African Governments Strain Startups' Cash Reserves with AI Tenders

South Africa’s Companies and Intellectual Property Commission wants an AI chatbot capable of handling an estimated two million customer interactions per month. Its tender covers development, integration, hosting, security, and support over a three-year period. But one condition exposes the challenge for a startup pursuing the contract: no advance payments. Invoices become payable within 30 days only after receipt and acceptance of work.

For a startup, winning the contract is only the beginning. It must fund the people, technology, and infrastructure needed to deliver before it can collect payment. That means a deal that promises revenue and credibility can also tie up scarce cash, leaving a young company to shoulder the cost of serving a public institution before seeing a return.

The result is a gap between government demand for AI and local startups’ ability to meet it. Public contracts could offer young companies a route to revenue and scale, but interest alone does not create a viable market. The test is whether procurement systems allow startups not only to qualify for contracts and deliver the technology, but also to survive the wait between investment and payment.