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SOUTH AFRICA’S SMMES NEED TO MAKE THE BIG DIGITAL LEAP

Telkom Business | 26 March 2023


We are living in a digital world, and today’s SMMEs have to make the transition rapidly if they wish to prosper and grow. Corporates must play their role in helping them to do so.


he lockdowns associated with the COVID-19 pandemic had many unexpected consequences, introducing new trends of what we call ‘normal’, the most important being a massive push to drive businesses online. This massive push has encouraged many small and medium businesses to navigate these trends by transitioning to selling online.


However, we must acknowledge the fact that moving a brick-and-mortar business to the digital world can be challenging. Small and medium business entrepreneurs are required to be more strategic with their business plans, have a detailed analysis of their customers’ needs, and have a holistic long-term vision of their business(es).


Today’s entrepreneurs must have a comprehensive plan that enables them to adapt to online business operation solutions. There are several advantages, both short-term and long-term, for small and medium businesses to move their businesses online. One of the most visible short-term advantages for entrepreneurs to move their businesses online is that they will still be able to increase and diversify their sales. Another advantage is that small and medium business entrepreneurs will be able to enhance the overall shopping experience for their customers through their physical and online business presence, providing business solutions such as buy online, pick up in-store (BOPIS) to offering curbside delivery, and more.


That is why it is crucial for big businesses to develop business solutions that are inclusive, and Yep! is one of those business solutions that is developed to advance small and medium entrepreneurs’ business ecosystems through digitalisation.


The shift online brings South Africa’s SMMEs to a crossroads. While many of them had already begun to move online, a large contingent of them remain stuck in the analogue era and find the idea of shifting onto digital platforms frankly daunting. It is necessary to view the imperative for SMMEs to shift to digital platforms within the bigger context—one in which our SMMEs have been underperforming for many years.


South Africa’s SMMEs make up 98.5% of our economy but, disastrously, only create 28% of the jobs. These figures from the Small Business Institute show that South Africa is lagging international benchmarks – in successful economies, the same high proportion of SMMEs employ somewhere between 60% and 70% of the workforce and contribute as much as 60% to GDP. In addition, a high proportion of our SMMEs are designated as survivalist, that is just focused on providing an income for a single individual. The Small Business Institute estimates that 3.3 million of our 5.6 million SMMEs fall into this category.


Bearing this in mind, it’s unsurprising that the Global Entrepreneurship Monitor for 2021-2 found that South African entrepreneurs are less likely to adjust their business plans to new business realities. Those realities include a highly competitive environment, a depressed economy and a growing need to adopt digital platforms. Digital platforms are key because they allow SMMEs to compete on more equal terms with larger businesses by refining their business processes to deliver better service, and to reach new customers.


Digital platforms also enable SMMEs to accept digital payments. The latter is an important point not only from a security point of view but also because digital payments automatically create the basis for a set of accounts that can be used to demonstrate a business’s health and potential when applying for financing from banks. The typical, cash-based SMME finds it virtually impossible to qualify for finance, thus preventing it from expanding.


In short, one can make a good argument that one of the major reasons behind the dire performance of South Africa’s SMME sector as an engine of growth and job creation is attributable to its relative lack of digitalisation, and its continuing addiction to cash.


Why it’s important to facilitate the digitalisation of SMMEs


There are good reasons for companies like Telkom Business to put a lot of energy and capital into developing solutions to assist SMMEs to make the digital transition. For one, it’s a large market with a huge potential for growth; it’s also vital that SMMEs are empowered to grow and become sustainable in order to create the inclusive, job-creating economy we need as a country.


That’s the thinking behind the Yep! portal created by Telkom Business. Yep! was born out of the Yellow Pages print directory which, like the SMMEs we have just been discussing, also had to make a transition into the Digital Age. Yep! is essentially a reinvention of the venerable Yellow Pages as a digital marketplace where customers (individuals or other SMMEs) can find SMME service providers.


Essentially, then, Yep! aims to create a digital ecosystem for SMMEs. We believe this approach is vital in enabling the digital transition I outlined above. To grow, our SMMEs need to be positioned to acquire new customers. Coming from an analogue environment, their current reach is typically very limited.


The feedback is good, with many SMEs reporting that they are experiencing significant growth. A good example is a computer company that is benefitting from help with refining its Google marketing campaign over time, with escalating returns.


A digital platform immediately gives them a national showcase for their businesses, something it would ordinarily take conventional business years to achieve. And because it’s digital, payment can easily be effected.


Another important component of any attempt to help SMMEs make the big digital leap forward is help in creating the website or digital storefront they will need. The smaller SMMEs will also need training of various levels in order to begin optimising their business practices. Assistance in creating and building a brand, as well as marketing of products and services, is another important area.


The National Development Plan envisages that, as in the rest of the world, our SMME sector will be the engine of inclusive, job-creating economic growth. Digitalising this sector is our best hope of enabling the sector to fulfil its promise, and corporate South Africa has a duty to assist.


‘Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER’.



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