and the city was a fine environment for an internet start-up, he says. “There’s a lot of money being pumped into developing IT talent down here, through an initiative called Silicon Cape,” says Gosling. “It’s a progressive, forward-looking community.”

There are obstacles, however, when it comes to doing business online in South Africa. “Part of the problem is the low access to credit cards – we’re still a relatively underbanked country,” says Gosling. “Also we’re not properly online – internet penetration is still only at about 10 per cent.”

But that is set to change, says Arthur Goldstuck, managing director of consultancy WorldWideWorx. “Over the next five years the internet user base is likely to double,” he says, thanks in part to the arrival of new fibre optic cables. On the corporate front, South Africa’s digital presence is not limited to the smaller companies – after all, the South African media group Naspers is the part-owner of Russia’s Mail.ru, which in turn owns a 5 per cent stake in Groupon.

But Cape Town will remain a hub for up-and-coming talent, says Goldstuck. “It is the hotbed of development in South Africa. In Johannesburg people will go and work for one of the big IT companies; in Cape Town people with talents will start their own online or software business.” Other Cape-based companies worth watching, he says, include mobile financial services company Fundamo, and Mxit, a mobile social networking site.